Materials Processing Laser Market Opportunity for Continued Fiber Laser Market Share Gain is Significant (US$ mm) IPG’s Core Existing Applications New Applications $1,867 $1,453 $1,323 $718 $662 $644 $569 $520 $431 $385 $352 $333 $278 $219 $183 $144 2015 2020 2015 2020 2015 2020 2015 2020 High Power Marking Fine Processing Micro Processing ( Excludes lithography) All Lasers Fiber Lasers ____________________ Source: Laser Focus World, Industrial Laser Solutions, Strategies Unlimited, Optech Consulting and IPGP estimates. 19
Fiber Laser Penetration of High Power Applications $1,400 80% 70% $1,200 Welding $364 60% Opportunity - $1,000 potentially 50% much more $800 significant 40% $591 $600 30% $967 $180 $400 20% $219 $462 $200 10% $356 $182 $- 0% 2015 2020 2015 2020 (US$ mm) Cutting Welding & Other High Power Fiber Lasers All Other Lasers Fiber Market Share Cutting Applications Welding Applications 7% Flat Sheet 9% 3% 16% Power Train Cutting Tube Welding 27% Tube Cutting 17% Car Body Scanner Welding 81% 3D Cutting Car Body Seam Welding 40% / Brazing Other 20
IR Laser Applications Welding Brazing Cutting Drilling Cladding Marking Surface Treatment Additive Manufacturing 21
High Power Cutting Market estimated at 7,500 systems per year. Underlying growth rate est. at 5-7% per annum - World leader with commanding market Cutting Applications position with room to grow Flat Sheet 16% Cutting 3% - Total market size expanding; ease of use, Tube Cutting lower cost, higher power trends 81% 3D Cutting - Fiber penetration estimated at 35% in Y15 with potential to grow to 80% by Y2020 Source: Strategies Unlimited & IPGP estimate 22
High Power Cutting • Approximately 30 major OEMs • Y15 High Power Laser Cutting Total market size of kW scale machines approximately 7,500 units, forecast to grow at CAGR of 5-7% through 2020; over 10,000 machines 35.2% 55.6% • Fiber forecast to grow to 80% market share by 2020, remainder 9.2% CO2 & Disk • Estimate 60-70% IPG share of Fiber Disk/OtherFiber CO2 industry sales achievable by 2020 • Some fiber opportunity not available to IPG due to OEM Source: IPGP estimate own laser/competition 23
High Power Welding Remote Welding Seam Welding Braizing (aesthetic, roofs, trunks) Laser Seam Stepper Spot Welding Fine Welding 24
Introduction – Laser Welding Market Welding Market USD - Laser Sources 600,000,000 CAGR 500,000,000 7% 400,000,000 300,000,000 200,000,000 100,000,000 0 Global HP Laser Welding Market - Analysis 2015 2019 by units (excl. Surface Treatment) 3,000 2,500 2,000 1,500 1,000 500 Source: Optech Consulting, Sep. 2015; Strategies Unlimited Mar. 2016; IPG estimates 0 2015 2019 25
Transitions in Welding – Medium and Long Term FUTURE CURRENT Limited Materials Diverse Materials Diverse Industries Diverse Products Aircraft Automotive Autos High Strength Aerospace Bridges Steel Construction Buildings Aluminum Heavy Pipelines Niche Welding Titanium Equipment Applications Rails Railways Alloys Railcars Shipbuilding Thick Ships Materials Transportation Storage Tanks & Storage Trucks In many instances strength of the laser weld > welded material Decreasing cost of laser welding, new laser welding technologies, know-how, software & algorithms 26
High Power CW Welding • TAM – Expecting to grow to 2,200 units by Y19 (conservative estimate) • Estimated CAGR of 6-7%, expected to outpace market growth for 2016 ~10-15% • Welding covers a wide industry cross section that encompasses aerospace, construction, consumer appliances, furniture, heavy industry and automotive 2015 • Opportunities include CO 2 displacement, new braising technologies, new remote welding solutions, penetration of new industries and flagship customers 38.5% IPG has strong traction within Auto 61.5% automotive segment. Over 850 HP lasers installed in Welding - welding applications with other automotive end users globally . Source: Strategies Unlimited, Optech Consulting and IPGP estimates. 27
New High Power Scanning (Remote Welding) • 2D currently undergoing testing, prototypes to apps labs and test customers this quarter • 3D alpha testing expected in Q3’16, prototypes in Q3’16 • New IPG Weld software and the scan controller seamlessly interfaces to IPG lasers and scanning systems • With the addition of the application software, IPG is able to offer a complete remote welding solution to Integrators and OEMs • Target to capture 50% of industry sales, incremental $45-$50M Market size scanning ~380 lasers in Y15, our sales <30%. Expect to grow as we roll out an integrated total product that we can support, at a competitive price point. 28
New Product Introductions: High Power Scan head Market Opportunity* [Product Image] (US$ mm) $140 $140 $90 $90 High Power Scan head 2015 2019 (E) Description: Launch: Scan head for high speed welding in 2D and 3D for Q2 2016 use with kW class lasers Market Opportunity*: Applications/Markets: $140M estimated by Y19 Automotive; body in white, seat welding, battery welding Strategy: Customer testing from Q2 in multiple Advantages: geographies Ease of use, lightweight, competitively priced, 2D & 3D IPG is able to provide complete solution laser + *Source: Optech/IPG beam delivery + chiller + software 29
