Annual laser market review & forecast can laser markets trump a global slowdown - laser focus world

4/7/2018 Annual Laser Market Review & Forecast: Can laser markets trump a global slowdown? - Laser Focus World
https://www.laserfocusworld.com/articles/print/volume-52/issue-01/features/annual-laser-market-review-forecast-can-laser-markets-trump-a-global-slowdown.htm
Annual Laser Market Review & Forecast: Can
laser markets trump a global slowdown?
02/01/2016
Most economic forecasters agree that the global economy is slowing.
However, the attractive ROI and energy efficiency of today's laser
technologies just may keep laser sales ahead of the pack.
GAIL OVERTON, ALLEN NOGEE, DAVID A. BELFORTE, and CONARD HOLTON
Can the laser industry, with its ability to forge 21st century innovations1 while leveraging its
newfound International Year of Light clout,2 manage to trump a global slowdown by actually
beating approximate 3% worldwide gross domestic product (GDP) growth3 projections? Our
answer: yes. Our worldwide laser sales forecast calls for 4.2% growth in 2016 to nearly $10.5
billion.
More than seven years have passed since the start of the global financial crisis of 2008/2009 that
left laser markets in a state of "high anxiety."4 Stock markets recovered and, in some cases,
temporarily surged to new highs: the UK's FTSE 100 approached its near-7000 peaks in 2000,
2007, and 2014/early 2015, and the Shanghai Stock Exchange (SSE) touched 5000 in mid-2015
after a post-recession drop to around 2000.
Although the late 2015 Dow Jones Industrial Average rallied to more than 18,000 (from the 2009
low of around 7000), there are signs of trouble worldwide. Europe continues to see high
unemployment and now a refugee crisis, quantitative easing in the U.S. has reached an end,
orders for non-defense capital goods in the U.S. declined5 3.8% in the first 10 months of 2015,
fears of rising interest rates loom, and, as of November, China's Caixin purchasing manager's
index (PMI)6 has been below the nominal 50 value in each of the past nine months.
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Even the Organisation for Economic Co-operation and Development (OECD; Paris, France) said
in November 2015, "Emerging market challenges, weak trade and concerns about potential
output suggest higher downside risks7 and vulnerabilities compared with the OECD's June
Outlook," and forecasts "weakened global growth to around 2.9% this year—well below the long-
run average."
And yet, for some companies, laser sales refuse to be anything but average. The materials-
processing portfolio of fiber lasers from IPG Photonics (Oxford, MA) continues to gain market
share from mechanical/conventional cutting and welding tools, leaving the company to bask in
the glow of 22% revenue growth in Q3 2015 to $243.5 million, while laser additive manufacturing
(LAM) or 3D printing systems company EOS (Munich, Germany) saw revenue rise 53% in 20158
to $282 million on the sales of 400 systems, bringing its worldwide installed base to 2000
systems over its 26-year history.
While these high double-digit growth rates are outliers among the 5.5% average revenue growth
seen from 2012 through 2014 for the 15 major laser companies that we track, the global success
of fiber lasers and 3D printing systems are by no means anomalies. They are simply two
examples—among many more—of winning laser technologies that should be able to beat the
pack in any economic environment by improving ROI and manufacturing efficiencies for
industrialized and emerging economies alike.
Bulls and bears
"The U.S. cannot depend on exports when its neighbors are hurting," says Ken Kaufmann, VP of
marketing at Hamamatsu (Bridgewater, NJ). "China is slowing despite low oil prices, Australia
and Brazil are in danger of recession due to their dependence on commodity exports to China,
and Europe is caught in a sub-2% growth rut." Indeed, the global economies are intertwined and
interdependent.
And yet, Kaufmann is bullish on technology: "Aging populations translate to a strong
bioinstrumentation and medical industry, the oil and gas industry will require increased emissions

monitoring, and the corresponding need for sensing instrumentation and quantum cascade laser
[QCL] technology, for example, and electronics/cameras/imaging equipment will surge for
Internet of Things [IoT] applications."
In Japan, Hamamatsu's GM of overseas sales management Atsushi Tsujimura says "Japan's
economy is improving; corporate earnings and personal consumption remain high, and exporting
companies retain price competitiveness due to the favorable exchange rate." Tsujimura points
out that despite overall economic slowing, noninvasive, noncontact, and nondestructive methods
enabled by photonics and lasers are highly sought after. "We expect demand to continue for
lasers and LEDs paired with our detectors, photomultiplier tubes, photodiodes, and imaging
devices," he says.
"The Wall Street Journal and New York Times paint a negative picture; economics can be largely
psychological and threats of a downturn perpetuate the possibility—but underlying fundamentals
are strong if you look at the future demands of the growing urbanization in China for the next 10–
20 years," says Bo Gu, president of Bos Photonics, a consulting firm located in Boston, MA.
"Each year, about 22 million new Chinese urbanites will fuel the economy—needing housing,
cars, and middle-class electronic devices. The world may see growth slowing in China, but 6.8%
is still a tremendous high-water mark in a sea of 3% nominal growth worldwide, considering that
China is already the second largest economy in the world."
A BRIC foundation
First and foremost, talk of China and its slowing growth consumes the conversation on Wall
Street and the financial halls of Europe, since many major laser manufacturers sell into this
emerging powerhouse. An interactive chart in The Economist9 allows you to predict when
China's gross domestic product (GPD) will exceed that of the U.S., based on GPD growth,
inflation, and Yuan appreciation/depreciation values. While the year varies according to the
inputs, it will probably happen around 2020 despite the fact that the International Monetary Fund
forecasts10 China's GDP growth rate to drop from 6.8% in 2015 to 6.3% in 2016—nonetheless,
very healthy figures compared to the slight uptick from 2.6% to 2.8% in 2015 and 2016,
respectively, forecast for U.S. GDP growth.
Companies like Coherent (Santa Clara, CA) continue to profit from China's success in certain
market areas, especially considering that sales to Asia account for 51% of its revenues followed
by 26% to North America and 17% into Europe. Coherent's fiscal Q4 sales for the period ended
October 5, 2015, were up modestly to $802.5 million from $794.6 million on strong sales of its
Linebeam laser systems for flat-panel display (FPD) processing. In fact, sales to China were
strong, as IHS (Englewood, CO) expects China to dominate the FPD market11 with a 35%
market share by 2018.
China has also been acquiring technologies and IP in disk drives, CMOS image sensors,
servers, memory chips, and advanced semiconductor packaging and test services. And while
Gartner (Stamford, CT) forecasts12 that semiconductor capital equipment spending will be down

