IPG to step up fiber laser capacity

01 Nov 2010

With growing market penetration in cutting and deep-engraving applications, IPG Photonics moves to increase its manufacturing capacity.

After reporting further rapid growth in demand for its fiber lasers, IPG Photonics says that it will soon invest in further capacity expansion to meet future market requirements.

That investment will include new factories in Russia and Italy, while the company’s laser diode fabrication facility in Oxford, MA, will be expanded, along with its German operation.

The need for further investment is a result of the growing popularity of fiber lasers around the world. IPG saw its revenues jump by nearly 19 per cent sequentially to $79.8 million in the third quarter, on rising demand for cutting applications in Europe and for marking and engraving applications in Asia.

That figure represented 74 per cent year-on-year growth from Q3 2009, when the worldwide recession was in full swing and demand among European laser system integrators in particular hit rock bottom.

Strong demand
“An 88 per cent increase in pulsed laser sales, the best selling product in the quarter, was driven by strong demand for marking/engraving, and an 83 per cent increase in high-power laser sales, the second-best selling product line in the quarter, benefited from the increase in the cutting OEMs and welding demand,” said IPG’s CEO Valentin Gapontsev. Demand for fiber amplifiers from the telecommunications market also increased strongly, thanks to increased deployment in long-haul optical and cable TV networks.

With the industrial laser market continuing to gain strength, and fiber lasers grabbing market traction and an increased share in many applications, Gapontsev is confident that sales will continue to rise.

“We anticipate that the sales momentum we have experienced during the first nine months of 2010 will continue through the end of the year,” said the CEO, before forecasting that fourth-quarter revenue would be in the range of $80 million to $86 million. Hitting the $80 million quarterly revenue level is an important point for IPG, as it indicates that the company is now operating with a fab utilization of around 75 per cent.

While that rate of utilization is good news for profit margins – IPG delivered a pre-tax income of $19.9 million, up from $15.5 million in the second quarter – it also means that the company needs to begin looking at ways to increase manufacturing capacity to meet future growth in demand.

Scaling up
The wider laser market is expected to grow at a compound average rate of 7-9 per cent per year, according to IPG’s CFO Tim Mammen. But the fiber laser market, which IPG dominates, is now growing much faster than that – at a compound rate of approximately 20 per cent. IPG’s revenues are likely to scale with that growth, meaning that the additional manufacturing capacity is likely to be required about a year from now.

At the moment, IPG is reaping the twin benefits of producing laser diodes with a higher output power – thanks to process improvements made in 2009 – and greater economies of scale within its laser diode fabrication facility as demand for laser systems and high-power diodes grows. Both of those trends help to reduce the cost of each Watt produced by a laser system.

Because it is vertically integrated, and able to meet rising demand for those diodes internally, IPG is also in a strong strategic position. With a number of other laser manufacturers now seeking to challenge IPG’s dominance of the fiber laser sector, that should prove to be a key advantage.

While marking and welding applications are now standard fiber laser applications, cutting with a fiber laser – which requires a much higher power – is at an earlier stage of market acceptance. But following on from initial orders in Italy last year, IPG reports that cutting applications are now gaining more attention worldwide, with OEMs elsewhere in Europe and more recently in Japan increasingly seeking fiber laser solutions.

Mammen estimates that the penetration of fiber lasers in the overall laser materials processing market will grow to 12-15 per cent by the end of this year, and to 30 per cent in the medium term as high-power applications like cutting increasingly switch to fiber lasers, and low-power systems become ubiquitous for engraving and marking.

The company is also developing very high-power lasers for defense applications such as directed-energy weapons, and is expecting to ship at least one single mode 10 kW laser before the end of the calendar year.