New Product Introductions: Trifocal Brazing Market Opportunity* (US$ mm) $65 $65 $3 $34.5 4.5 2015 2019 (E) Trifocal Brazing Launch: Launched Q2 Y15, several large Description: IPG's new YLS-5000-BR trifocal laser automotive manufacturer wins, multiple brazing allows cleaning of the base metal parts improving global engagements filler material flow, resulting in reproducible brazed joint with increased strength and better appearance Market Opportunity*: Market size estimated at 140 units, growing Applications/Markets: Brazing of Electrogalvanized to 380+ by Y20 Material, Automotive manufacturing Strategy: Rapid deployment globally to Advantages: Unique three beam approach, cleaning become technology of choice for brazing and braising. Highly reproducible brazed joint with increased strength and better appearance Source: Optech Consulting, Sep. 2015; Strategies Unlimited Mar. 2016; IPG estimates 30
Unique Quasi-CW Fiber Lasers Fine welding, brittle material cutting, high power drilling • QCW has grown strongly in past 3 years to $56M in Y15 • Market opportunity to displace YAG remains with 5000+ per annum still produced in China. Expect 20-30% of market to transition to QCW • Unique technology with high peak power, has typically displaced old YAG lasers which are large, inefficient and unreliable • Target to grow to $100M by Y20 • Medical Devices • Micro welding • Computer Components • Deep Engraving • Drilling (aerospace) • Cutting • Spot Welding • Batteries • Seam Welding 31
Pulsed Lasers 1-100 W, 1-200 ns, up to 1 mJ Main market application marking & • Low Divergence engraving across most/all industries, • High Beam Quality ablation, cleaning, micro-processing • Increased competition in low power pulsed market; erosion of ASP’s • IPG working in higher power applications, sales up 20% in Q1 with good pricing/margin • New integrated marking platform (laser + scan head + software) New 100 W to 5 kW, 100-600 ns, 10- gaining traction 100 mJ • Opportunities in higher power • High Throughput applications growing; coatings • High Pulse Energy removal, cutting applications Strategy – Defend volume market, expand applications and trend to high power 32
World Leadership in High Power Fiber Lasers UV Fiber Lasers www. ipgphotonics .com
New Product Introductions: UV Fiber Lasers Market Opportunity* (US$ mm) $140 $140 $110 $110 Low Power UV Laser 2015 2019 (E) Description: Launch: Laser marking module with 2-axis scanner Ready for introduction integrated with IPG UV laser Market Opportunity*: Applications/Markets: >$110 million UV marking for white plastics and cabling; electronics, aerospace *Source: IPG Estimates Advantages: IPG’s Complete UV Marking Module Provides Ease-of-Integration, High Performance and Reliability to Integrators and OEMs at a competitive cost point 34
World Leadership in High Power Fiber Lasers Ultrafast Fiber Lasers www. ipgphotonics .com
Ultrafast Lasers Ultrafast lasers have short pulses of pico (10 -12 s) to femtosecond (10 -15 s) duration, pulse duration so short that little of no thermal damage occurs when laser interacts with materials. Pico and femto pulses enable microprocessing and medical applications Key process areas are micro cutting, scribing, 3D micro-milling, micro hole drilling and blind hole machining, laser lift- off, selective material removal and ultrafine marking Typical industries include production of consumer and appliances, semiconductor industry, medical device manufacturing and medical procedures Leverage IPG fiber laser technology into the $130+M ultrafast laser market segment by developing compelling new lasers differentiated by performance, form factor and total cost of ownership 36
New Product Introductions: Picosecond Fiber Lasers Market Opportunity* (US$ mm) $300 $300 $190 $190 Industrial Picosecond IR Laser 2015 2019 (E) Launch: Description: Ready for introduction Air-cooled, rack-mountable chassis featuring remote head produces 50 µJ pulses at high Market Opportunity*: repetition rate totaling >50 Watts average power $190 million annual industrial picosecond laser market opportunity Applications/Markets: Sapphire scribing (LED)/cutting (watch glass), Strategy: high strength glass cutting (smartphone/tablet), IPG will accelerate ultrafast market thin film ablation (display/electronics) growth by providing robust, easy to integrate economical fiber lasers Advantages: *Source: Strategies Unlimited Compact, affordable, reliable picosecond laser 37
New Product Introductions: Femtosecond Fiber Lasers Market Opportunity* >$1B $620 Industrial Femtosecond IR Laser 2015 2019 (E) Launch: Description: Initial units available Air-cooled, rack-mountable chassis featuring Market Opportunity*: remote head produces 500 femtosecond pulses >$600 million annual industrial at high repetition rates totaling >10 Watts femtosecond laser market opportunity average power Strategy: Applications/Markets: IPG’s robust, affordable fiber lasers will Medical (Laser Eye Surgery), Scientific, enable femtosecond laser processing to Ultra-precise micromachining enter the mainstream Advantages: *Source: Strategies Unlimited Compact, affordable, reliable femtosecond laser 38
