Chinese star eyes Europe

22 Aug 2003

China's largest maker of industrial lasers is searching for international partners to grow its business. Oliver Graydon met Chutian Laser chairman Sun Wen at LASER 2003.

From Opto & Laser Europe September 2003

Chutian Laser may not be a name that is familiar to many in the optics industry, but if its growth continues unabated, it soon will be. Tucked away in the corner of a hall at this year's LASER show in Munich, it had a small, unassuming stand that many delegates probably walked straight past.

Those who did stop, however, would have learned that Chutian employs almost 1000 staff and boasts doubling annual sales that are forecast to reach around RMB280 m (€30 m) by the end of 2003. Chutian has a simple goal - to become Asia's largest maker and supplier of laser products.

Founded in January 1985 and based in Wuhan, the "optics valley of China" in the Hubei province, the Chutian Laser Group is China's largest maker of Nd:YAG and CO₂ laser systems. It can claim a whole string of pioneering achievements, including holding more patents on laser technology than anyone else in China, being the first firm in the country to receive ISO9001 quality accreditation and being one of only three Chinese laser firms to achieve an annual revenue of more than RMB50 m.

Business divisions

Chutian Laser has four business divisions (marking, cutting and welding, medical systems and laser processing) and has production bases in Wuhan, Beijing and Suzhou. The operation is supported by distribution and after-sales outlets located in more than 30 locations throughout Asia with an additional presence in Germany and the US. According to Chutian's chairman, Sun Wen, its products are used in a huge range of applications, from laser-welding pacemakers and fibre-optics to treating vehicle crank shafts, performing cosmetic surgery and engraving artworks.

Chutian's current product range features a high-speed laser-marking system that uses a 50 W Nd:YAG laser to mark electronics components, precision instruments and hardware tools. Other products include a series of Nd:YAG-based laser-welding systems for joining electronic and machine parts, spot-welding of jewellery and assembly of optical-fibre components. Light sources for hair and tattoo removal, and a series of CO₂ laser systems for engraving and cutting plastic, wood and textiles, are also available.

The fact that should perhaps be most disturbing for its European competitors is that Chutian claims that many of its products retail for around 40% of the price of similar items on the European market, even after import tax is taken into account. The reason is twofold: prices are driven down by the limited purchasing budgets of Chinese customers, and Chutian has the ability to make its products very cheaply. The cost of skilled labour in China is far lower than in Europe, with salaries of just €200 a month being commonplace.

Chutian's rapid growth appears to result from China's development as "the world's factory". As plants producing cars, electronics and high-tech consumer goods are built all over the country, the importance of the laser as a manufacturing tool is now being recognized and firms like Chutian are cashing in. It's no wonder that German laser firms Trumpf and Rofin Sinar have recently established a stronger presence in the region.

"The Chinese economy is growing very fast and advancing rapidly due to the low cost of manpower and reform," explained Wen. "It's catching up with the West very quickly, for example the car industry is growing at 15-20% a year."

Sights on Europe The big news is that Chutian is now setting its sights on building a relationship with Europe and the US - which is why it made an appearance at LASER 2003. The firm wants to raise its profile in the international arena and plans to do this in two ways. Firstly, it will expand its sales outside China - currently 90% of its revenue comes from domestic sales - and secondly, it will act as a distributor and partner for foreign firms wishing to bring new technology into its home market.

Wen admits that the former goal may be hard to achieve. "Our products are very competitive in price and we want to enter international markets," he commented. "The problem is that it is hard to build a good reputation in Europe and the US."

The second goal may prove easier to tackle. Chutian already acts as Chinese distributors for about a dozen foreign companies including Jenoptik and Radiance, a US supplier of optical medical equipment.

Cosmetic subsidiary According to Wen, medical-laser systems for cosmetic surgery are a particularly fast-growing area. In 2001, Chutian launched a new subsidiary called Miracle Laser to help build this market. As well as developing its own laser systems for treating skin conditions, it has signed distribution agreements with several non-Chinese firms including BioLase (tooth whitening systems), ICN (wrinkle removal) and Daavlin (treatment of psoriasis).

Wen is keen for more of this international collaboration and partnership to take place. "We are interested in setting up joint ventures with foreign firms and are looking for partners so that we can license and distribute their products in China," said Wen. "In particular, we want to establish joint ventures with world-class manufacturers of low-to-medium power solid-state and CO₂ lasers, as well as co-operation on the development of fibre lasers and ultraviolet lasers."

He stresses that it can be a very expensive and frustrating process for foreign companies to try to penetrate the potentially lucrative Chinese market by themselves. "If international companies want to access China they should work with us rather than trying to do it on their own," commented Wen. "We understand the culture, have strong relationships with clients and a very good supply chain."

Wen is all too aware of the bad press that Chinese firms have received in the past for ripping off foreign technology and making it themselves. "I want to correct a common misconception," he said. "China has now entered the WTO [World Trade Organization] and Chinese companies like Chutian will not copy foreign technology. We want to establish long-standing relationships with international partners."

As well as helping with cultural and language barriers, Wen says that Chutian can offer solutions to the high costs that can hinder the success of imported technology. "Cost-effective local production, assembly and packaging can help reduce the price of imported foreign products," he said.

Chinese laser market

According to the China Optics and Optoelectronics Industry Association, there are now more than 100 major makers of laser products in China, with a total workforce of 6400.

The output of China's laser industry has increased in value from RMB 100 m in 1988 to RMB 800 m in 1998, and is now growing at a rate of 22% per year. Around 10% of the goods manufactured are currently exported. By the end of 2001 nearly 3000 YAG lasers, mostly 30, 50, 100 and 200 W models, had been sold in China, while the sales figure for high-power CO₂ lasers (500 W to 5 kW) was around 600.

Marking is the dominant application, holding a 45.3% share of the market. It is followed by cutting (21.7%), welding and heat treatment (11% each).