Liu Shen’s judgment: Short-wavelength fiber lasers are the biggest dividend in this wave of industrial upgrading

April 22, 2024

If you want to select the most stable investment theme in the primary market of the hard technology track in the past two decades, the laser industry chain will definitely be on the list. According to our statistics, the laser track has cultivated more than 20 listed companies in the past 20 years and has steadily produced at least one company with a market value of tens of billions every year since 2016.

From both sides of supply and demand, core components on the supply side continue to realize domestic substitution + new technology applications, and incremental industry demand on the demand side continues to explode, which are the two major investment drivers in the laser track.


Standing at the node of 2023, Liushen's core judgment is that there are very few market opportunities driven by a single factor (such as purely domestic substitution or the explosion of downstream applications driving laser integrators). At the same time, it has two major driving forces: the huge incremental application market on the demand side and the introduction of new technologies on the supply side. Opening up the key elements of upstream and downstream is the next wave of industry dividends in the laser track. High-power short-wavelength lasers are a very promising investment direction for us under this logic.


In particular, lasers are strictly divided into two parts: information lasers and power lasers. This article focuses on power lasers, with manufacturing applications as the main line, excluding optical communications, lidar, etc.

The material determines the wavelength. The demand for processing in the infrared band, represented by steel alloys, has been basically saturated. Short-wavelength lasers guided by the absorption peaks of copper and aluminum, highly reflective materials, precious metals, and semiconductors are the largest incremental opportunities in the next ten years.


China's laser application started with the marking of consumer non-metallic materials. The high absorption rate of non-metallic materials for CO2 laser with a wavelength of 10.6 microns led to the first wave of opportunities in the industrial chain. Han's Laser officially entered Apple's supply chain, which is a benchmark event at this stage.


With the expansion of laser processing scenarios, on the one hand, the demand for metal material processing is rising, on the other hand, the demand for higher power and higher precision applications is increasing, and laser technology is beginning to flourish. Judging from the revenue and market value of listed companies, high-power processing dominated by steel processing scenarios is undoubtedly the main line of the track. Raycus' domestic replacement of IPG fiber infrared lasers is a benchmark event at this stage.


At present, laser processing in traditional industries is becoming saturated, and the market demand for laser processing has transitioned from steel materials to electrified metals represented by copper + semiconductor materials represented by silicon. These materials correspond to China's rapidly developing lithium batteries, photovoltaics, and semiconductors. Emerging manufacturing industries, such as manufacturing, will be the largest incremental market in the next 10 years.


New materials will surely bring about a new wave of changes in the laser industry. Take copper as an example. The absorption rate of copper at room temperature for near-infrared wavelengths (about 1 micron) is less than 5%. Therefore, using infrared light to process copper materials is extremely inefficient. 95% of the laser will be reflected, and it will also cause damage to the laser itself. Cause damage; and copper's absorption rate of green light wavelengths (515nm and 532nm) is as high as more than 40%. Even if the industry develops a variety of improvement solutions based on the infrared band, such as material heating to increase absorption, annular spot nesting preheating, etc., infrared lasers still have at least a 5-fold efficiency gap compared to short-wavelength lasers of the same power.
High-power processing occupies an overwhelming market share in the laser industry. Fiber laser solutions are the optimal, high-power technical route. Short-wavelength fiber lasers are the biggest track for next-generation laser dividends.


There are many ways to classify lasers. According to the gain medium, there are optical fibers, solids, gases, etc.; according to the working mode, there are continuous and pulse; according to the power level, there are low, medium and high power, and the list goes on. Every company seems to be able to use 1-2 attributes to modify it, and it is difficult to distinguish between good and bad.


Fundamentally, the two essential requirements of laser industrial processing are a set of trade offs: processing efficiency (power) versus processing accuracy (pulse). For applications that pursue higher processing speed and efficiency with appropriate precision, we will continue to use high power, such as cutting, welding and other industrial applications. In such scenarios, fiber lasers are the absolute monopoly technology route; pursue ultimate precision and are willing to give up processing for it To be efficient, we can do narrow pulse ultrafast, such as life sciences, micro-nano processing, etc., and solid-state, semiconductor and other laser routes are good at each.


Apart from this set of trade offs, other evolutions are nothing more than "customization" of each company based on its own technical expertise, market segment characteristics, etc., which is not the essence. Only among the options of high power and narrow pulse, the first step from left to right determines the upper limit and speed of development of a laser company. According to Liu Shen's dismantling analysis of the application directions of various companies in the entire secondary market, the market space for high-power scenarios is at least five times that of high-precision scenarios. First increasing the upper limit of laser output power, and then seeking pulse width compression in optical design and light source modulation on each generation of power platform, is the optimal development path for the short-wavelength laser track.


Flow-depth judgment: Short-wavelength fiber lasers are the biggest dividend in this wave of industrial upgrading.

On the supply side, unlike Raycus's domestic substitution in the infrared band, China can basically match the progress of global leaders in the short-wavelength field, and the supply chain is also less dependent on external sources. This is the logic of Me Better; on the demand side, represented by IPG and TRUMPF Overseas, leaders have clear implementation in the fields of photovoltaics, lithium batteries, 3D printing, and other fields, with clear incremental market opportunities and an obvious industry pull.


Global laser leaders IPG and Trumpf have been vigorously promoting green light in recent years. IPG's green light power can reach 1 KW, focusing on MOPA photovoltaics. With the exclusive cooperation of IPG, Domestic Dier has occupied 80% of the laser equipment market in the PERC era and has become a leading listed company with a revenue of $1 billion+; while TRUMPF Green Light can do 3KW continuous wave, focusing on the lithium battery industry. In the past two years, it has won a large welding order for Tesla's 4680 large cylindrical battery and has become a new benchmark in the industry. After breaking through the kilowatt-level high power threshold, it has become the world's first and, so far, only company that can 3D print gold, silver, copper, and precious metals.


According to research by Liushen Capital, there are already leading domestic companies that can achieve kilowatt-level green light, which is only 2-3 years later than overseas. At the same time, the largest markets for green light applications include new energy, photovoltaics, and other industries, with domestic demand leading the world. These two points determine that under the opportunity of short-wavelength lasers, domestic leading companies will no longer just repeat the catch-up route of Raycus, but will have the opportunity to truly lead global development.


The technical core of the green fiber laser lies in the polarization-maintaining beam under multi-stage amplification, output in a single polarization direction, and back-end frequency doubling to minimize energy loss. Some of the most core components, such as polarization-maintaining fiber, light source modulation, and frequency multipliers, are prohibited from being sold in China. Domestic manufacturers need a high degree of self-research capability to break through the restrictions. This also provides startups with an excellent opportunity to overtake in corners.


Liu Shen’s judgment: The domestic laser track is expected to overtake the green light era after decades of following, and create a great company that is truly a global leader comparable to IPG and TRUMPF.