First you say you do and then you say you don't

Forecasting may be the easy part, explaining why you got it wrong after publishing it is the
hard part. So I was pleased to read, in an article by Casselman and Izzo in the February 13th Wall Street Journal, that I wasn’t theonly one that guessed wrong on the 2011 economy. It seems that 52 economists WSJ surveyed weren’t great forecasters as they predicted the economy would move forward and things were looking good. Then, as they say, “all hell broke loose” followed by one in Thailand and the economy tanked in Europe and all bets on a good year were off. As the Journal says, “The results reflect the inherent uncertainty of economic prognostication.”
For my part I went the other way on the industrial laser economy and took a more conservative approach. The result, I missed the record year number and had to do a fast shuffle at the end of November to get a more reasonable number in print in the January issue of ILS.
The Association for Manufacturing Technology just reported their calendar 2011 numbers. December U.S. manufacturing technology orders were up 12.2% from November and up 12.7% when compared with the total of $461.48 million reported for December 2010. For the year 2011 was up 66.4% compared with 2010, making 2011 the strongest year in more than a decade and higher than forecasters predicted.
I had noted the strength in the U.S. manufacturing sector but frankly was reticent to report it, as were many other analysts. We were all waiting for the proverbial other shoe, a double dip recession, to drop, month after month, until it became a non-issue in the fourth quarter.
Now I am reconsidering my forecast for 2012, especially since the WSJ economists are predicting only a modestly fast growth in 2012. They got it wrong last year and who says they won’t this year. Their track record isn’t great.

Good times in the city by the bay

Optimism with caution was the rule-of-the-day among the dozens of exhibitors we interviewed at this year's Photonics West, held in San Francisco last week. This show has grown from an
intra-industry event to one of the world’s premier international photonics exhibitions now expanding into the field of industrial laser material processing equipment.

If it hadn’t been for the continuing mixed economic news from Europe, the gloom and doom of feature stories in the media, and the playoff loss of the local San Francisco 49’s professional football team, nobody would have had any complaints. And why not –about 20,000 visitors, presenters, and exhibitors helped to set an attendance record for show and conference. Almost 1200 exhibitors filled two halls at the Moscone Center, and from the opening bell, the aisles were full of enthusiastic lookers and
buyers.

Earlier in the week, at the Lasers & Photonics Marketplace Seminar, I had presented a glowing picture of the 2011 market and forecasts for a good but not great 2012. My remarks were corroborated by exhibitors who had attended the seminar with the general consensus being that a modest mid-single digit growth on 2012 coupled with the phenomenal 2011 growth wouldn't be all that bad.

If there was one drag among show-goers, it was the nagging news that suppliers were playing it close to the vest in terms of increasing employment and that Capex was being monitored
closely.

From the long dinner lines at area restaurants, it seemed that Photonics West was an economic boom for expense spending, and city officials might take note and lay out a more welcoming carpet for next year's event. You wouldn't even know we were in town, if talking to cab drivers is any indication. Or maybe the laid-back Silicon Valley residents are blasé when it comes to exciting technology shows and
conference

Laser microprocessing — a bright future

Laser micromachining was recently defined in a magazine as being “for those who must think small," a good example of tautology (restatement in other words of an idea already stated). I’m often asked to define the term and rather than being tautological I usually say it's processing on a micron scale.

Semiconductor processing and applications in microelectronics fit this description nicely, but the sector on the border line is laser processing medical devices. Is laser welding of implantable devices, for example, pacemakers, a micro or macro application? At Industrial Laser Solutions, we classify this as micro.

As the makers of medical devices strive to miniaturize their high tolerance products such as catheters, thin-wall tubing, stents, and wire insulation — the use of ultra-short pulse laser technology for drilling, welding, and ablating on a micron scale boosted the acceptance of this laser as a means to achieve precision solutions to intricate applications in new materials ranging from memory alloys to polymers.

The "think small" concept certainly doesn’t apply to the market for ultra-short pulse lasers, which has been doubling each year for the past three years — ILS forecasts it will grow 95% in 2012 — and is likely to show more modest growth thereafter only because the base numbers have become substantial. One could get a little cute and say that the laser microprocessing market is "macro".

At Industrial Laser Solutions, we think the micro market, so dependent on the precise nature of the laser processes, has unlimited growth potential.

