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Company/Photo provided by Peng Chunxia/Drawing

Securities Times reporter Liu Qian

"One year to lay the foundation, two years to start, and three years to double", empowering the laser industry to drive the development of thousands of industries. Recently, Hubei issued the "Implementation Opinions on Promoting the High-Quality Development of the Laser Industry" (hereinafter referred to as the "Implementation Opinions"), striving to achieve a laser industry output value of 28 billion yuan in 2024, 38 billion yuan in 2025, and 50 billion yuan in 2026.

As the birthplace of my country's laser industry, Wuhan, Hubei, has gathered many laser-related listed companies, which also connect thousands of upstream and downstream companies in the surrounding areas, forming one of China's laser industry clusters with the most complete industrial chain and the largest number of companies.

The development of Hubei's laser industry is also a microcosm of the entire industry. Hubei's laser industry has driven the Chinese laser industry from scratch, and in the past "golden decade" has completed the localization of some products, and even reversed. However, high-pressure competition has quickly matured China's laser industry, but it has also created a situation of excessive "price wars" and homogeneous competition.

"Against this background, Hubei's laser industry is seeking to double its size in three years in order to achieve the leap from 'running side by side' to 'leading the way'." During the interview, many laser industry professionals told the Securities Times reporter that the gap between domestic manufacturers' key laser technologies and those of foreign countries is gradually narrowing, and it is a good time to proactively deploy new technologies and seek to overtake others. This will also push China's laser industry into a new round of growth cycle.

Seeking growth opportunities amid crisis

The laser industry chain can be divided into upstream optical materials and components, midstream lasers, and downstream laser processing equipment. In the industrialization track, Chinese laser companies started relatively late, but they have caught up with the latecomers, especially the fiber laser market, which has rapidly promoted domestic substitution at a visible speed.

The 2024 China Laser Industry Development Report counts the sales of fiber lasers in the Chinese market in 2023. Raycus Laser surpasses IPG Photonics of the United States. IPG's sales in the Chinese market fell by 25% year-on-year, and its market share is the lowest in the past 10 years. At present, the localization rate of 1kW to 3kW and 3kW to 6kW fiber lasers has reached more than 98%, and the penetration rate of domestic lasers above 10kW has increased from less than 6% in 2018 to 70%.

However, as more players enter the market, some companies have begun to "compete on prices." Industry insiders revealed that the price of domestic fiber lasers will drop by about 60% year-on-year in 2022.

The industry is experiencing a phenomenon of "increased volume but no increased revenue, and increased revenue but no increased profits". According to statistics from the Laser Processing Committee, the output value of China's laser industry will be about 98 billion yuan in 2023, a year-on-year increase of 9%. In the previous 10 years, the average growth rate of China's industrial laser and system sales exceeded 16%.

Affected by this, Raycus Laser's net profit attributable to shareholders declined in 2022. However, as the company strengthened cost control and technological innovation, it gradually got rid of the shadow of the "price war". In 2023, the company achieved double growth in revenue and net profit, with net profit attributable to shareholders increasing by 431.95% year-on-year, and this momentum continued into the first quarter of this year.

The relevant person in charge of the company once said that domestic competitors have shown a stratification trend, and some companies are gradually withdrawing from the competition. Only companies with industrial chain integration capabilities and large-scale production capabilities can obtain cost advantages. It is expected that the competitive landscape will become clearer in the next few years.

In addition to Raycus, many listed companies in Hubei's laser industry chain have maintained stable performance growth despite the market context of structural overcapacity in some of the segments.

Not long ago, Yifei Laser's high-speed magnetic levitation large cylindrical full-tab battery intelligent assembly line completed FAT (factory acceptance test) and was officially offline and delivered to the customer factory. The production line is equipped with the industry's first magnetic levitation transmission technology, achieving a maximum high-speed transmission of 2000mm/s in the main process section.

"The industrialization process of large cylindrical batteries is accelerating. It will be one of the important growth poles of the battery industry and drive the innovation of related industrial chains." Mi Renbing, deputy general manager of Yifei Laser, said that the company proposed the concept of full-ear battery in 2009. The large-scale mass production of large cylindrical batteries is restricted by factors such as low yield rate and immature key technologies. The company has comprehensively broken through the technical difficulties of cylindrical full-ear battery manufacturing process, pioneered core process technologies such as full-ear molding and full-ear welding, and promoted its continuous upgrading and iteration. The yield rate of the company's cylindrical full-ear battery automatic assembly line has reached more than 99.8%.

Although there have been arguments in the market that new energy battery production capacity is oversupplied, Mi Renbing believes that there is still a large market for high-quality production capacity. The cylindrical full-ear battery technology path is in the early stages of development. As the technology matures, it is expected to usher in accelerated global mass production. At present, Yifei Laser has delivered cylindrical full-ear battery cell assembly lines in batches to mainstream lithium battery companies.

In addition, in the first half of this year, when companies in the main industrial chain of the photovoltaic industry suffered large-scale losses, Delong Laser, an equipment manufacturer that "shovels seller", also maintained steady growth in its performance.

Ye Xiankuo, assistant to the general manager of Deer Laser, said that the company's main products are precision laser processing equipment used in the photovoltaic industry, and its performance growth is directly related to the continuous acceptance of orders. The long product acceptance and payment cycle is a feature of the photovoltaic equipment industry. Currently, the top 20 companies in the industry, such as Longi Green Energy and Tongwei Co., Ltd., are basically the company's main customers, and their business conditions are good.