World Leadership in High Power Fiber Lasers Visible Fiber Lasers www. ipgphotonics .com
Green Fiber Lasers Overview Overview: IPG provides visible fiber lasers in many wavelengths, including red, yellow, orange, green. These sources can be utilised in many application areas such as materials processing, medical and entertainment. For example green wavelength has distinct advantages for fine processing of highly reflective metals like Copper, gold and platinum Strategy: Penetrate emerging micro applications and enable new applications through the introduction of visible fiber lasers with unprecedented performance levels Competition: IPG Green Fiber lasers provide unprecedented levels of average power with reasonable pulse energy in a rack-mountable industrial footprint with an elegantly compact remote laser head 40
New Product: High-Power High Rep Rate Green Fiber Laser Market Opportunity* $10-20 (US$ mm) <$1 <$ High-Power Quasi-CW 2015 2019 (E) Green Fiber Laser Launch: Expected Q3 2016 Description: Rack-mountable 500 Watt single mode laser Market Opportunity: providing 1.5 nano second pulses at high 150 MHz Kilowatt-class HRR green laser creates a new repetition rate through a compact remote head market segment Applications/Markets: Strategy: Emerging applications in reflective metal welding and IPG is partnered with leading OEMs in the drilling, wafer and glass panel annealing PCB, Aerospace and Semi Equip industries to pioneer new applications Advantages: Unprecedented level of single-mode green power *Source: IPG Internal Data 41
New Product: Nanosecond Green Fiber Laser Market Opportunity* $451 $451 (US$ mm) $263 $263 High Pulse Energy Green Nanosecond Fiber Laser 2015 2019 (E) Description: Market Opportunity*: Rack-mountable 100 Watt nanosecond laser $250M annual micro materials laser providing up to 500 milliJoule pulse energy market in Semi, PCB and Solar through a compact remote head Strategy: Applications/Markets: IPG partners with leading micro materials Solar Cell thin film ablation and wafer dicing, processing companies to pioneer new high precision via drilling for microelectronics PCBs pulse energy green applications Advantages: Unique combination of throughput and precision *Source: Strategies Unlimited, 2016 Worldwide Laser Report stemming from high pulse energy and short 1.5 nanosecond pulse width 42
World Leadership in High Power Fiber Lasers Laser Systems www. ipgphotonics .com
Adding Value Through Integration Process Heads Resonators Chillers Lasers Couplers, Switches & and Power Amplifiers Delivery Fibers Supplies $5-40K $10- $20K $4-$10K $3K $15-$20K $4-$10K $50K to $1.0 million $8-$100K COMPLETE SYSTEMS $200k to $5 million + INTEGRATED LASER, ACCESSORIES AND CONTROLLER TO DRIVE LASER, OPTICAL PROCESSING AND ROBOT 44
Laser Systems – Developing New Applications and Opportunities Overview: IPG manufactures complete integrated systems for welding, cladding, cutting, drilling. The systems are typically customised solutions i.e. 50kW laser welding cell with IPG laser, welding head, control software for US customer welding rockets. We integrate the industry’s best lasers with IPG high precision motion systems, optics, beam switches, processing heads and software. Strategy: Penetrate new applications for lasers and expand product portfolio through the development and introduction of specialized laser-based systems to meet the specific needs of manufacturing end users whose requirements are not met by standard systems or in certain geographic areas where fiber laser systems are not currently available Growth Targets: Target to develop systems business of $200M + by 2020 45
Laser Systems Overview New system platforms offering specific laser and beam delivery tailored to specific applications Small format 2D Micromachining cutting Tube and Profile Welding Multi-axis pipe welding system Small format multi-axis Multi-axis welding, welding, cutting & drilling cutting & drilling Orbital Pipe Welding Laser Seam Stepper 46
Robotic Laser Processing System High Power Automated Welding System Laser Equipment: – YLS-50000-CT 50 KW Welding Laser – IPG FLC D50 Welding Head – LC170 Chiller Motion System – 6-Axes Robot, 10 ft reach – 10 ft linear track – Rotary worktable 22 ton 8 ft dia – Tip/Tilt 2-axes positioner Application: Welding Aerospace Components Example. Seam welding 1 inch thick copper 47
New Product Introductions: Laser Systems 5-Axis Pipe Welding System Description: Launch: Multi-axis high power fiber laser pipe welding First system delivered in Q1 2016 system Market Opportunity: Applications/Markets: Large application area with zero Pipelines, construction penetration by lasers today Advantages: High productivity vs incumbent technology 48