Happy New Year, I think

When I reasoned why the manufacturing sectors served by industrial lasers were outperforming analysts' forecasts, I was slightly hesitant to talk about it. I had been stung before in 2008 when I came away from EuroBlech in October touting the optimistic forecast of the fabricating metals sector only to be rudely shocked into reality as that industry collapsed in December of that year as the great recession of 2009 took hold.

But today the industries that exhibit fertile ground for growth in industrial laser processing - energy, transportation, medical devices, fabricated metal products and aerospace - are now acknowledged by even the most jaded analysts as solid factors in positioning manufacturing as an economic leader in an otherwise down market. And by extension these industries are a strong contributor to the record 2011 growth of industrial laser revenues.

However, once stung - forever wary, and I reacted to the beginnings of some less than enthusiastic forecasts by showing caution in my 2012 market forecast, which those of you who are digital subscribers will read on January 15th and others will read online at www.industrial-lasers.com the next week.

But now, as this is being written, a raft of new information is appearing that suggests that manufacturing, at least in the US, is in for a more active period than anticipated. The Institute for Supply Management cued by a strong December growth in manufacturing suggests that the first half of 2012 should be very good for US manufacturing and in fact 11 of 18 US manufacturing industries will expand in the first 6 months of the year, including those that drove the 2011 market to new highs. Furthermore, 3 of our market drivers are forecast to expand for the entire year.

The Association for Manufacturing Technology and I were on the same track, and they cautiously forecast a positive outlook for 2012. IHI Global Insight was more positive, saying that a 2012 recession was unlikely.

Globally, the picture was not as clear and The Washington Post hedged on the US situation, as seen by surveyed economists, as possibly threatened by the situation in Europe, an issue that I factored into my forecast.

Right now, things look bright in the industrial laser sector at least for the first two quarters. Even problems in solar seemed to be easing as expansion in South America is set to grow this year. So sit back and enjoy 2012, at least the first half, and hope that it is strong enough to offset any potential decline later in the year.

"Non-conventional" industry breaks 2008

It won’t be long before that bearded guy in the red suit will be making his annual appearance and right behind him that little kid in the diapers that welcomes the new year. You’ll pardon me if I protest that it seems like yesterday when they showed up last year, my how time flies.

I just finished my PowerPoint for the late January "Marketplace for Lasers & Photonics" meeting in San Francisco (www.marketplaceseminar.com) and have been making a last review of the numbers. Each year I cut it closer and closer to the deadline for submission of this file as I massage the final 3rd quarter numbers that continue to come in. For example, I've received changes in the financials of companies that suffered losses as a result of the flooding in Thailand, II-VI Corp. was one of the more notable ones.

As a little Christmas gift, I’ll give you a hint of what will be disclosed in my forthcoming report in 2011. Sales revenues for industrial lasers (almost $2 billion) and systems (more than $7 billion) broke the 2008 records by 11%, wiping out the losses of the recession a year ahead of what the industry expected.

Historically, since 1970, the year I date as the beginning of industrial laser sales, more than a half million lasers have been sold – valued at close to $22 billion – which were integrated into systems worth more than $75 billion – for a CAGR of 17%. Not bad for an industry that was labeled, in it’s early years, as "non-conventional" by statisticians. In fact, last time I looked, laser machines represented about 10% of total world machine tool sales.

And as I will report in the new year, even with some cooling-off in the markets, industrial lasers and systems should grow another 5% in 2012

So, Happy Holidays to all and see you in 2012.

Enthusiasm and expansion evident at Fabtech 2011

We had early clues that Fabtech International (Chicago, November 14-17) was going to be a success from exhibitors and from the FMA/SME organizers' preregistation numbers. But when the doors opened at McCormick Place, thousands of visitors lined up for badges, and at the opening bell, mobs of determined manufacturing people surged into the North and South Halls, many heading purposely for specific exhibits. And the second day of the show was even more packed than the first.

I was sitting on the mezzanine of the large TRUMPF exhibit as the opening bell sounded. Hordes of visitors could be seen rushing toward the major exhibits that were clustered near the front of the South Hall. Below me in the TRUMPF exhibition area, every system and sales representative were immediately engaged in discussions. The same held true at many other exhibits I could see from my perch.

