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World Leadership in High Power Fiber Lasers
www.ipgphotonics.com
IPG Photonics CorporationThe Fiber Laser Company™
(NASDAQ: IPGP)
2016 Investor Day
May 11, 2016
World Leadership in High Power Fiber Lasers
www.ipgphotonics.com
Welcome and Overview
Tim Mammen
Chief Financial Officer and Senior Vice President
Safe Harbor Statement
The statements in this presentation that relate to future plans, market forecasts, events or performance are forward-looking statements. These statements involve risks and uncertainties, including, risks associated with the strength or weakness of the business conditions in industries and geographic markets that IPG serves, particularly the effect of downturns in the markets IPG serves; uncertainties and adverse changes in the general economic conditions of markets; IPG's ability to penetrate new applications for fiber lasers and increase market share; the rate of acceptance and penetration of IPG's products; inability to manage risks associated with international customers and operations; foreign currency fluctuations; high levels of fixed costs from IPG's vertical integration; the appropriateness of IPG's manufacturing capacity for the level of demand; competitive factors, including declining average selling prices; the effect of acquisitions and investments; inventory write-downs; intellectual property infringement claims and litigation; interruption in supply of key components; manufacturing risks; government regulations and trade sanctions; and other risks identified in the Company's SEC filings. Readers are encouraged to refer to the risk factors described in the Company's Annual Report on Form 10-K and its periodic reports filed with the SEC, as applicable. Actual results, events and performance may differ materially. Readers are cautioned not to rely on the forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to release publicly the result of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
3
Agenda
4
Welcome and Overview ………………………………………………………….…….Tim Mammen
Current and Future Market Opportunities…………………………………………. Trevor Ness
Accessories………………………………………………………………… Felix Stukalin
Strategic Growth Projects…………………………………………………Yuri Erokhin
Medical……………………………………………………………………… Gregory Altshuler
Telecom………………………………………………………………………Mark Cannata
Manufacturing
Devices and Components……………………………………………….. Eugene Scherbakov
Diodes………………………………………………………………………..Alex Ovtchinnikov
Break
China……………………………………………………………………………………… Trevor Ness
Financial Review…………………..…………………………………………………… Tim Mammen
Summary and Growth Strategy............................................................................ Valentin Gapontsev
Q&A Session
Tours and Lunch
IPG Overview
Global leader in industrial fiber lasers
FY 2015 sales of $901 million; YOY growth of 17%
$4.53 diluted EPS; up 20% YOY
Q1 2016 sales of $207.2 million; YOY growth of 4%
$0.99 diluted EPS; up 2% YOY excluding foreign
exchange transaction loss/gain
Growing acceptance of fiber lasers replacing traditional lasers
Products are sold to OEMs, systems integrators and end
users for use in many industries
Global operations with over 3,700 employees
5
Investment Highlights
Expanding $4.8 billion opportunity for all lasers Approximate average annual growth rate of 6%
Recognized leader in the rapidly growing fiber laser market Estimated 12% CAGR from 2015 to 2020
Significant competitive advantages First mover advantage
Performance, product range and reliability
Lowest cost (vertically integrated model)
Strong IP position
Vertical integration and direct sales model drives industry-leading
margins (54.6% GM in FY 2015, 55.2% GM in Q1 2016)
Broad geographies, end markets and applications Asia & Australia 51%, Europe 33%, North & South America 15%
6
The technology leader and most profitable
company in the rapidly growing fiber laser market
$-
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
All Lasers Fiber Lasers All Lasers Fiber Lasers
2015 2020
Forecast
Materials Processing Advanced Applications Medical
7
Rapidly Taking Share in Large, Existing Laser Markets
$4,800
$1,480
$6,751
$2,600
____________________
Source: Laser Focus World, Industrial Laser Solutions, Strategies Unlimited, Optech Consulting and IPGP estimates.