Macro and Micro Laser Systems Market Macro and Micro Laser Systems 2015 - Approximately $9.6 Billion* 10% 11% Cutting 38% Welding & Brazing 10% Other High Power Micro-processing Excluding DUV & EUV Fine Cutting, Welding & Drilling Marking 19% 9% Other Low Power 2% *Source: Strategies Unlimited, Optech Consulting and IPG Photonics estimates 49
World Leadership in High Power Fiber Lasers Accessories Felix Stukalin Senior Vice President, U.S. Operations www. ipgphotonics .com
Typical Laser System Architecture Laser System Lasers & Chillers Couplers, Switches & Cutting Heads Delivery Fibers CUTTING Welding Heads WELDING Integrated Modules Controller + Scan Heads MARKING Pulsed Laser Software 51
Strategic Rational Significant greenfield revenue opportunity Facilitates higher power laser sales through integrated subsystem solution Enables new laser material processing applications through optimized beam delivery and process control Captures more value from laser processing by integrating lasers, with beam delivery, controllers, software and process monitoring 52
IPG Strategy Product Development of Laser Process Heads – Develop product platforms for highest volume applications – Leverage expertise into more specialized and new applications IPG Differentiators – Achieve highest quality through technological superiority • In-house high power optics and coating capability • Extensive testing with high power laser • Advanced application expertise – Offer superior performance though integration with laser source – Provide lower cost through vertical integration 53
Major IPG Opportunity for Integrated Heads Value – Cutting and welding heads are sold at 10% of laser price – Advanced process heads are sold at 30% to 50% of laser price – Marking heads are sold at 30% of laser price – Sensors and advanced features are sold at significant premium – IPG can offer better value to IPG customers Performance – Power of IPG fiber lasers advanced faster than process heads – Existing offering have power limitations above 20 - 30 kW for welding and above 6 kW for cutting – IPG in-house optics technology and sealed designs solve power limitations Sales and Service – One-stop shop from IPG for the laser, processing head and application – Enhanced opportunity for advanced applications development – Service and warranties are aligned with integrated solution – Service and support benefits from IPG’s worldwide infrastructure 54
Total Available Market* – Accessories Sold with IPG Lasers Total available in 2015 ~$150M, projected 2020 ~$280M to $300M Targeting >60% market penetration by 2020 ~$180M – IPG currently provides 100% in Switches and Process Fibers – IPG current share is less then 10% in Process Heads and Scanners TAM 2015 2020E TOTAL $150M $280M-$300M Welding heads $35M $80M Cutting heads $50M $80M Scanning heads $30M $60M Beam Switches $22M $45M Process Fibers $13M $25M *Market size estimate by IPG 55
Recent Products Introduced in 2015 IPG CUTTING HEAD WOBBLE & SEAM TRACKING MODULE WELDING CUTTING • Highest power handling in the • Wobble and Seam Tracking Industry – 12kW combined in one product • Ultra-stable capacitive height • Unique Product sensing • Provides improved weld quality • Hermetically sealed design and better visual finish • Motorized Focus and Pierce • Variety of Wobble shapes at a Sensing options frequency of 300Hz • Power Handling of up to 12kW MID-POWER 50kW WELDING HEAD SCANNING SYSTEM • Optimized for welding applications WELDING SCANNING of up to 50kW • Hermetically sealed design • Remote Scanning • Provides unmatched results in Applications penetration depth • Plug & Play with QCW or CW lasers • Up to 2kW laser power 35mm+ of penetration handling depth in SST at 50kW • Calibrated Scan Field 56
New Products for 2016 Introduction IPG HP CUTTING D30 WOBBLE & SEAM HEAD TRACKING MODULE WELDING CUTTING • IPG Wobbler design is now available in a compact and • Highest power handling in the lightweight architecture Industry – 15kW • Wobble frequencies of up to • Ultra-stable capacitive height 1000Hz sensing • Power Handling of up to 6kW • Hermetically sealed design 2D/3D REMOTE UV INTEGRATED REMOTE WELDING WELDING MARKER • Highest power handling in MARKING • Integrated Module the Industry – 15kW • Optimized for Marking • Hermetically sealed design applications • Through the lens vision • Completely sealed • Plug and Play with IPG design Lasers • Includes Controller and • Available with IPG Controller Software and IPG Weld software 57
Next Level of Integration - Specialized Beam Delivery Systems Expand Market Opportunities Welding with Seam Seam Stepper Cladding Heads and 3D Tracking Sub-system Cutting Heads • Specialized cladding and 3D • • Welding unit with seam Integrated robotic welding unit cutting heads for emerging tracking capability addresses addresses large resistance material processing applications pipe and seam welding market spot welding market 58