1% in 2015 and down 3.3% more in 2016, it is predicted that China's chip production will outpace
the growth of the overall integrated circuit (IC) market,13 thanks to government investment of
nearly $170 billion over the next 5–10 years.
Historically, much of the qualitative summary for our readers in this report has focused on the
U.S., Europe, and China. But what is happening in the remaining BRIC nations of Brazil, Russia,
and India, as well as other emerging markets such as Africa? Are these nations importing or
exporting laser technology, and will their evolution from emerging to industrialized countries allow
them to build a sturdy foundation for future laser sales growth?
"The so-called BRIC market is funneling down into a C-market; only China is significantly
contributing to laser sales," says Jörg Neukum, sales and marketing director at Dilas Diodenlaser
(Mainz, Germany). "Brazil does not have significant OEM industries integrating high-power laser
diodes and Brazil's needs in laser processing are mainly served by European or American laser
system providers, besides a few local laser machine builders. Exchange rate issues have slowed
the ability of Russian customers to buy abroad and more importantly, Russia has been under
extreme export control because of the Ukrainian conflict and we weren't able to deliver to even
long-term customers." And finally, Neukum adds, "India has mainly been a scientific market for
us, but with all the boundary conditions of tenders and/or export licenses."
To put India into perspective, sources tell us that they have something like 70 high-power laser
cutting machines vs. 1500 or more in China—so just about 5% of Chinese volumes. Although
India manufactures and sells $6000 cars and could benefit from laser technology, their
infrastructure and bureaucratic development methods support a larger workforce and less
automation.
Today, many lower-power laser sales to India and Africa go to Chinese suppliers, but U.S.- and
European-based suppliers are carefully following these emerging markets as well as burgeoning
markets in Mexico, where there is a lot of investment from automotive and electronics
manufacturers. These suppliers are also following Russia for applications in telecommunications
and pipe welding and cladding to support mining and oil and gas operations.
Beam delivery advances for high-power lasers have enabled them to overtake traditional plasma
techniques for thick-material cutting and, in some cases, 4X faster welding speeds that bring
about compelling manufacturing efficiencies that even emerging countries with cheap labor
forces will embrace. In addition to the major cutting, welding, ablation, and additive
manufacturing markets for fiber laser materials processing, there are another hundred or so
applications like medical device processing and laser projection that represent very strong
growth opportunities for any laser company—growth that is capable of outpacing global GDP.
Beware commoditization
Indeed, the presence of surveillance cameras on nearly every street corner and shopping center
exemplifies the ubiquitous presence of technology in our society. And like cameras, lasers are
joining the OEM equipment list for high-volume ubiquitous applications. Already, miniature $100

light detection and ranging (lidar) systems16 promise all-seeing drones and affordable self-
driving cars, and freeform optics17 deliver automotive laser diode lighting and complex light-
emitting diode (LED) luminaire designs.
Unfortunately, as the laser solution grows in various applications, volumes rise and
manufacturing costs (and selling price) inevitably fall, resulting in lower margins and the
commoditization/price erosion status18 that has plagued many telecommunications component
suppliers and CD/DVD optical storage laser manufacturers.
One case in point is the decision by General Electric (GE; Fairfield, CT) to rethink the profitability
model for its lighting business, especially for LED-based light bulbs. "Lighting is our oldest
business. The combination of LEDs and analytics puts a computer where a light bulb used to
be," said Jeff Immelt in his CEO letter19 within GE's 2014 annual report. "In cities around the
world, GE is working to transform street lighting into the analytical brain of urban life."
An article in Lux Review20 surmises that GE aims to use the bulb as a loss leader in a more
profitable lighting services and infrastructure business, considering that the price of an LED light
bulb has dropped from $25 to less than $4 over the past three years—a trajectory with little room
for respectable margins and nearly zero replacement business for a product that lasts 20 years.
This reality easily extends to high-volume laser applications, wherein a "niche" product may
indeed prove more profitable than the next "hot" laser technology that falls victim to gross-margin
depletion.
"Be careful what you wish for," says Tom Hausken, senior advisor for The Optical Society (OSA;
Washington, DC). "The technology in a quantum-well laser in a 400G transceiver or a kilowatt
fiber laser or a smartphone display is phenomenal. For an average person, it's indistinguishable
from magic. But sometimes we engineers are too smart for our own good. Achieving rapid
technological improvement and submitting to the tyranny of standards can mean that the return
on R&D for one generation is not fully captured before another takes over the market. Good
examples are solar cells and LEDs," adds Hausken. "Ambitious goals for price declines have
been achieved, but now it's hard to make a profit. Alternatively, companies selling what I call
dumb 'bent metal' products can often earn better margins by buying low-margin products like
FTTH [fiber-to-the-home] lasers or LEDs and sticking them in an enclosure that meets the
customers' needs."
But Hausken isn't advising against high-volume laser sales. "Companies that get to market first
reap the benefits in terms of premium pricing, scale, and return on investment. It also places
them in a better position for the next big thing."
AIM high
In the U.S., government agencies are betting that the next big thing can only come from targeted
investment in key scientific disciplines. To that end, the National Network for Manufacturing
Innovation (NNMI) was designed to coordinate public and private investment in emerging