(000)
Fiber, 31%
2015 - Share of Total Laser Market
Fiber, 39%
2020 - Share of Total Laser Market
Materials Processing – Diverse End Uses and Customers
8
Automotive
General Manufacturing
Heavy Industry
Oil & Gas
Shipbuilding
Nuclear
Construction
Aerospace
Shipbuilding
Semi/
Electronics
Displays
Consumer
Expand addressable market and enhance future growth opportunities by
addressing new application and customer specific requirements
Recent & New Product Introductions
9
Marking & Engraving
Cutting
Welding
Fine Processing
Additive Manufacturing
Brazing
Drilling
Welding of Alloys and Specialty Materials
Cladding & Deposition
Ablation
Display & Imaging
3D-Cinema
Entertainment and Projection
Micro-processing
Medical Devices
Bio-Medical
Sensing & LIDAR
CURRENT FUTURE
Future Opportunities in Micro-processing
10
Semi/PC Board/Display, $153
Solar/LED/ Other, $367
Excimer/DUV ,$719
CO2/EUV , $193
Addressable Market,
36%Other Applications,
64%
Significant area of growth for ultra-fast pulsed lasers, and shorter
wavelength lasers at the green and ultra-violet wavelengths
Other Applications Provide Potential Additional Longer
Term Growth Opportunities
11
____________________
Source: Strategies Unlimited, IPGP estimate of potentially addressable market.
Fiber participation is relatively low in these other applications. Longer term opportunity will depend
on successful product development and market acceptance of fiber laser products.
2015 2020
(US$ mm)
$192
$161
$67
$455
$372
$628
Displays & Light Shows
Sensors, LIDAR & Inspection
Mid-IR Spectroscopy
R&D
Defense
Medical
$569
$236
$108
$594 $524
$1,042
IPG’s Defensible Laser Position
12
Strong IP Portfolio
Vertical Integrated Business Model
Manufacturing Scale
13
Three Distribution Channels
OEMs/Integrators Direct Sales Representatives
End User
End User
End User
End User
End User
End User
End User
End User
Factory 1
Factory 2
Factory 3
End User
OEM
Large Manuf.
OEM
Integrator
Representatives
Direct Sales
Direct Sales
Direct Sales
Leveraged Sales Model Maximizes Market Reach
World Leadership in High Power Fiber Lasers
www.ipgphotonics.com
Current and Future Market Opportunities
Trevor Ness
Senior Vice President, World Wide Sales and Marketing
IR Lasers
UV Laser
Ultrafast
Visible Fiber Lasers
Systems
Accessories (Felix Stukalin)
Strategic Growth Projects (Dr. Yuri Erokhin)
Medical Applications (Dr. Greg Altshuler)
Telecom (Mark Cannata)
Diverse Product Lines and Market Opportunities
15
World Leadership in High Power Fiber Lasers
www.ipgphotonics.com
IR Lasers
IPG Laser Wavelengths, Mode of Operation and Power
Wavelength
Mode of Operation
Laser Power
Fe:ZnSe/S
3.4 -5.2 mm
IPG manufactures lasers with average
power ranging from a few Watts to
hundreds of kW (virtually unlimited)
UV ~0.36 mm
Ultra-violet
Blue, green, yellow , orange and red 0.45-0.73 mm Ytterbium
~1.07 mm
Visible Near-Infra-red
400 nm 700 nm 1.5 mm
Diode
~0.98 mmErbium
~1.5 mm
Thulium,
Holmium
~2 mm
Cr:Zn/Se/S
1.8-3.4 mm
> 5 mm
Mid-Infra-red
• CW: the laser is ON all the time
• Quasi-CW: the laser is modulated in ms to ms range
• Pulsed: the laser is switched on for 10-9 s
• Ultrafast: the laser is switched on for 10-12 t0 10-15 s
Any wavelength, any
pulse duration, any
average power:
ANY APPLICATION
17
Overview:
IR fiber lasers are the laser of choice in
materials processing applications
Strategy:
IPG fiber lasers have the broadest product
range, the highest performance and
reliability, the lowest cost of ownership and
offer unmatched integration capabilities
Margin Profile:
Vertical integration and direct sales model
drives industry-leading margins
Growth Targets:
Fiber lasers forecast to outpace laser market
growth, with CAGR of 15% though 2019
IR Lasers Overview
18Source: Optech Consulting and IPGP estimates.
IPG’s Core Existing Applications
$1,453
$1,867
$569 $662
$385 $431 $520
$718 $644
$1,323
$278 $352
$219 $333
$144 $183
2015 2020 2015 2020 2015 2020 2015 2020
High Power Marking Fine Processing Micro Processing
All Lasers Fiber Lasers
Materials Processing Laser Market
____________________
Source: Laser Focus World, Industrial Laser Solutions, Strategies Unlimited, Optech Consulting and IPGP estimates.
