Fabtech 2012: Hiking through an oasis of lasers in the desert

Walking the 450,000 square feet of the Las Vegas Convention Center dedicated to Fabtech for three days is usually a chore. This year, the hike was made longer by the fact that the booth assignment for Industrial Laser Solutions was as far from the main entrance as one could get, against the far wall of the Center hall. Reaching this "home base" location after forays into the Center and North halls of the show at times felt like being a constant hiker to the summit of Mount Everest. You were glad to get there and rest, but apprehensive about doing it again and again as you tried to visit all the laser exhibits among the 1100 spread throughout the halls.

However, like good soldiers, my partner, associate editor Jim Montgomery, and I logged innumerable miles as we managed to see most of the exhibitors until we ran out of time, and energy, at the end of the third day.

As already reported, the show appeared to be a significant success. We did not hear any negative comments about the show, and for the most part the positive comments were effusive regarding the quantity and quality of the show visitors. Business was good, with many orders closed by exhibitors and with others piling up leads as the first two days saw a continuous stream of visitors in the dozens of aisles. As an aside, we wondered where all these visitors were coming from: after all, there isn't much industry in and around Las Vegas since it's mostly desert. So we surmised that these adamant show-goers -- more than 25,000 of them -- came from a distance and spent time and money to see metal fabricating and welding specifically.

On the morning of the final day, after a very strong Tuesday attendance, I recalled a video that was shot of me exiting the 2008 Fabtech (see below), which had been held in this same facility. My recorded comment was that the show had been a spectacular success, with many orders placed and prospects for the coming quarter projected as very bright. That show, like this year's, was scheduled a few short weeks after a very successful EuroBlech -- just as happened this year.

You will recall that 2008 was a year of indecision, where "cautiously optimistic" became a marketing manager's mantra, whereas this year it is "uncertainty." At EuroBlech and Fabtech that year, positive business news seemed to run counter to all the negative financial news in the media. However, in the first week of December 2008, the bottom fell out of the laser market as order cancellations began to flow in, and projects were summarily delayed.

Fabtech 2012 had an eerie feeling of déjà vu. On my iPhone were reports of a return of recession in Europe, unrest in Israel/Palestine, and the "fiscal cliff" in the US. Strangely reminiscent of the negative news in 2008, just of a different character.

I left the Las Vegas Convention Center with an unsettling feeling. Will 2012 be a repeat of 2008? My head tells me that things are different today, but my gut kept rumbling -- déjà vu. I sincerely hope it was just indigestion from the Brazilian Churrasco I had the night before, and not an indication of some negative news to come.

Industrial laser exhibition shows growth

There has been a growing interest, among the industrial laser equipment suppliers, for a trade show of their own in which to promote their products to potential buyers who attend because of this interest. The Laser Institute of America (LIA), an international society mainly known as the organizer of the world renowned International Congress on Lasers and Electro-Optics (ICALEO), stepped up to the plate last year and they organized the first Lasers for Manufacturing Event (LME).

The October 22nd second convening of this event, again held in Schaumburg, IL, was a larger version of the inaugural with an additional 30% exhibitors and a growth in attendance of 37%. Peter Baker, LIA executive director, told me that the growth of LME was akin to that old adage, "You must crawl before you walk." Consequently the LIA, with two years under its belt, has committed to another three years at the attractive and convenient Schaumburg Convention Center.

Attempting to slide an industrial trade show into an already crowded calendar is not an easy task. Many of these trade shows (IMTS, Fabtech, EuroBlech, MD&M, and even the LIA's own ICALEO) have industrial laser material processing related content, drawing away potential exhibitors and attendees. However LME is a truly different show -- it is a show of industrial laser suppliers showing their products to interested laser buyers. As more than one exhibitor told me this year, "The level of interest among attendees is of high quality because this is an industrial laser show, and the majority of visitors came because they have interest in this technology." Another exhibitor said they had doubled their orders this year over last year. Confirming this good news, 90% of exhibitors surveyed advised they will return next year.