advanced manufacturing technologies, bringing together industry, academia, and government
partners to advance manufacturing innovation and accelerate commercialization.
Of the seven Institutes for Manufacturing Innovation already established by the Obama
Administration, the first was America Makes, focusing on additive manufacturing and 3D printing.
In mid-2015, a consortium led by the State University of New York (SUNY) was awarded a $110
million matching grant by the Department of Defense to establish the Integrated Photonics
Institute for Manufacturing Innovation (IP-IMI), now called the American Institute for
Manufacturing Integrated Photonics or AIM Photonics. This IP-IMI21 is intended to advance the
state-of-the-art in the design, manufacture, testing, assembly, and packaging of photonic
integrated circuits (PICs).
In Europe, the Framework Programmes and Key Enabling Technologies (KET) centers for
advanced manufacturing and materials, industrial biotechnology, micro-/nanoelectronics,
photonics, and nanotechnology have blazed a trail for Horizon 2020, the European Union's
Research and Innovation program, with nearly $85 billion in funding available from 2014 to 2020
(in addition to private investments). The funding aims to generate breakthroughs in science and
industry while tackling societal challenges and taking ideas from the laboratory to the
marketplace.
And as part of its "Made in China 2025" roadmap to be the world's leading manufacturing country
in the next 10 years, the Chinese government also plans to create a "golden decade for the laser
industry."22 In November 2015, during the 12th Optics Valley of China International
Optoelectronic Exposition and Forum, Min Dayong, president of HG Laser (Wuhan, China), said
that as an advanced manufacturing tool, the laser will play an important role in transforming
China into a world-leading manufacturing giant in the next 10 years.
International photonics programs continue to benefit the laser industry by raising awareness of
light-based technologies and hopefully improving the funding situation for small and large laser
companies alike.
The Laser Market Segments
This year, laser revenues in the communications and optical storage segment were surpassed by
materials processing and lithography laser revenues, primarily because of the commoditization
issues discussed in our introduction. Lasers for scientific and military markets are the third-
largest revenue segment, followed by medical and aesthetic and instrumentation and sensor
markets, respectively. Entertainment, displays, and image-recording segments continue to be
small—yet important—laser categories.

Materials processing and lithography
Not since the great recession of 2008/2009 has there been such uncertainty in the global
manufacturing sector. World economic conditions have deteriorated in the past few months with
faltering demand for finished goods in China, Southeast Asia, Europe, and the Middle East,
leading to empty container ships leaving U.S. West Coast ports for the return to Asia. Even U.S.
manufacturing, which had remained strong when other economies did not, began to feel the
fallout as exports decreased along with consumer demand for nonessential goods.
So it was with considerable trepidation that this year's analysis of the global market for industrial
lasers was put together in a rather gloomy atmosphere, where the impact that global hotspots
were having on world manufacturing was drawn from headlines in business media.
Just as Europe was managing to show signs of stabilization after months of troubling economic
news, a scandal at the world's leading auto company and disaster in the form of terrorist attacks
shook Western Europe, leading to concerns that escalation would quench growth in the
Eurozone economies. An economic slowdown in Asia, led by confusing market conditions in
China and Japan (the latter now in its second recession since the election of a pro-business
Prime Minister), was only exacerbated by the fact that the hoped-for contribution from emerging
nations and the rest of the world did not happen.
Countering this depressing news was the upbeat attitude in the industrial laser sector, led by
positive financial news from the leading makers of these products. Setting the tone was Trumpf
(Ditzingen, Germany), the largest industrial laser/system supplier, whose Laser Technology
group turned in a sterling 16.8% growth to $946 million in its 2014/15 fiscal year ended with the
company as a whole expecting single-digit growth for the 2015/16 period.
Challenging Trumpf for market leadership is fiber laser manufacturer IPG Photonics, who
reported outstanding 22% growth in the third quarter and predicted seasonally adjusted fourth
quarter sales growth that would take the company close to the $1 billion revenue level. Following
this are Coherent ($802 million, up 1%) and Rofin-Sinar Technologies (Plymouth, MI, and
Hamburg, Germany; $520 million, down 2%).

So, what is going on here? Is the laser industry out of sync with global manufacturing in terms of
market strength? Or is the historical exuberance of the technology clouding its view? After all,
there is only one company turning in strong double-digit growth quarter to quarter: IPG
Photonics. Industrial Laser Solutions tracks four-dozen global public companies and although
overall quarterly performance is mixed, the largest companies have shown growth through the
three quarters reported. These tend to be suppliers of fiber and ultrafast lasers. But aren't these
lasers being used by the manufacturers experiencing economic difficulties in the market sectors
identified above?
The answer is yes and no. The laser industry, which had finally come into sync with the cycles of
international machine tool sales, could be lagging the curve again, supported by strong sales in
key market sectors extending into first-half 2016 revenues. And the substantive revenue growth
of fiber and ultrafast lasers in specific industries is towing the revenue numbers of the
underperforming others along with it.
Revenue numbers for 2014 have been adjusted compared to those Industrial Laser Solutions
published in January 2015, as our partner, Strategies Unlimited (who collects this data), made
category changes that reflect evolution in the technology. Also note that high-power disk laser
revenues are counted in the solid-state category.
In 2015, industrial laser revenues grew by 6.9%, led by the continued strong growth (22%) of
fiber lasers for macroprocessing applications. Macromaterials processing represents about half
of all industrial laser revenues—understandable because these lasers typically carry a high
selling price per unit. Overall, macromaterial processing grew 9%, boosted by a 17% increase in
welding installations.
Fiber laser growth continued at a high level in 2015, as this technology increases its share of the
total market at the expense of carbon-dioxide (CO2, -5%) and solid-state (0%) lasers. Fiber laser
applications grew across the board with a 6% increase in low-power lasers for marking, a 10%
increase in medium-power micromaterials processing, and a 22% increase in macro
applications, of which metal cutting grew 5%—consistent with growth in that industry.
Carbon-dioxide lasers lost market share across the board from low- to high-power, as a
combination of medium- to high-power fiber and disk lasers eroded market shares. Solid-state
lasers remained flat, as higher revenues in disk lasers offset declines in diode-pumped solid-
state (DPSS) marking applications. The expected growth in high-power diodes for cutting and
welding will shift to 2016.
The first indication of slowness in the laser manufacturing marketplace shows up in the 2015
modest single-digit growth in marking (4%) and micromaterials processing (4%) compared to the
more-robust 9% for macroprocessing.
And then there is laser additive manufacturing—sometimes erroneously called 3D printing—
which is technically not always a laser application. The use of all types of industrial lasers as a