Opportunity for Continued Fiber Laser
Market Share Gain is Significant(US$ mm)
(Excludes lithography)
New Applications
19
$462
$967
$182 $356
$591
$364
$219
$180
0%
10%
20%
30%
40%
50%
60%
70%
80%
$-
$200
$400
$600
$800
$1,000
$1,200
$1,400
2015 2020 2015 2020
Cutting Welding & Other High Power
Fiber Lasers All Other Lasers Fiber Market Share
Fiber Laser Penetration of High Power Applications
7%9%
17%
40%
27%
Welding Applications
Power Train
Tube Welding
Car Body ScannerWeldingCar Body Seam Welding/ BrazingOther
81%
3% 16%
Cutting Applications
Flat SheetCutting
Tube Cutting
3D Cutting
(US$ mm)
Welding
Opportunity -
potentially
much more
significant
20
IR Laser Applications
Welding
Additive ManufacturingCladding
Cutting Brazing Drilling
Marking Surface Treatment
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
position with room to grow
- Total market size expanding; ease of use,
lower cost, higher power trends
- Fiber penetration estimated at 35% in Y15
with potential to grow to 80% by Y2020
81%
3% 16%
Cutting Applications
Flat SheetCutting
Tube Cutting
3D Cutting
Source: Strategies Unlimited & IPGP estimate
22
Y15 High Power Laser Cutting
Fiber Disk/OtherFiber CO2
High Power Cutting
• Approximately 30 major OEMs
• 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
• Fiber forecast to grow to 80%
market share by 2020, remainder
CO2 & Disk
• Estimate 60-70% IPG share of
industry sales achievable by 2020
• Some fiber opportunity not
available to IPG due to OEM
own laser/competitionSource: IPGP estimate
35.2%55.6%
9.2%
23
High Power Welding
Remote Welding
Laser Seam StepperSpot Welding
Seam Welding Braizing (aesthetic,
roofs, trunks)
Fine Welding
24
Introduction – Laser Welding Market
Source: Optech Consulting, Sep. 2015;
Strategies Unlimited Mar. 2016; IPG estimates
0
100,000,000
200,000,000
300,000,000
400,000,000
500,000,000
600,000,000
2015 2019
Welding Market USD - Laser Sources
CAGR7%
0
500
1,000
1,500
2,000
2,500
3,000
2015 2019
Global HP Laser Welding Market - Analysis
by units (excl. Surface Treatment)
25
Niche Welding
Applications
Transitions in Welding – Medium and Long Term
High Strength Steel
Aluminum
Titanium
Alloys
Thick Materials
Automotive
Aerospace Construction
Heavy Equipment
Railways
Shipbuilding
Transportation & Storage
Decreasing cost of laser welding, new laser welding technologies, know-how,
software & algorithms
In many instances strength of the laser weld > welded material
Diverse Materials Diverse Industries Limited Materials
Aircraft
Autos
Bridges
Buildings
Pipelines
Rails
Railcars
Ships
Storage Tanks
Trucks
Diverse Products
FUTURECURRENT
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
• Opportunities include CO2 displacement, new braising
technologies, new remote welding solutions,
penetration of new industries and flagship customers
Auto
Welding -
other
Source: Strategies Unlimited, Optech Consulting and IPGP estimates.
38.5%
61.5%IPG has strong traction within
automotive segment.
Over 850 HP lasers installed in
welding applications with
automotive end users globally.
2015
27
• 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 IPGWeld 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.
New High Power Scanning (Remote Welding)
28
High Power Scan head
New Product Introductions: High Power Scan head
Launch:
Q2 2016
Market Opportunity*:
$140M estimated by Y19
Strategy:
Customer testing from Q2 in multiple
geographies
$90
$140
2015 2019 (E)
Market Opportunity*(US$ mm)
*Source: Optech/IPG
[Product Image]
Description:
Scan head for high speed welding in 2D and 3D for
use with kW class lasers
Applications/Markets:
Automotive; body in white, seat welding, battery
welding
Advantages:
Ease of use, lightweight, competitively priced, 2D &
3D IPG is able to provide complete solution laser +
beam delivery + chiller + software
29
New Product Introductions: Trifocal Brazing
Launch: Launched Q2 Y15, several large
automotive manufacturer wins, multiple
global engagements
Market Opportunity*:
Market size estimated at 140 units, growing
to 380+ by Y20
Strategy: Rapid deployment globally to
become technology of choice for brazing
$34.5
$65
2015 2019 (E)
Market Opportunity*(US$ mm)
Source: Optech Consulting, Sep. 2015;
Strategies Unlimited Mar. 2016; IPG estimates
Description: IPG's new YLS-5000-BR trifocal laser
brazing allows cleaning of the base metal parts improving
filler material flow, resulting in reproducible brazed joint
with increased strength and better appearance