It's too early for weird

This spot has not been updated for a while due in large part to my relative incapacity -- a result of some unplanned surgery that sapped my energy. I suggest readers might find it amusing to read My View, appearing in the November/December issue of ILS, for details. But I am now almost 100% and back at the keyboard. Again, see My View for more thoughts on this.

So how did the world fair while I was away? Let's see: the Eurozone is still a mess, although Greece is back in favor with a new finance minister in charge. However, Portugal and Spain are still stressing out -- no change there. China remains the big thorn in everyone's side, as manufacturing in that country has contracted for the 11th straight month and the economic expansion in August was the worst performance in three years. The government still seems to be focused on domestic opportunities, and there does not seem to be any support for assisting the capex market to produce sales of sophisticated imported equipment for the production of parts for export. The outlook in China, according to MAPI (Manufacturers Alliance for Productivity and Innovation), is for 2012 manufacturing sales to grow 7.8%, down from previous estimates of 8.6%. For machinery and equipment, sales revenue is anticipated to be down 3% in 2012 and 4% in 2013 from previous estimates.

All of this means that countries exporting equipment into China will have to gut out 2012 and hope the government has another change of policy to open the floodgates for imports in 2013.

Working back down the food chain, this is not pleasant news for European companies dependent on exports to China. In the US, manufacturing grew for the first time in four months according to the ISM (Institute for Supply Management). And this poses a conundrum: are US companies dependent on sales to China or not? It looks like a "not" at this time, as manufacturing is cruising along even though surveys suggest that these companies are anxious about the possibility of a fiscal cliff brought on by domestic tax increases and budget cuts.

Third quarter reports and guidance from our ILS survey companies will start to arrive in our offices in late November, just in time for compilation into our annual economic review of the laser market. As of this writing, I don't have a clue as to what the numbers will look like, but I have the feeling the China situation may finally be rearing its ugly head here, as in other industrialized nations. Whatever happens, it looks like a bumpy ride for the coming weeks.

Eye's East

China, that powerhouse economy, has thrown the world a curve-ball. Some saw this coming, as the financial news from the country had turned neutral and then negative in the past few weeks. But like many Pollyannas, reality in the stock markets never set in and predictions of a government-led turnaround were common in manufacturing industry corporate reports to stockholders. The magic elixir of government stimulation, rapidly applied and instantly effective, was expected to turn this situation around. Weeks went by and this did not occur, at least in the short-run which had been the modus operandi since the recession.

Official figures released over the weekend showed only an 8.7% increase in production, the same rate as the country experienced in the recession three years ago. It wasn't as sharp decline as China's economy had been slipping over the last year or so, refusing to react to government moves to turn it around -- and distinctly sending a message of independence from the non-state-owned manufacturing community. Both imports and exports took a hit with the former down 2.6% and the latter growing only a so-so 2.7%. With domestic demand slipping in China, this prolonged situation is not good news especially in countries and companies for whom exports to China may be their life-blood in a near-recession economy.

Among the industrial laser and systems suppliers, this is troubling news. The end of the third quarter is only three weeks away and the anticipated recovery to stronger shipments to the Far East looks questionable. Some analysts see the government's infrastructure stimulus favoring imports in the coming months but there seems to be little support for an instant boom in the economy. That said, it looks like the industry will settle down to modest growth market in China into the new year.

Technology to the rescue

I have been trumpeting the resurgence of US manufacturing, and the contribution of industrial lasers to it, since the recession began its recovery. The latest supporting data: July saw a second straight month of higher factory output (0.5%), according to the Federal Reserve, and overall industrial production increased 0.6%, a fourth straight month of growth. And although US manufacturing technology orders inched down in June 2012, according to the Association For Manufacturing Technology (AMT, as backlogs swell in the supply chain, order activity is expected to rejuvenate by summer's end.

Articles are now appearing in all the industrial-related publications, supporting the growth of US manufacturing as the rest of the world has gone into a manufacturing slump. Every once in a while I come across a succinct look at the US manufacturing sector from an observer. Mike Collins, president of MPC Management and the author of Saving American Manufacturing, has nailed it in his latest contribution. I highly recommend it.

Thank you Mike, for reminding us that the US is still a technology leader.