power source for direct-metal laser deposition or sintering for additive manufacturing has caught
the imagination of global manufacturers, and sales of modest- to very-large size processing
systems has grown rapidly. In 2015, it is 71% over 2014, and will likely do so again in 2016.
The semiconductor/PC board/display market took a hit in 2015 and, consequently, industrial
lasers followed, showing the largest decline (-13%) of all the applications. This is, for the most
part, a cyclical phenomenon that industry has experienced before and even though zero growth
is anticipated in 2015, industry expects to see a pickup in the second half as consumer buying
grows.
Solar power applications were strong (9%) for micromaterials processing in 2015, as electric
power rate increases drove more home-owning consumers in the U.S. to solar power. Subsidy
revisions will likely slow that growth rate to 5% in 2016.
As we look at the various laser markets, it is apparent that, with the few exceptions mentioned,
most of the applications are in the positive column for 2015. This realization takes us back to the
opening statement in the materials processing segment, namely that the laser industry is out of
sync with global manufacturing. This seems to be the case with certain industries: aerospace,
automotive (SUV and light truck), fabricated metal products, and medical devices holding strong
in early 2016 and consumer-driven slowness in electronics, appliances, and semiconductors
carrying over into 2016. Industry tells us that 2016 will see slower growth after a good start. In
essence, we are assuming 2016 to be a repeat of 2015, which wasn't all that bad.
Materials processing & lithography
Includes lasers used for all types of metal processing (welding, cutting, annealing, drilling);
semiconductor and microelectronics manufacturing (lithography, scribing, defect repair, via
drilling); marking of all materials; and other materials processing (such as cutting and welding
organics, rapid prototyping, micromachining, and grating manufacture). Also includes lasers for
lithography.
Despite a weak economy in most of Europe, the well-publicized slowing economy in China, and
a strong dollar in the U.S., industrial laser sales managed to remain quite strong, especially high-

power fiber laser sales. Automotive sales reached a record in 2015, especially light trucks and
SUVs, and this helped drive sales for metal cutting.
In China, laser sales are in large part being supplemented by the Chinese Government's
ambitions to become a hub of advanced manufacturing, with sales of lasers for this purpose
being immune to any economic slowdowns. Sales of lasers for marking and other lower power
applications did slow a bit, but sales of ultrafast lasers have remained strong.
Communications and optical storage
In 2015, companies like Oclaro (San Jose, CA), Infinera (Sunnyvale, CA), Finisar (Sunnyvale,
CA), and NeoPhotonics (San Jose, CA) leveraged their silicon photonics and/or PIC expertise to
nicely grow their telecom laser sales.
Oclaro's first fiscal quarter ended September 26, 2015 saw sales of $87.5 million compared to
$82.2 million in the prior quarter, citing strong growth in its indium phosphide (InP) PIC-based
100G product offering. For this same quarter, Infinera's sales leaped to $232.5 million from
$207.3 million in the previous quarter and just $173.6 million in the same quarter last year on
strong metro and long-haul sales, and claimed in its financial summary that the company is "the
most vertically integrated transport provider in the world."
Finisar's sales of products for telecom applications grew 2.3% for the quarter ended November 1,
2015, with revenue strength driven by 100G Ethernet transceivers and 10 GB tunable
transceivers and wavelength-selective switches. And NeoPhotonics' sales for the quarter ended
September 30, 2015 were up 2.4% from the same quarter last year to $83.6 million on strong
100G sales as they work to extend their products to 400G and beyond.
"Multimode fiber-optic links continue to thrive in datacenters for connections up to 300 m
although the increasing data rates of 25 Gbit/s and 50 Gbit/s will limit distances to sub-100 m,"
says Michael Lebby, CEO of OneChip Photonics (Ottawa, ON, Canada) and Lightwave Logic
(Longmont, CO) board member. "Single-mode fiber-optic links are now the preferred platform for
2 km and 10 km links, and as cost levels become more competitive, single-mode links will
compete more head-on with multimode at distances in the 100 m range."
Lebby continues, "VCSELs, which are the basis source emitter for multimode links, will still hold
the very short-distance links markets below 100 m, but 1310 nm-based FP [Fabry-Perot] and
DFB [distributed feedback] laser devices integrated into PIC platforms will gain favor as single-
mode PIC solutions continue to grow given the stringent power consumption levels, size, and
cost limits imposed by the big datacenter customers. Furthermore, it is not clear what the PIC
platform should be over the next five years—we know indium phosphide is the incumbent today,
but silicon photonics and polymer photonics are both contenders for this market that could
change the dynamics of transceiver design significantly."
"PIC-based silicon photonics are still 10 times more expensive than discrete FP and DFB lasers,
yet necessary to reduce power consumption for new datacenter builds," Lebby cautions.

