By David A. Belforte
We have all breathed a sigh of relief that the deep recession of 2008/09 is over and that industry has recovered. In the words of one industry association, “the sense of imminent financial contagion has ‘dialed down’ and world economies have drawn back from the brink.” Reality is that aggregate GDP growth in industrialized countries (non-US) is sluggish, and growth in the emerging markets which has accelerated through end of 2013 is expected to decelerate in 2014. This weak global growth translated to a weak outlook for US exports in 2013, but will be rising in 2014. So it is remarkable that in this less than ebullient global economy, manufacturing, specifically that manufacturing that utilizes industrial laser material processing technology, continued to expand in 2013, albeit at a modest pace.
Global industrial laser revenues, which grew at eight percent in 2012, are expected to grow six percent in a sluggish 2013 economy (Table 1), a rate that owes its strength to excellent fiber laser revenue growth at 21 percent and unexpected 14 percent growth in ‘other’ laser technology – excimer and direct diode.
Table 1: Global Laser Revenues
Source: Belforte Associates
The 2012 global distribution of industrial laser installations is shown in Figure 1. The market sector driving growth is Asia, representing about 50 percent of the total global market for laser material processing systems. This market is led by strong sales in China, which recovered in the second half of 2013 from a government-induced slower pace in the first half, and the rising contribution of the ASEAN countries — a 10-nation association that is bidding to compete with China in the Asian marketplace. Already we hear about companies in Vietnam outsourcing from companies in a higher-labor-rate China.
Fig. 1: Global System Installations
Confirming its importance, the 2012 market for laser material processing systems in China was about $2.3 billion, according to industry leader Han’s Laser. Of this total, Chinese manufacturers produced about 66 percent (including $200 million of exports).
Another Asian market contributing about 15 percent to the total world market for laser material processing systems is Japan, where domestic laser materials processing system suppliers generated about $1 billion in revenues, with international imports adding another $100 million.
What are the applications that the lasers in Table 1 are used for? In Figure 2, it is clear that metal processing remains the dominant application for high power CO2 and fiber lasers generating than twice the revenues of all the other applications. Metal processing includes lasers for welding, cutting and surface treatment applications. Marking lasers are mostly low power fiber lasers, and lasers used in microprocessing include high brightness fiber and solid-state (ultrafast pulse) lasers. Lasers used in the ‘other’ category are direct diode, excimer and fiber.
Fig. 2: Laser Revenues By Application – 2013
Identified in Figure 3 are seven market sectors that offer good to excellent growth opportunities for industrial lasers, markets that have been essentially recession-proof or that have recovered more rapidly from economic downturns. These are current and near-term markets that offer several years of solid growth for laser applications.
Fig. 3: International Markets for Industrial Lasers – 2013
Source: Belforte Associates
In no particular order are what we call “Markets of Opportunity”: transportation, energy, medical devices, agricultural, aerospace, communications and fabricated metal products.
Transportation – In 2012, for the first time in history, over 60 million passenger cars ($1400 billion) were produced in a single year (or 165,000 new cars produced every day). Lasers are key to welding and cutting high-strength steel and brazing body components to aid in weight reduction to improve fuel efficiency. Today many vehicles could not be manufactured were it not for laser processing. In the passenger aircraft industry, revenue grew 2.2 percent during 2012, reaching $152.8 billion. Airlines have placed orders for 5000 narrow-bodies to be built in next 20 years, many of which will use laser cut fiber-reinforced polymer materials.
Energy – The forecast is $150 billion of land-based turbines over the next 10 years that are expected to generate one-quarter of all power in the US in the next five years. These engines use laser drilling, cladding and additive manufacturing operations. Global wind power capacity in 2012 was in excess of 4000 MW; it is a $60 billion industry, with 22 percent of world installations in Texas ($15 billion) and California ($17 billion). Lasers are used to cut and weld components and engine parts.
Medical Devices – have been and continue to be a strong double-digit growth industry for solid-state, fiber and excimer lasers. For example, the annual global market for laser cut stents exceeds $5 billion. About one million patients receive them each year. As of the end of this year, all makers of these and other medical devices must have unique laser-produced ID codes on their packaging.
Agricultural – World demand for agricultural equipment is expected to increase 6.8 percent per year through 2016 to $175 billion. The Asia/Pacific region — led by China and India — will be the fastest growing market, followed by Central and South America. Applications for lasers include cutting, welding, additive manufacturing, cladding and marking. In the area of maintenance and repair, laser cladding is used to refurbish worn parts.
Aerospace – The global aircraft turbine engine market in 2012 was in excess of $200 billion. Airbus predicts that airlines will buy planes valued at $4.4 trillion (> 36,000 planes) over the next two decades, each with two engines. Each engine has blades and vanes that are laser drilled, cut, clad and additive-manufactured using laser technology. Boeing will also supply like quantities of engines that are also laser processed.
Communications Industry – is a major user of solid-state, excimer, fiber and CO2 lasers for cutting, welding, annealing and marking applications. Laser cutting of display panel glass is a major application. Vendors shipped 144.9 million smartphones in 1Q12 compared to 101.7 million units in 1Q11. The US shipped 20.6 percent of smartphones in 2012. Laser annealing is the process of choice for flat panel displays used to produce high-definition images. Excimer laser annealing systems sell for up to $7 million each.
Fabricated Metal Products – is a global application just now coming into its own in developing nations. Sheet metal cutting is a common operation in shops around the world. The global market for 2D sheet metal cutting laser systems is in excess of $3 billion. Globally, the fabricated metal product manufacturing industry generates nearly $2 trillion in annual revenue. Top producers include the US, China, Japan, Germany, Italy and Canada. High power CO2 lasers and increasingly fiber lasers are integrated in half-million-dollar systems for this application.
Industrial lasers are used in diverse industries valued at more than $1800 billion that have not been overly sensitive to recent economic pressures: aerospace aircraft and engines are in the midst of a massive expansion, energy (conventional and alternative) is expanding to offset reliance on oil, a resurgent auto industry is booming, medical devices look forward to a 15 percent increase in 2014, smart phone usage and tablets show unlimited growth potential, agriculture offers sustained growth led by exports, and fabricated metal products companies are recovering from tight credit to regain market share.
As a consequence, US manufacturing activity confounds experts: the laser market in Europe is stagnant as economic woes in the Eurozone countries slow manufacturing output, China recovers from a slight downturn, and laser imports rebound while domestic supply is encouraged. Laser growth in India is still illusive, but the ASEAN nations are returning to a modest growth pattern. Laser application drivers in key manufacturing sectors have strong near-term growth prospects, overcoming some of the global economic situations. Indications are that 2014 will bring a return to stronger revenue growth for lasers as economies stabilize and recover.
David A. Belforte is Editor-In-Chief at Industrial Laser Solutions.