World Leadership in High Power Fiber Lasers Strategic Growth Projects Dr. Yuri Erokhin VP, Strategic Marketing www. ipgphotonics .com
Laser Luminaire: Large Greenfield Opportunity Industry Trend – Major cinema players upgrading image quality and overall moviegoer experience, opportunities in other entertainment and signage markets – Transitioning projectors from Xenon Bulb to laser luminaires Opportunity – ~$200M annualized IPG revenue potential beginning to ramp in 2017 IPG Solution – Key Differentiators versus laser diode based illumination alternatives: • Improved image quality: higher brightness & contrast, lower speckle • Increased optical efficiency of next gen projector designs • Reduced overall Cost-of-Ownership – Leverages IPG existing fiber laser technologies – Successful product introduction at CinemaCon-2016 Significant interest from leading projector makers and high-end theater operators 60 5/11/2016
Cinema Market Opportunity: Up to $2.4B Over 8-10 Years Projected Top-Down Laser Luminaire Market Adoption Screen TAM over Segment Count 8-10 years Ultra-Premium Laser Strength Segments $200M- IMAX, Dolby, etc. 2,000 3D Ultra $400M Mostly 3D Premium Very Large Very Large $250M- Screens 5,000 Screens 2D $450M 2D and 3D and 3D Large Screens $300M- Large Screens 10,000 Primarily 2D, some $600M 3D capable Fiber Lasers or diodes $425M- Medium Screens, Mostly 2D Medium Screens 38,000 $950M 55,000* $1.2B to screens $2.4B** * Remaining 85.000 (+/-) screens WW are small size **Revenue opportunity is exclusive of service 61
Laser Opportunities in Signage and Entertainment Markets 2015 Freightliner unveiling autonomous truck - Hoover Dam Laser Projection is rapidly gaining promo event. 60 projectors with 1.17M lumen traction in signage and entertainment – High impact advertising campaigns – Theme parks and museums – Architectural projection mapping – Concerts, other performances Laser projectors enable lower costs, easier field installation and Creating Technology – design; Barco Entertainment – projection system superior image quality $50M annualized RGB Fiber Laser Illumination Source opportunity http://www.barco.com Projection mapping: A map to spectacle 62
Flat Panel Display Anneal Market Opportunity FPD market segments are undergoing disruptive structural shifts: – Accelerated growth of high resolution smartphone displays – iPhone adopts OLED displays in 2018 – High-Res OLED tablets Laser Annealed L ow T emperature P oly- S i ( LTPS ) is key enabler of these Source: Samsung Display products $500M market today, dominated by Excimer Lasers Unique Flat Panel market opportunity Source: DisplaySearch, 2014 for IPG UV fiber lasers 63
UV Fiber Laser Flat Panel Market Opportunity E xcimer L aser A nneal (ELA) is an incumbent LTPS process ELA process (excimer) suffers from high cost, both initial capital requirements and high ongoing equipment maintenance 96% of LCDs (by area) still fabricated on a -Si will transition to high mobility DisplaySearch, Jan., 20 th , 2014 backplane fiber laser opportunity By 2018 Samsung Projects Proliferation of LTPS 3-5x lower operating cost vs. ELA into High End Tablets expands OLED to next generation smartphone, tablet and laptop displays >$300M IPG opportunity IPG patent pending processes under evaluation with three major WW Flat Panel Manufacturers *Source: Samsung 64
Laser Ablation for Paint Stripping and Surface Cleaning Environmental Benefits: Ablates paint from the surface Vacuum removes 99.9% of residue Plus 165 lbs of Liquid Waste Does not require chemicals which produce toxic 10 Solid waste (lb.) generated Per 1 lb. on paint stripped sludge or plastic beads Manual paint stripping requires: 5 F-16 4 people 16 to 18 people for a C-130 Dept. of Defense current paint stripping costs > 0 $800 million per year (2015 Air Force LCMC) Media Blast* Solvent* Laser Ablation** Many applications outside of aerospace: Paint Stripping Method Cleaning of molds, casts, tanks, pipes & other surfaces New generation of Nano-Second Pulsed laser with average power up to 4 kilowatt Pulsed product limits thermal damage to cleaned surface Sources: *Potential alternative report for the portable handheld laser small area supplemental coating removal system, prepared for USAF by SAIC, Feb. 2001 ** Penn State Applied Research laboratory, Automated Rotor Blade Stripping System (ARBSS) study for the USN, 2005 65
World Leadership in High Power Fiber Lasers Medical Dr. Greg Altshuler President, IPG Medical www. ipgphotonics .com
Large Medical Laser and Systems Market 4-8 Times Larger Opportunity for Laser Medical Systems $9,000 ($ in Millions) $7,759 $8,000 $7,000 $6,000 Laser medical systems*, $5,000 $MM $4,110 $4,000 Laser sources for medical systems**, $MM $3,000 $2,000 $1,042 $628 $1,000 $0 2015 2020 *Includes Ophthalmic, Surgical, Cosmetic, Dental and Veterinary applications Source: BCC Research **Source: Strategies Unlimited 67