"However, few established companies seem to be willing to take on the low margins insisted
upon by the ultralarge datacenter companies that are becoming big customers of fiber-optic
transceivers. In fact, it is these datacenter companies that have injected chaos—for want of a
better term-into the telecom and datacom markets by demanding certain price/performance
levels regardless of how their suppliers fare financially. For that reason, Taiwanese and Chinese
companies will probably reap the benefits long-term as they are willing to take on lower margins
at high volumes."
"Profits in the laser communications sector come primarily from lasers based on indium-gallium-
arsenide-phosphide/InP (InGaAsP/InP) materials—low-power, single-mode lasers with gigabit
modulation," says Carlos Lee, director general of EPIC. "Customers are a small group of
systems manufacturers: Alcatel-Lucent and Huawei, for example, who use these components to
design highly functional communications systems that meet network requirements."
Lee continues, "The sector is led by Finisar with 16% of the sector revenues in 2014, but most
suppliers are from the U.S. or Asia. Because the communications component market typically
evolves into a high-volume, low-price scenario, every company we have studied is diversifying its
products to meet demand in other market segments."
For 2016, we expect laser communications and data storage sales to reach more than $3.5
billion, around 1.7% higher than 2015 revenues.
Communications & optical storage
Includes all laser diodes used in telecommunications, data communications, and optical storage
applications, including pumps for optical amplifiers.
Although 2013-2015 remained relatively strong in the communications sector, there are signs
that 2016 and beyond may be slowing. This segment tends to be driven by wired and wireless
data and voice demand, and while wired and wireless traffic are growing every year, the rate of
this growth is slowing. In addition, service providers tend to upgrade their networks in spurts,
when newer technologies are deployed network-wide. However, both wireline and wireless are
between transitions, and the next generation of wireless technology won't arrive until 2020.
As for optical storage, the prospects continue to remain dim. DVD, CD, and Blu-ray media sales
continue to drop, and more cloud-based solutions are eliminating the need for large local

storage. Heat-assisted magnetic recording (HAMR), which uses a laser to increase storage
capacity of magnetic media, has been promised for many years now. Seagate says it will arrive
in 2017, but by then, will it really matter? Maybe for large datacenters, if anywhere.
Scientific research and military
Global R&D spending is forecast to increase in 2014 and 2015 (although at a decreasing rate in
2015) according to the 2014 Global R&D Funding Forecast
23 from Battelle (Columbus, OH). Currently, the U.S., China, Japan, and Europe comprise 78%
of the $1.6 trillion R&D spending forecast for 2014. Furthermore, China's total R&D spending is
forecast to take first place ahead of the U.S. by 2022.
Even though Japan accounts for 10% of the total global R&D spending, Paradigm Laser
Research (Tokyo, Japan) president Kunihiko Washio says, "The many imports from Europe have
slowed laser development in Japan, and Japanese government investment in industrial laser
technology has been sluggish until quite recently." Washio says that Japan is now reconsidering
the value of lasers for processing novel high-value-added materials such as wide-bandgap
silicon carbide (SiC) for high-temperature power devices and lightweight, high-strength
composites such as carbon-fiber reinforced polymer (CFRP) for eco-friendly vehicles. He adds,
"Japan is now going to invest in development of high-brightness and highly efficient lasers in
short and ultrashort pulsed modes, as well as in CW operation modes."
Ultrafast or ultrashort-pulse lasers continue to be at the forefront of new materials processing
and scientific applications, with a tremendous amount of R&D needed to bring these lasers out of
the laboratory and into mainstream applications. In particular, as Washio understands, ultrashort
beam delivery options using kagome24 or photonic-crystal fiber varieties need to improve to
reach parity with legacy CW solid-state laser capabilities.
Fortunately, companies like Photonic Tools (Berlin, Germany) have already developed a
microstructured hollow-core fiber (MHCF) ultrafast laser beam delivery system that transmits
more than 100 W of average power of picosecond and femtosecond pulses with 90%
transmission throughput while maintaining single-mode performance.
Helium-cadmium (HeCd) lasers at 325 and 442 nm comprise 95% of the sales for Kimmon Koha
(Tokyo, Japan), which has seen slow and steady growth for applications ranging from inspection
to Raman spectroscopy to photoluminescence studies. Kimmon Koha executive director
Masamori Nakahara says ultraviolet HeCd lasers are enjoying double-digit growth, but that the
weak Japanese yen has made imported materials very expensive, hurting profitability.
In the U.S., Newport (Irvine, CA) provides a good metric for the health of laser and photonics
R&D markets, and reports scientific research revenue in its financial statements. For its third
quarter ended October 3, 2015, Newport reported sales of $147.6 million, down only 0.3% from
the prior quarter but up 0.9% from the same quarter the previous year. But despite weakness in