Making your mark in the world

I've been looking at the quarterly reports, and transcripts of telephone analyst interviews, of several industrial laser industry leaders, and I have also been keeping an unofficial tab on Google postings, and it is clear to me that laser marking is experiencing a strong year akin to pre-recession double digit growth levels.

Laser marking systems are the closest thing the industrial laser industry has to a consumer product. I liken it to a laser printer in the office products business, or a pick-and-place robot in the manufacturing sector. The term "ubiquitous" is apt because there are at least 155 companies in the Industrial Laser Solutions database of global laser marking system suppliers, with more showing up each week.

For those of you who haven't been paying attention to this application, let me explain why it has arrived at its current stature. Simply put, it's because of industry standards and government regulations for product marking and identification for traceability and security purposes.

Years ago, pioneers in the laser industry used to bemoan the fact that the laser was not like a razor, where the aftersales market for the consumable razor blades was where the profits were made. Lo and behold, the consumables issue worked in reverse for the laser companies. Users' issues with consumables when using ink-jet labeling created an interest in the non-consumable laser marking technology. This, along with other technical advantages -- legibility, permeability, readability, and process flexibility -- built the market for laser marking systems. So when corporations, trade associations, and governments looked for a marking technology with these attributes, they settled on the laser. This created a market built on regulations, which carried the industry through the recession in better shape than other laser technologies. This is all neatly spelled out in the now available Industrial Laser Solutions Laser Marking Digest.

By the end of this year, more than 36,000 laser marking/engraving systems worth between three-quarter and one billion dollars will have been installed globally. This will be at least a 10% growth over a good 2011 sales year. And the next time you see one of those 2D bar codes on a package, consider that precise laser marking allows the users to pack more marketing data in this identifier than other processes, assuring continuing growth in this industrial laser sector.

Curiouser and curiouser: Unearthing a gem from ILS' readership data

A good editor looks for trends in the markets they report on. Searching for some clues as to shifts in the industrial laser markets, I have been reviewing the geographic breakdown of Industrial Laser Solutions' international readers, which comprise almost half the total readership. And I found a gem: among the African readers of ILS (we have subscribers in 32 of the continent's 52 countries), 31% are located in Nigeria, making this nation the heaviest reader of ILS. I would have thought this distinction belonged to South Africa which has an acknowledged manufacturing economy, but it is home to only 18% of ILS' African readership -- and it isn't even second, with that honor going to Egypt at 21%.

So I looked back at data from five years ago, and found the African splits were in the same order, but back then Africa only accounted for 0.7% of ILS's readers versus today's 2.7%. Is there something going on in the industrial laser community in that continent that caused a greater than 300% increase in those interested in industrial lasers?

Nigeria is one-third larger than Texas and it is the most populous country in Africa. Industrially it generates revenues from crude oil, coal, tin, palm oil, cotton, footwear, chemicals, fertilizer, ceramics, steel, and small commercial ship construction and repair. Petroleum and petroleum products, cocoa, and rubber are its major exports.

Among our Nigerian readers, 65% identify themselves as CEOs, directors, engineering and production managers, and engineers in companies that seem to be heavily slanted to the petroleum industry and its service companies. That sector is a potential choice market for laser applications such as welding, laser additive manufacturing, and drilling. Without Googling all the readers' companies (which might be fun but time-consuming), it's hard to find an obvious reason why ILS and industrial laser technology seem to be of such interest in Africa's largest nation.

Last year in a My View column on the manufacturing economy, I made a prediction about Africa's place as a factor in the industrial market and when it could happen. It was written as tongue-in-cheek and meant to be a think piece, yet it drew a surprising amount of supportive comments. Others, it seems, are also of the opinion that Africa will be a "hot industrial laser market." Maybe my 25-year horizon was a bit off, as evidenced by this publication's readership growth.

Update 7/17/2012: And apparently I'm not the only one who is turning my attention to Africa as a high-growth region -- the latest issue of Fortune has hit my desk with a special advertising section, "Africa's Moment" [PDF download here], discussing Africa's emergence "as a strong global player" for private sector and economic development activities.