Medical Laser Sources by Type Laser Medical Systems use legacy technologies such as flash lamp pumped and gas lasers with slow transition to new diode and fiber laser platforms 2020 2015 Diode laser Diode laser 17% 20% Lamp Pumped SSL Diode Diode Lamp Pumped 35% Pumped SSL Pumped SSL 12% SSL 37% 16% Fiber laser CO2 CO2 Fiber laser 5% 20% 9% 21% Eximer laser Eximer laser 4% 4% IPGM believes it can target 20% to 30% growth Source: Strategies Unlimited 68
Fundamental Advantages of Fiber Lasers for Photo-medicine All spectrum of wavelengths for safer and more effective selective photothermolysis and tissue surgery Pulse width from CW to picosecond and femtosecond High-quality laser beam enables tight focusing of energy for precise and safe surgery and delivery of laser energy to tissue through ultra-thin quartz fiber Low cost compare with old laser technology Small system size, air cooling High reliability, no water and lamp replacement - low ownership cost Opportunity for dramatic improvement of existing laser medical applications and development new medical technologies 69 69
IPG Medical Overview and Strategy Overview: – IPG Medical provides turn-key solutions for development and manufacturing of lasers and laser-based medical systems – ISO 13485 certified and FDA registered manufacturer (2016) – Research and development in Marlboro (USA) and Fryasino (Russia) – Production of components and final product in Fryasino (Russia) and final product for US market in Marlboro (USA) Strategy: – IPG’s unique fiber lasers new game-changing products which are more efficient, safe and cost-effective and enable new medical procedures – Penetrate new medical applications, such as urology (BPH and Lithotripsy), aesthetic (hair removal, vascular and pigment, skin texture and tightening, body contouring, tattoo), dental (surgery and tissue regeneration), ophthalmology, through the development and introduction of new products – Approach the market in partnership with leading medical device companies in particular fields or direct distribution in selective field and territory Growth Targets: – We target medical opportunities from $70M - $150M in 2020 70
Dental Laser Partnership IPG: – Conducts joint research, design and development of the new product platform for professional dental use – Manufactures laser console and application modules on exclusive basis Biolase: – Commercializes the final medical products with Biolase accessories in the professional dental field under Biolase brand – Exclusive, performance-based distribution rights Expected revenue beginning in 2016 71
Urology Opportunity New IPG products based on QCW Tm fiber laser: laser for Lithotripsy and Benign Prostatic Hyperplasia & Lithotripsy would replace flash-lamp pumped Ho:YAG laser platforms with more than 10,000 installed base 2 times faster speed of human stone dusting with significantly lower retropusion than current “gold standard” Ho laser has been demonstrated in vitro study (Super Pulse Tm Laser for Lithotripsy, ASLMS Annual Meeting 2016) First product would be launched in 2016 in Russia pending regulatory approval US and worldwide market would be approached in partnership with leading urology partner with product launch in 2018 IPG Consumable Surgical Fiber with proprietary connector 72
Dentistry Opportunity Gum regeneration for periodontology and implantology New solution with IPG proprietary patent pending fractional dental laser technology ALD 2015, G. Altshuler et al.: Laser 3 w after Tx Before Tx Patterned technology: a new natural method of tissue regeneration Laser patterns on gum Replacement of tissue tissue treatment grafting 73
World Leadership in High Power Fiber Lasers Telecom Products Mark Cannata Director, Sales and Marketing, Telecommunications Products www. ipgphotonics .com
Differentiated Products for Growing Market Product Line Today – Optical amplifiers and Raman lasers – Optical transmission and DWDM systems Markets/Customers – Fiber-based Fiber to the Home (FTTH) and Cable TV (CATV) • Arris, Calix, Portugal Telecom – Ultra-long haul • ABB, Saudi Electricity Company, Rostelecom IPG Differentiators – Highest power amplifiers, any wavelength/any power Raman – Proprietary signal processing system technology for ultra-long haul telemetry and DWDM applications – Eliminates mid-span optical regeneration in long-haul links – Provides industry’s highest density amplification with the lowest electrical power utilization Amplifier Market Size – $520M (2016) growing to $630M (2020) 1 ; 15% CATV amplifiers / 85% transport amplifiers 1 1 Ovum, Total OC Forecast Spreadsheet: 2014 – 20, August 2015 75
Optical Amplifiers for Broadband and CATV IPG EDFAs for FTTH Networks RF Overlay for CATV delivery 64-port with integrated WDMs 32-port Front Access ~10W amplification OEM EDFAs for CATV Networks Fiber Deep architectures e.g. RFOG, Node Segmentation Node EDFA Head-end CATV EDFA 76
Optical Transmission - Line Cards, Modules, DWDM Systems Addressable Optical Networks Market: $12.8B in 2016 to $15.4B in 2020 All Growth in 100G+ Line Cards and Pluggable Modules IPG DWDM and Optical Transport Menara Optical System Modules Repeater-less 40x100G DWDM – 400+ Km 10G OTN XFP System in a Module 10G SFP+ 100G CFP/CFP2/QSFP Vendor Agnostic Plug-and-Play Data Center / metro / Regional And DWDM Connectivity 77