its microelectronics and industrial manufacturing sectors, sales were up 9% from the prior
quarter and up 13% from the previous quarter last year in its scientific research markets, in
keeping with the positive trend of Battelle's global R&D funding projections.
Unlike its strength in the R&D markets, however, Newport's defense and security sales were 2%
lower than the prior quarter and orders were down 13.7%—more than any other sector. But
Newport's defense sales do not correlate well with major military system providers. BAE Systems
(London, England) saw sales for the six months ended June 30, 2015 grow 11% to $12.7 billion
compared to the same half last year. Similarly, Thales Group (Paris, France) first-half 2015 sales
were also up 11% to $6.73 billion.
While we don't see military laser sales growing at these rates, we do forecast an increase in
military laser revenue, led by an increase in high-power and mid-IR laser technology in particular.
High-power laser companies like IPG Photonics are benefiting from a surge in directed-energy
weapon (DEW) R&D projects from tier 1 defense contractors, even though many of these
projects have a long gestation period.
In August 2015, the U.S. Army awarded Northrop Grumman (Los Angeles, CA) a more-than $35
million contract for engineering and manufacturing development and low-rate initial production of
products for the Common Infrared Countermeasure (CIRCM) program. Northrop Grumman
industry partner Daylight Solutions (San Diego, CA) will benefit by providing QCL technology for
directed-laser jamming of IR missile threats.
And, as we reveal in our November Laser Focus World cover story, QCLs are making inroads in
defense, biomedical, and security markets beyond IR countermeasures: Pendar Technologies
(Cambridge, MA) is developing a compact QCL array module25 that operates from 7 to 11 μm
for standoff explosives detection as part of the Department of Homeland Security (DHS) Widely
Tunable Infrared Source (WTIRS) program.
Scientific research & military
Includes lasers used for fundamental research and development, such as by universities and
national laboratories, and new and existing military applications, such as rangefinders,
illuminators, infrared (IR) countermeasures, and directed-energy weapons research.

What a difference a year makes. While the U.S. Government shutdown in 2013 greatly disrupted
spending on both research and military lasers (which only partially corrected in 2014), 2015 was
essentially back to business as usual. While research spending overall remains flat in the U.S.
and Europe, the percentage spent on lasers is definitely increasing, and research on lasers used
for lighting, transportation, and for medical purposes have all increased in this past year.
Research spending by China continues to increase, and could overtake spending by the U.S. in
2020.
Lasers are also playing a much larger role within the military. Gone are the grandiose Star Wars
weapons that never reached their goal of destroying distant intercontinental ballistic missiles.
Instead, laser-directed weapons are now used to neutralize the close-range threat of a small
plane or drone attacking an aircraft carrier or even land-based targets. In September 2015,
Northrop Grumman received a $35M contract to produce IR countermeasure systems for light
aircraft for the first time using quantum cascade lasers (QCLs). Future contracts for just these
systems could well exceed $1.5B over the next five years.
Medical and aesthetic
"We saw strong interest in our OEM Instrument Quality IQ lasers for biomedical applications that
require wavelength and power stability," says Walter Burgess, VP of sales and engineering for
Power Technology (Little Rock, AR). "The economy forced many customers to source lower-cost
lasers from Asia in 2014 and those customers suffering with that decision have been actively
pursuing higher-quality products made in the USA. Though sales growth was modest from 2014
to 2015, we expect 10% growth for 2016 leveraging the success of our Grande laser diode
module that offers up to 20 W of laser light—10 times the amount we offered last year in a single
laser."
Wavelength-specific laser diodes are also in demand for photodynamic therapy (PDT)
applications. For example, Theralase Technologies (Toronto, ON, Canada) is developing a range
of photodynamic compounds (PDCs) that absorb red, green, and near-IR light to destroy cancer
cells,26 and is currently working on Health Canada and FDA approval. A recent trial in rats of
one of its osmium-based PDCs completely destroyed muscle-invasive bladder cancer (MIBC)
tumors while leaving surrounding tissues and blood vessels unaffected by the treatment.
And like last year, Modulight (Tampere, Finland) saw no signs of a slowing economy and grew its
medical laser system sales 30% once again as it focused less on military/industrial accounts.
Modulight executive chairman Seppo Orsila said its ML7710 PDT laser system—with
wavelengths from 400 to 2000 nm for a variety of applications from dentistry to surgery to
photodisinfection—has expanded from exclusive use by one pharmaceutical company to now
more than half a dozen.
For GSI Group (Bedford, MA)—owners of Synrad, Cambridge Technology, and, most recently,
Lincoln Laser,27 Q3 2015 revenue was $92.3 million, an increase of 4% from $88.8 million in Q3
2014. In the financial release, GSI CEO John Roush said, "During the quarter, we had strong

orders from medical applications, which helped to mitigate the weakness we are now seeing in
the advanced industrial end markets."
Our global medical and aesthetic laser sales figure for 2015 of $787 million is anticipated to
remain on a healthy trajectory and grow to $859 million in 2016.
In the laser aesthetics markets, Cutera (Brisbane, CA) reported Q3 revenues for the period
ended September 30, 2015 of $23.1 million-a 23% increase over the same quarter last year (with
an 80% increase in North America) and its fifth consecutive quarter of double-digit revenue
growth. The significant sales growth was attributed to its enlighten dual-wavelength (1064 nm +
532 nm) dual-pulse duration (750 ps + 2 ns) laser systems for tattoo removal and the treatment
of benign pigmented lesions, as well as its excel HR long-pulse 1064 nm Nd:YAG laser and a
new high-power 755 nm alexandrite laser for hair removal.
Geographically, aesthetic laser sales are growing the fastest in North America. Syneron Medical
(Irvine, CA) saw 15% revenue growth in North America in Q3 2015 to $62.1 million—3% year-
over-year growth, but 8% in constant currency. Similarly, Cynosure (Westford, MA) grew
revenues by 10% in Q3 2015 to $78.4 million, with 29% of that revenue from North America.
Compared with the same quarter last year, Cynosure said international revenue was flat because
of unfavorable foreign currency exchange rates and continued weakness in Europe and China.
"With 75% of our sales in Europe, 10% in the Middle East, and 15% in Asia, we were pleased to
see southern Europeans spending again on nonessential items as the economy there slowly
recovers from seven years of high unemployment," says Carles Oriach Font, sales and
marketing director at Monocrom (Barcelona, Spain). "Sales of our OEM lasers grew 40% in 2015
as system providers managed to complete certain FDA and CE approvals. Currently, there is a
shift in our sales from high-power >2 kW lasers to lower-power lasers <1.2 kW needed for
aesthetic laser devices, and next year, we anticipate sales growing 25%."
Those who say that aesthetic lasers represent a true "killer app" wouldn't be wrong, but beyond
aesthetic and even surgical applications, lasers are about to gain even more notoriety through
the Qualcomm Tricorder X-Prize competition (see http://tricorder.xprize.org). As of November
2015, seven finalist teams had been selected to demonstrate their handheld devices capable of
measuring key health indicators such as blood pressure, respiration, and temperature, as well as
diagnosing 15 diseases. Of the seven finalists, at least two disclose the use of laser technology:
the DNA Medicine Institute (DMI; Cambridge, MA) uses laser fluorescence and Danvantri
(Chennai, India) uses a variety of components, including a light-based pulse oximeter and IR
laser diodes.
Regardless of which team wins the competition, the medical laser segment will continue to
diversify, even in difficult economic environments—an aging population is an unfortunate reality
of most industrialized nations, and laser-based point-of-care diagnostic tools such as a diode-
laser-based breath screen for tuberculosis28 and a laser-based eye test for early Alzheimer's
disease detection29 will continue to serve both industrialized and emerging nations alike.