Applications/Markets: Brazing of Electrogalvanized
Material, Automotive manufacturing
Advantages: Unique three beam approach, cleaning
and braising. Highly reproducible brazed joint with
increased strength and better appearance
Trifocal Brazing
30
Unique Quasi-CW Fiber Lasers
• Medical Devices
• Micro welding
• Computer
Components
• Deep Engraving
• Drilling (aerospace)
• Cutting
• Spot Welding
• Batteries
• Seam Welding
• 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
Fine welding, brittle material cutting, high power drilling
31
Pulsed Lasers
Main market application marking &
engraving across most/all industries,
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)
gaining traction
• Opportunities in higher power
applications growing; coatings
removal, cutting applications
1-100 W, 1-200 ns, up to 1 mJ• Low Divergence
• High Beam Quality
New 100 W to 5 kW, 100-600 ns, 10-
100 mJ• High Throughput
• High Pulse Energy
Strategy – Defend volume market,
expand applications and trend to
high power
32
World Leadership in High Power Fiber Lasers
www.ipgphotonics.com
UV Fiber Lasers
New Product Introductions: UV Fiber Lasers
Launch:
Ready for introduction
Market Opportunity*:
>$110 million
Low Power UV Laser
$110
$140
2015 2019 (E)
Market Opportunity*(US$ mm)
*Source: IPG Estimates
Description:
Laser marking module with 2-axis scanner
integrated with IPG UV laser
Applications/Markets:
UV marking for white plastics and cabling;
electronics, aerospace
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
www.ipgphotonics.com
Ultrafast Fiber Lasers
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
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.
36
New Product Introductions: Picosecond Fiber Lasers
Launch:
Ready for introduction
Market Opportunity*:
$190 million annual industrial
picosecond laser market opportunity
Strategy:
IPG will accelerate ultrafast market
growth by providing robust, easy to
integrate economical fiber lasers
Industrial Picosecond IR Laser
$190
$300
2015 2019 (E)
Market Opportunity*(US$ mm)
*Source: Strategies Unlimited
Description:
Air-cooled, rack-mountable chassis featuring
remote head produces 50 µJ pulses at high
repetition rate totaling >50 Watts average power
Applications/Markets:
Sapphire scribing (LED)/cutting (watch glass),
high strength glass cutting (smartphone/tablet),
thin film ablation (display/electronics)
Advantages:
Compact, affordable, reliable picosecond laser
37
New Product Introductions: Femtosecond Fiber Lasers
Launch:
Initial units available
Market Opportunity*:
>$600 million annual industrial
femtosecond laser market opportunity
Strategy:
IPG’s robust, affordable fiber lasers will
enable femtosecond laser processing to
enter the mainstream
Industrial Femtosecond IR Laser
$620
>$1B
2015 2019 (E)
Market Opportunity*
*Source: Strategies Unlimited
Description:
Air-cooled, rack-mountable chassis featuring
remote head produces 500 femtosecond pulses
at high repetition rates totaling >10 Watts
average power
Applications/Markets:
Medical (Laser Eye Surgery), Scientific,
Ultra-precise micromachining
Advantages:
Compact, affordable, reliable femtosecond laser
38
World Leadership in High Power Fiber Lasers
www.ipgphotonics.com
Visible Fiber Lasers
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
Green Fiber Lasers Overview
40
New Product: High-Power High Rep Rate Green Fiber Laser
Launch:
Expected Q3 2016
Market Opportunity:
Kilowatt-class HRR green laser creates a new
market segment
Strategy:
IPG is partnered with leading OEMs in the
PCB, Aerospace and Semi Equip industries to
pioneer new applications
High-Power Quasi-CW Green Fiber Laser
<$1
2015 2019 (E)
Market Opportunity*
(US$ mm)
*Source: IPG Internal Data
Description:
Rack-mountable 500 Watt single mode laser
providing 1.5 nano second pulses at high 150 MHz
repetition rate through a compact remote head
Applications/Markets:
Emerging applications in reflective metal welding and
drilling, wafer and glass panel annealing
Advantages:
Unprecedented level of single-mode green power
$10-20
41
New Product: Nanosecond Green Fiber Laser
Market Opportunity*:
$250M annual micro materials laser
market in Semi, PCB and Solar
Strategy:IPG partners with leading micro materials
processing companies to pioneer new high
pulse energy green applications
High Pulse Energy Green Nanosecond Fiber Laser
$263
$451
2015 2019 (E)
Market Opportunity*(US$ mm)
*Source: Strategies Unlimited, 2016 Worldwide Laser Report