IPG to Enter Large and Growing Optical Pluggable Systems Market with Menara Acquisition Product Line Tomorrow (with Menara) – Patented “System in a pluggable module” integrating all line card functions; “transponder - less transport” – Short Reach to Ultra-Long Reach, 1G to 100G+ DWDM for all network segments Markets and Customers – Major network operators, CATV MSOs, Data, Wireless – Optical network equipment manufacturers Large and Growing Optical Line Card Market Opportunity – 100G+ market growing from $5.4B in 2016 to $8B by 2020 IPG + Menara Differentiators – Vertically integrated transponder technology- optics, ASICs, manufacturing – ASIC with patented mixed-mode coherent & multilevel 100G+ signal processing – Plug-and-play functionality with all vendor transmission and switching equipment – Optimized DWDM solutions with transponder blade elimination – Software Defined Network control Synergies – Vertical integration of IPG’s optical transmission solutions – Add new addressable markets for IPG’s telecom portfolio – Leverage IPG’s resources to accelerate time to market, lower cost, expand Menara’s current markets 78
100% of Optical Networks 5yr Growth in 100G Line Cards $2.5B Growth 2016 2020 In 100G+ Transmission Line Cards $12,830M $15,350M Terminals, Terminals, L2/OTN L2/OTN switching, switching, $2,002 $1,973 100G, >100G ROADMs, ROADMs, 100G, >100G MXP/TXP, Amplifiers, Amplifiers, MXP/TXP, $5,360 $2,531 $1,967 $7,900 10G, 40G TXP, $2,915 10G, 40G TXP, $3,536 $25.0 Optimistic Most likely Pessimistic $20.0 $15.0 Revenue ($bn) $10.0 $5.0 $0.0 2012 2013 2014 2015 2016 2017 2018 2019 2020 Ovum, Optical Networks Forecast Spreadsheet: 2015 – 20, December 2015 79
Growing Telecom Opportunity Telecom Acquisition Adds Scale to Business and Expands 3-to-5 Year Growth Opportunity to between $100 million and $150 million 160,000.00 140,000.00 120,000.00 100,000.00 80,000.00 60,000.00 40,000.00 20,000.00 - Current Business With Menara 3-5 Year Opportunity 80
World Leadership in High Power Fiber Lasers Manufacturing: Devices and Components Dr. Eugene Scherbakov Managing Director, IPG Laser GmbH and SVP, Europe www. ipgphotonics .com
Proven Vertical Manufacturing Drives Leading Results Vertically integrated volume manufacturing provides cost and technology advantages Leverages scientific and manufacturing expertise in different locations to develop new technologies and implement low cost high volume manufacturing Capitalizes on labor intensive component and finished product manufacturing in lowest cost geographic locations Benefits from proximity to large end markets and customers Manufactures in strategic locations where there is strong IP protection Manufactures close to customers, providing excellent service 82
Vertical Integration Drives Significant Benefits 83
Major Global Production Facilities Production Facility and IPG Laser Facility NTO Facility World Headquarters Burbach, Germany Fryazino, Russia Oxford, MA Total: 57,000 sq.m. Total: 38,600 sq.m. Total: 50,000 sq.m. Clean Rooms: 10,000 sq.m. Clean Rooms: 10,000 sq.m. Clean Rooms: 8,000 sq.m. Employees: 1,400 Employees: 1,113 Employees: 1,100 84
Vertical Integration & Production Location US, Germany & Russia US Laser diode Fab Operations Packaging Semiconductor Wafer Growth Up to 120-watts Diode Processing, Chip Mounting Germany & Russia & Burn-In Optical Preform US & Russia Optical Delivery Silica based glass Systems: Welding MCVD method & Cutting Heads, Dope with rare Scanners, process earth ions fibers Germany & Russia US, Germany & Russia Deep in technology Deep in experience Fiber Draw Draw towers US, Germany & Russia US, Germany & Russia Final Assembly US, Germany & Russia Components Coupling Bragg Gratings Final burn in Modules Isolators, Couplers Shipment Up to 2000 Watts Fiber Block 85
Core Technologies Manufactured at IPG’s Facilities Core Technologies U.S. Germany Russia Diode Fab/Front End Laser Diode Packaging Active and Passive Fibers Laser Crystals Fiber & Bulk Gratings Fiber Couplers & Combiners Fiber Blocks & Modules Bulk and Micro Optics. Thin Film Coatings Laser Assembly Laser Systems Assembly Optical Heads & Scanners 86
IPG's Commercial Products IPG offers more than 510 different fiber lasers for micro and macro applications! 2015 - First 6kW W ECO O laser 2013 - First 100kW kW HPL WPE> E>50% 10 20 100 200 400 600 1000 2000 4000 5000 8000 10000 15000 20000 50000 Output Power [W] 87
NTO Sales 2013-2015 at Internal Transfer Prices ($ in millions) 200.0 $173 180.0 160.0 $129 140.0 $109 120.0 100.0 80.0 60.0 40.0 20.0 0.0 2013 2014 2015 HP Lasers LP Lasers Systems Laser Heads Telecom Medicine Components 88