Medical & aesthetic
Includes all lasers used for ophthalmology (including refractive surgery and photocoagulation),
surgical, dental, therapeutic, skin, hair, and other cosmetic applications.
The medical laser market has remained resilient and seems to weather any economic
fluctuations with ease. Lasers used for cosmetology and dermatology were especially strong in
2015, with surgical lasers coming in at a close second. While lasers have a long history of use in
medicine, only in the last few years have lasers become robust and reliable enough to be used in
smaller medical offices at a reasonable cost while not requiring excessive maintenance and
adjustments. Dental lasers still remain a rather small market, as in many cases they are still
beyond the means of many smaller dental practices.
Instrumentation and sensors
Spectroscopy, multiphoton microscopy and its myriad variations, optical coherence tomography
(OCT), lidar, and distributed fiber-optic and acousto-optic sensing systems are among the
numerous laser-based instrumentation and sensing systems enjoying widespread and, yes,
increasingly ubiquitous use worldwide. We forecast that this laser segment will grow to $675
million in 2016.
Interestingly enough, countries large and small are cashing in on the use of lasers for a variety of
instrumentation and sensing applications. A 2013 presentation30 from the Lithuanian Laser
Association (Vilnius, Lithuania) claimed that Lithuania held more than 50% of the world market
for high-energy picosecond lasers and ultrafast parametric light generators, and saw 2012 sales
of nearly $64 million from 22 laser technology companies employing 600 individuals—10%
having PhD degrees.
Although 25% of its sales come from industrial materials processing markets, Lithuanian laser
companies (all listed here are in Vilnius) are heavily engaged in supplying lasers for
instrumentation and sensing: Brolis Semiconductors' mid-IR semiconductor broadband gain
chips suit widely tunable spectroscopy applications; Ekspla manufactures terahertz, second-
harmonic generation (SHG), vibrational sum frequency generation (SFG), and coherent anti-
Stokes Raman spectrometers (CARS); Integrated Optics holds patents for miniature MatchBox
series lasers for Raman and fluorescence spectroscopy as well as surface-enhanced Raman

scattering (SERS) substrates; and TeraVil manufactures terahertz time-domain spectroscopy
systems and components.
"I believe that the year 2015 was the industrial breakthrough year for ultrafast lasers in general,
and ultrafast fiber lasers in particular," says Wilhelm Kaenders, president of Toptica Photonics,
which grew sales 10% in its fiscal year ended September 30, 2015. "This holds true for all the
markets that Toptica serves, from biophotonics to biomedical and from two-photon
polymerization to high-speed materials processing, where Toptica is a subsupplier."
Kaenders says that the field of multiphoton/nonlinear microscopy is opening up more and more
for novel laser schemes—particularly for fiber-based laser solutions and their relatively easy
access to the wavelength range not accessible for Ti:sapphire lasers. "We have also seen more
interest in our multi-color laser engines, as they are frequently used in confocal microscopy or
cytometry."
In addition to microscopy, spectroscopy, and cytometry instrumentation, OCT and fiber-optic
sensing show no signs of slowing down. In 2013, OCT pioneer Eric Swanson estimated the OCT
instrumentation market at $450 million31 and some forecasting services see the OCT market
growing annually at more than 10%. Ophthalmic OCT remains the most popular application,
followed by cardiovascular and gastrointestinal applications. For example, Carl Zeiss Meditec
(Jena, Germany) said revenue in the nine months preceding its Q3 financials for its Ophthalmic
Systems business unit increased 13.9%, or 5.7% after currency adjustments. In particular, it said
that refractive lasers played a significant role in this revenue growth.
And although fuel prices are at all-time lows, Strategic Directions International (SDi; Los Angeles,
CA), publishers of the Instrument Business Outlook newsletter as well as market reports on
Raman and Fourier transform infrared (FTIR) spectroscopy, oil and gas sensing, and particle
analysis markets, said the following in an August 2015 oil and gas summary report:32 "During
the last half of 2014, the price of oil fell roughly 50%, and it has not yet recovered. While this
might suggest that oil companies are tightening their belts and demand for instrumentation may
suffer, the truth is quite another story. In SDi's survey of oil & gas scientists, more than half
expected their instrumentation budgets to increase next year."
Instrumentation & sensors
Includes lasers used within biomedical instruments, analytical instruments (such as
spectroscopy), wafer and mask inspection, metrology, levelers, optical mice, gesture recognition,
lidar, barcode readers, and other sensors.