Increase investment in R&D and layout of new technologies

At the 2024 World Laser Industry Conference held a few months ago, there was such a scene. When one company stated that "the market is vibrant and the operating pressure is great", it instantly resonated with other companies.

Under the involution of the industry, where is the moat of enterprises? Judging from the choices of many laser enterprises in Hubei, the answer is to rely on technological innovation to solve the problem of exchanging low prices for market share.

At present, China has basically formed four major laser industry clusters in the Pearl River Delta, Yangtze River Delta, Central China and Bohai Rim. Compared with other clusters, one of the characteristics of Hubei's laser industry is that it drives cluster development with original innovation. Huazhong University of Science and Technology is regarded as the "Huangpu Military Academy" of the laser industry in the industry, and Wuhan University, Wuhan University of Technology and other universities have also opened laser majors.

"From independently developing full-tab battery equipment to becoming a national-level specialized and innovative 'little giant', and then to being promoted to the Science and Technology Innovation Board, Yifei Laser has gradually formed the current industrial scale through the model of transforming scientific and technological achievements." Mi Renbing believes that companies that have precipitated and cultivated core technologies through original innovation will have stronger risk resistance in the future market structure.

The reporter noticed that since the beginning of this year, many Hubei laser companies have made moves to increase research and development, expand production capacity and deploy new technologies.

In the first half of this year, Delong Laser's R&D investment increased again, with R&D expenses accounting for 15.41% of its revenue, a year-on-year increase of 44.56%. At the same time, it announced plans to invest 3 billion yuan to establish a headquarters and R&D production base phase III project in Wuhan East Lake High-tech Zone, of which 1.025 billion yuan will be invested in fixed assets to build the group headquarters and cutting-edge laser technology innovation institute, expand the photovoltaic module laser packaging equipment production line, and add a new semiconductor laser equipment production plant.

Ye Xiankuo introduced that at present, the company is constantly developing new laser technologies and applying them to different high-efficiency battery processes to improve efficiency or reduce costs. At the same time, the company is actively extending its technology in the display panel industry and other industries. In the first half of this year, the company has completed the shipment of panel-level glass substrate through-hole equipment, achieving full coverage of wafer-level and panel-level TGV (glass through-hole process) packaging laser technology.

In addition, Raycus Laser reviewed and approved the "Proposal on the Company's First Phase Construction of the Fiber Laser Production and Research Capability Enhancement Project", with a total investment of 490 million yuan to solve the development bottleneck of the special light source industry. Yifei Laser plans to invest a total of 35 million yuan in the "Solid-State Battery Packaging Technology and Equipment Development" project, and plans to develop a series of solid-state battery equipment and production lines to support the entire process of solid-state battery process development, pilot verification and mass production application.

"The integration of government, industry, academia, research and application is one of the magic weapons for the growth of Hubei's laser industry to date." A person familiar with Hubei's laser industry said that in the "Implementation Opinions" issued by Hubei, the construction of maintaining the leading edge of innovation in the application of laser technology was placed in the first place. The construction of research and development institutions such as the Central Research Institute of Huazhong University of Science and Technology, Yifei Laser Engineering and Technology Research Institute, and public service platforms such as CNAS (China National Accreditation Service for Conformity Assessment) laboratories will promote the solution of laser technology problems and enhance the support capacity for the transformation of results.

Yifei Laser was mentioned many times in the "Implementation Opinions". Mi Renbing said that the company is an important carrier and support enterprise of the policy. For the company, it will seize the opportunities related to industrial policies, take use as the orientation, improve the level of transformation and industrialization of scientific and technological achievements, and let "industrial incubation" move towards "industrial transformation".

Policy support to make up for shortcomings and weaknesses

Laser, in essence, is a tool that should be used in various scenarios. The market determines the scale. In the early development, Hubei was located inland, with relatively weak resources in the application market, and its ecological scene was not as perfect as that in the Pearl River Delta and Yangtze River Delta. From the "Implementation Opinions", Hubei is more concerned about breakthroughs in new application fields within the new technology cycle, and making up for the shortcomings in the industrial chain.

With the support of listed companies such as HGTECH and Raycus, Hubei has a clear advantage in the mid- and downstream laser industry. Aiming at the shortcomings of core materials such as laser crystals in the upstream of the industry chain, as well as key components such as laser reflectors, the Implementation Opinions proposes to attract advantageous enterprises to settle down, strengthen the fields with a foundation in the province such as laser chips, develop semiconductor laser chips with higher power and better performance, and help improve the performance of lasers and laser equipment.

The core driving force of the growth in the industrial laser field lies in the continuous penetration and replacement of traditional processes by laser technology. Ye Xiankuo said that relevant national policies have proposed to improve the reliability of CNC systems for industrial mother machines, high-power lasers, laser welding and cutting equipment, which will undoubtedly inject new vitality into the development of the laser industry.

The "Implementation Opinions" also clearly proposed to accelerate the replacement of laser processing equipment, further expand the market share of Hubei-produced laser equipment, develop new products such as TGV laser micropore equipment, pan-semiconductor laser equipment, and shipbuilding laser equipment, so as to drive the output value of laser application-related industries such as high-end manufacturing, photovoltaics, lithium batteries, consumer electronics, and medical beauty to exceed one trillion yuan.

In addition to traditional policy and financial support for the laser industry, the "Implementation Opinions" proposes to give full play to the role of the provincial government's investment guidance fund, the provincial "Chutian Fengming" science and technology innovation angel fund's 50 billion yuan state-owned capital mother fund, and the Optics Valley's 10 billion yuan laser industry development fund to support laser companies in mergers and acquisitions, restructuring, technological innovation and other aspects.