Components Production: Fibers Active Fibers NTO IRE-Polus 1,331 1,400 IPG Laser GmbH 1,200 Total length, km 985 497 1,000 879 795 192 56 800 67 644 66 600 418 402 834 400 823 793 728 578 200 200 386 384 180 0 2008 2009 2010 2011 2012 2013 2014 2015 Passive Fibers NTO IRE-Polus 14,000 12,018 IPG Laser GmbH 12,000 Total length, km 9,523 10,000 7,800 8,000 6,729 6,213 6,100 6,120 6,000 3,600 3,564 3,388 3,713 4,000 3,095 2,134 1,541 4,218 2,000 985 3,403 3,129 2,712 2,500 1,554 1,430 575 0 2008 2009 2010 2011 2012 2013 2014 2015 89
Components Production: Fiber Blocks Fiber Blocks: Production in Germany and Russia 100,000 93,833 NTO IRE-Polus 90,000 IPG Laser GmbH 80,000 Quantity, pcs 70,000 65,631 60,000 54,488 79,570 47,677 50,000 42,735 40,000 52,600 32,756 41,032 30,000 34,838 32,278 22,569 20,000 24,480 15,756 9,486 10,000 4,133 14,263 13,456 13,031 12,839 10,457 8,276 6,813 5,353 0 2008 2009 2010 2011 2012 2013 2014 2015 Year 90
Pulsed Lasers Production Pulsed Lasers. Production in US, Germany and Russia. 20,000 18,604 IPG Photonics 18,000 IPG Laser GmbH 15,681 NTO IRE-Polus 16,000 14,829 14,051 14,000 Quantity of Lasers, pcs 11,579 12,000 6,181 7,940 5,334 10,468 10,000 9,246 4,011 8,000 2,637 5,916 6,000 - 7,434 7,697 6,616 4,000 3,159 6,578 6,011 5,640 - 5,785 2,000 2,951 1,214 1,125 1,020 817 - 2008 2009 2010 2011 2012 2013 2014 2015 91
High Power Lasers (P > 1KW) High Power Lasers. Production in US, Germany and Russia. 4,500 IPG Photonics 3,883 IPG Laser GmbH 4,000 NTO IRE-Polus 3,500 3,021 Quantity of Lasers, pcs 3,000 2,500 2,241 2,758 2,000 2,015 1,518 1,500 1,266 1,398 1,000 947 842 590 276 1,051 500 259 886 724 413 461 352 191 164 - 2008 2009 2010 2011 2012 2013 2014 2015 92
Low- & Mid-power Lasers (P < 1KW) Low- & Mid-power Lasers. Production in US, Germany and Russia. 10,000 IPG Photonics 8,734 9,000 IPG Laser GmbH NTO IRE-Polus 8,000 1,677 7,000 Quantity of Lasers, pcs 6,000 5,148 3,616 5,000 634 3,652 4,000 2,940 2,759 2,686 3,000 2,317 1,957 1,647 1,635 2,000 1,583 3,441 1,259 1,454 694 1,000 1,755 1,518 1,083 1,230 1,043 939 827 - 2008 2009 2010 2011 2012 2013 2014 2015 93
Scale in High Power Laser Sales IPG has shipped more than 19,000 lasers with output power of more than 500-watts since 2007 7,000 6,000 5,000 4,000 >500W 3,000 >1KW 2,000 1,000 - 2007 2008 2009 2010 2011 2012 2013 2014 2015 94
Rapid Penetration of the Laser Market Across All Products Approximately 160,000 IPG lasers in the field since 2007 35,000 30,000 25,000 20,000 Total Units Sold 15,000 10,000 5,000 - 2007 2008 2009 2010 2011 2012 2013 2014 2015 95
Automotive – IPGL IPG is already an important player in automotive welding field; ~$108M revenue in 2015 (primarily for welding, some cutting) Potential upside in automotive welding is substantial – Many OEMs are just starting to use fiber lasers – Huge potential substitution for spot/ arc/ other joining technologies – Move to lightweight materials creates opportunities for fiber lasers – Strong growth potential in electric vehicle batteries – Many new products; trifocal braising, high power scan head, three beam LSS aid application and market growth However- this is a difficult and time consuming market to penetrate – Requires extensive design in work with auto OEMs – Long preproduction time frames – Competition with other joining techniques 96
Automotive – Outlook for HP Lasers Auto HP units for joining forecast to Growth in HP Lasers for grow from 718 in 2015 to 1,200 in 2019 Automotive Joining IPG targeting to grow sales in joining 1200 from ~50% to 65% through superior technology, technical differentiation, 1000 applications wins, regional excellence and strong commercial position 800 Opportunity is $200M+ by 2019 (mid and HP welding, cutting and ablation) 600 Existing market forecast could have strong upside from electric vehicles 400 200 0 2015 2019 Total IPG 97
World Leadership in High Power Fiber Lasers Manufacturing: Diodes Dr. Alexander Octchinnikov SVP, Components www. ipgphotonics .com
IPG Diode Manufacturing: Significant Competitive Barrier Most technically advanced, highest volume and lowest cost in the industry Key Benefits: – Cost control: Advantage of internal manufacturing – Quality control: Key subcomponents manufactured internally – Technology/IP control: Significant process know how, trade secrets & strong patent protection – Unprecedented flexibility: Rapid product development and introduction into volume production Scale and Scope: – Full vertical integration: Not a single manufacturing step or key subcomponent is outsourced – High-volume manufacturing: IPG is largest manufacturer of high power pump laser diodes – Highly automated robotic manufacturing: Most automation processes and equipment are designed and manufactured in-house 99
Ongoing Strategic Initiatives and Cost Improvements Enhancing vertical integration Capitalizing on next-generation pumps – Increases output power per chip and reliability – Lowers manufacturing cost volume of packaged diodes Improving utilization of existing global facilities Result: Driving down cost and maintaining significant competitive advantage 100
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