At the end of the first two days, exhibitors had all met or exceeded past show records, and many were posting sold signs on the equipment on display. Several major exhibitors told me about sales consummated at the show. For example Burke Doar, VP Sales of TRUMPF Inc. said the 12 units booked on the first day was in-line with good show records of the past.

So I set off to ask all the major industrial laser system exhibitors their show experience and their impression of the current year's sales and prospects for 2012. Exhibitor after exhibitor praised the show; expected to have a good, great or record sales year; and looked forward to a continued good, but not great 2012.

These opinions were backed up by solid facts on the strength of key markets: agricultural and heavy equipment, aerospace, transportation and energy. Asked about the fabricated metal job shop sector, most were equally positive about it, even though it has been feeling the pinch of tight bank lending policies which has required some creative financial arrangements on the part of the equipment sellers.

The companies that participate in the annual market survey I conduct all modified the conservative estimates they made at the beginning of the year. It looks like the North American sheet metal system sales for 2011 will be about 725 units, a number equal to the very good pre-recession year of 2001.


So how to explain this excellent performance of the laser cutting system suppliers in light of all the negative media comments on the state of manufacturing in North America? I received a number of explanations, but the one that seemed most factual was that the industries served by laser cutting systems were not experiencing market problems, and buyers of capital equipment had the resources to expand their business, even in what seems to be a shaky economy. Yes, I heard that some buying decisions were made after long deliberations, but in the end these buyers were betting that the manufacturing market had a positive future.

Fabtech 2011 was a great show. As this was being written we still had not received the official show attendance figures. Exhibitors left with good feelings about near-term prospects, and visitors were upbeat about their business prospects. Counter to prevailing sentiment among the economists, yes, but I could not find weaknesses in the market forecasts we heard.

Posted by David Belforte

ICALEO more international than ever

This comment on the recent ICALEO held in Orlando is being written rather tardily as I am just now recovering from the 7-day power outage in my area brought on by the ravages of what is now being called THE October Northeaster, not with any fondness.

ICALEO 2011 was, judging by attendee comments, a very successful event, with 523 registered for the Congress with 51% coming from the US. Attendance was up 12.5% from last year's event in Anaheim. 262 papers and posters were presented in several concurrent sessions, a decrease of 6%over last year. Of the papers presented 82% were by international authors, a situation that caused considerable talk among long-time attendees. Some Program Committee members attribute the limited papers from the U.S to restrictive non-disclosure arrangements imposed by US research sponsors preventing this work from being shared.

On the other hand, ICALEO is as, the name says, international, and the organizers, the Laser Institute of America, has become an international society, so a diverse membership and subsequent diversity in conference presenters is a natural consequence.

Five ILS Editorial Advisors attended this year's event along with me, which made coverage of concurrent sessions and the micro (LMF) and macro (LMP) conferences easier. Their thoughts are incorporated in this conference perspective.

The large discrepancy in paper sources is seen as both a plus and minus, with one advisor commenting that a large number of papers from Germany was "a delight," while another remarked that only 18% of papers were US-originated and that some of these were from authors working for foreign companies. The two conference program committees were actually about evenly split in terms of domestic versus international membership so one can’t find obvious prejudice in author selections with them.

Several advisors sensed the lack of US papers and assigned the blame, in part, on the US government, which, as one said, "has never been able to devise and implement a complex action plan to support industrial research." Another noted that, "Someone needs to lead a credible lobbying effort to find federal funding to help US companies apply laser technology to compete with similar efforts in Europe."

To most observers, this year's ICALEO was slanted toward solid-state laser applications with fiber and disc lasers making up two-thirds of the macro (LMP) sessions, of which 2/3rds were fiber related and 1/3rd disc. The papers featuring disc lasers were mostly from Germany and the ratio of fiber to disc was 3:1. In the micro (LMF) conference, 40% of the papers featured ultra-fast pulse (ps and fs) laser applications and the remainder were ns lasers (36%) and long pulse (24%).

The conclusion one can draw from the preponderance of solid-state applications in the papers would be that most of the advanced laser material processing work being done today is with these lasers as opposed to the CO2 laser, which, while being used in more mature applications, commercially dominates annual sales: about 50% of 2011 revenues.

ILS picked up on this trend several years ago and has been featuring applications with fiber, disc, and UFP lasers in many issues.