The laser instrumentation and sensors category includes a variety of applications that are
becoming increasingly important in many areas. Not only is lidar essential for most self-driving
cars, but laser sensors are increasingly appearing in regular automotive applications for self-
parking functions, lane departure applications, automatic cruise control, and other safety
applications. While the number of fiber sensors sold for gas and oil drilling is down sharply, other
applications for fiber sensors such as bridge monitoring and security applications have taken up
much of the slack.
While some applications within this segment are flat or dropping in demand, such as lasers for
barcode readers and laser PC mice (and these applications will never return to prior levels), new
applications such as gesture and facial recognition are in their very early stages and could
greatly exceed the applications that they are replacing. In addition, smartphones are enabling a
range of low-cost applications that could bring laser sensing to a wider range of users in higher
numbers and at a lower cost than ever seen before.
Entertainment, displays, and printing
This year, we have combined the former "Entertainment and Displays" and "Image Recording
and Printing" categories into a single category entitled "Entertainment, Displays, and Printing."
While some of these categories are enjoying healthy growth, the numbers are still small in
comparison to the other laser segments we track.
In 2015, laser-based entertainment and light shows continued to gain popularity for most
televised concerts and awards programs, although no significant technical changes have taken
place in recent years other than the cost of visible entertainment lasers (typically red, green, and
blue) continues to drop, making them affordable for a broader audience.
For the holidays, the Star Shower laser light33 will spray red and green spots over your house
without the hassle of hanging Christmas lights—not a bad business at $40 each if only a fraction
of the public buys one (and hopefully, makes sure—as the online advertisement cautions—not to
point the laser up into the sky if one's house is within 10 nautical miles of an airport).
Laser-based cinema projection is continuing to penetrate movie theater venues worldwide, and
even some fiber laser manufacturers are looking to enter the sector. In a recent press release,34

Christie (Cypress, CA) announced that its 6-Primary (6P) dual-head laser projection system is a
preferred choice for 3D cinema and reported that "To date, about 100 state-of-the-art RGB laser
projectors and hundreds of laser modules have been shipped to premium cinemas and theme
parks around the world."
"Display and projection are finally materializing into a viable market," says Neukum of Dilas.
"This market is served by our 40 W, 638 nm fiber-coupled laser diodes, as well as our 25 W, 450
nm fiber-coupled products. For both wavelengths, we have already shown higher powers and
currently working on 80 W, 638 nm and 150 W, 675 nm as well as 50 W, 450 nm fiber-coupled
devices." Neukum says that sales grew approximately 7% in 2015 over 2014 and he expects to
see similar growth rates in 2016.
In the picoprojection world, MicroVision's (Redmond, WA) PicoP technology has been integrated
into Sharp's (Osaka, Japan) new RoBoHoN robot—a cute, 20-cm-tall robot with integrated
smartphone and camera functionality that projects images from its forehead, has an LCD screen
on its back, and comes with a mic, speakers, and both facial and voice recognition.
In the image-recording category, International Data Corporation (IDC; Framingham, MA) saw a
slight decrease in 2015 printer sales worldwide, and estimates that around 10 million laser
printers are sold each quarter.35 Most forecasters agree that laser multifunction printers,
however, will continue strong growth rates of around 8%.
Revenues for the combined entertainment, displays, and printing category are forecast to grow
nearly 19% in 2016 to $307 million.
Entertainment, displays & printing
Includes lasers used for light shows, games, digital cinema, front and rear projectors,
picoprojectors, and laser pointers. Also includes lasers for commercial pre-press systems and
photofinishing, as well as conventional laser printers for consumer and commercial applications.
While the majority of laser revenue in this segment is currently tied to laser light shows,
increasingly lasers are being used in business-type digital projectors, small laser picoprojectors,
automotive head-up displays, and in a few types of laser projection TVs. But while all these
display applications are growing, there is one that could exceed them all: lasers used for digital

cinema projection. To date, there are approximately 15 laser-powered digital cinemas in
operation worldwide, but as more theater chains back the technology, this number could grow
rapidly. IMAX is already running nine of these theaters and expects to have many more running
by the end of next year.
REFERENCES
For the complete list of references, please see www.laserfocusworld.com/jan2016references.
For more in-depth analysis
Much more detail on the laser markets is available from Strategies Unlimited in its report,
Worldwide Market for Lasers 2016 (www.strategies-u.com). Details include forecasts to 2018 of
laser units, average prices, and revenues by segment, estimates of market share, and
discussion of the dynamics within each laser segment. The report is the only comprehensive
report on the laser market, and the 13th in a series that includes fiber lasers and industrial lasers.
Special topics reports in the series cover mid-IR lasers and ultrafast lasers.
Strategies Unlimited specializes in photonics markets, including lasers, LEDs and lighting, and
imaging. It was founded in 1979 and is located in Mountain View, CA. Strategies Unlimited is one
of PennWell's many brands, which also include Laser Focus World, Industrial Laser Solutions,
BioOptics World, Vision Systems Design, LEDs Magazine, and Lightwave.
About the numbers
The estimates and forecasts of laser shipments were based on both supply and demand side
analyses by Strategies Unlimited (www.strategies-u.com), a PennWell business. Strategies
Unlimited has been conducting market research in photonics products for more than 30 years,
with specialties in lasers and high-brightness LEDs. The effort considered both quarterly trends
and long-term historical trends; results were then compared and adjusted to correct for known
errors. More information will be available from Strategies Unlimited and at the Lasers &
Photonics Marketplace Seminar (www.marketplaceseminar.com) held in conjunction with SPIE
Photonics West in San Francisco on Monday, February 15, 2016.
Copyright © 2007-2018. PennWell Corporation, Tulsa, OK. All Rights Reserved.
PRIVACY POLICY | TERMS AND CONDITIONS

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