Description:
Rack-mountable 100 Watt nanosecond laser
providing up to 500 milliJoule pulse energy
through a compact remote head
Applications/Markets:
Solar Cell thin film ablation and wafer dicing,
precision via drilling for microelectronics PCBs
Advantages:
Unique combination of throughput and precision
stemming from high pulse energy and short 1.5
nanosecond pulse width
42
World Leadership in High Power Fiber Lasers
www.ipgphotonics.com
Laser Systems
Resonators Lasers Process Heads
Adding Value Through Integration
INTEGRATED LASER, ACCESSORIES
AND CONTROLLER TO DRIVE
LASER, OPTICAL PROCESSING AND
ROBOT
$15-$20K
$50K to $1.0
million
$4-$10K
$10-
$20K
$8-$100K
COMPLETE SYSTEMS $200k to $5 million +
Amplifiers
Chillers
and Power
Supplies
$3K
Couplers, Switches &
Delivery Fibers
$5-40K
$4-$10K
44
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
Laser Systems – Developing New Applications and
Opportunities
45
Laser Systems Overview
New system platforms offering specific laser and beam delivery tailored to specific
applications
Small format 2D
cutting
Small format multi-axis
welding, cutting & drilling
Micromachining
Multi-axis welding,
cutting & drilling
Multi-axis pipe
welding system
Tube and Profile Welding
Laser Seam Stepper Orbital Pipe Welding
46
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
Robotic Laser Processing System
Application: Welding Aerospace Components
Example. Seam welding 1 inch thick copper
High Power Automated Welding System
47
5-Axis Pipe Welding System
New Product Introductions: Laser Systems
Launch:
First system delivered in Q1 2016
Market Opportunity:
Large application area with zero
penetration by lasers today
Description:
Multi-axis high power fiber laser pipe welding
system
Applications/Markets:
Pipelines, construction
Advantages:
High productivity vs incumbent technology
48
Macro and Micro Laser Systems Market
38%
9%
2%
19%
10%
11%10%
Macro and Micro Laser Systems 2015 - Approximately $9.6 Billion*
Cutting
Welding & Brazing
Other High Power
Micro-processing Excluding DUV & EUV
Fine Cutting, Welding & Drilling
Marking
Other Low Power
*Source: Strategies Unlimited, Optech Consulting and IPG Photonics estimates
49
World Leadership in High Power Fiber Lasers
www.ipgphotonics.com
Accessories
Felix Stukalin
Senior Vice President, U.S. Operations
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Laser System Lasers & Chillers Couplers, Switches &
Delivery Fibers
Cutting Heads
Typical Laser System Architecture
Welding Heads
Integrated ModulesScan HeadsPulsed Laser Controller +
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
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
IPG Strategy
53
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
Major IPG Opportunity for Integrated Heads
54
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
Total Available Market* – Accessories Sold with IPG Lasers
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
• Highest power handling in the
Industry – 12kW
• Ultra-stable capacitive height
sensing
• Hermetically sealed design
• Motorized Focus and Pierce
Sensing options
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• Wobble and Seam Tracking
combined in one product
• Unique Product
• Provides improved weld quality
and better visual finish
• Variety of Wobble shapes at a
frequency of 300Hz
• Power Handling of up to 12kW
• Remote Scanning
Applications
• Plug & Play with QCW or
CW lasers
• Up to 2kW laser power
handling
• Calibrated Scan Field
IPG CUTTING HEAD WOBBLE & SEAM
TRACKING MODULE
MID-POWER
SCANNING SYSTEM• Optimized for welding applications
of up to 50kW
• Hermetically sealed design
• Provides unmatched results in
penetration depth
50kW WELDING HEAD
35mm+ of penetration
depth in SST at 50kW
56
• Highest power handling in the
Industry – 15kW
• Ultra-stable capacitive height
sensing
• Hermetically sealed design
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WE
LD
ING
• IPG Wobbler design is now
available in a compact and
lightweight architecture
• Wobble frequencies of up to
1000Hz
• Power Handling of up to 6kW
• Integrated Module
• Optimized for Marking
applications
• Completely sealed
design
• Includes Controller and
Software
IPG HP CUTTING
HEADD30 WOBBLE & SEAM
TRACKING MODULE
UV INTEGRATED
MARKER• Highest power handling in
the Industry – 15kW
• Hermetically sealed design
• Through the lens vision
• Plug and Play with IPG
Lasers
• Available with IPG Controller
and IPGWeld software
2D/3D REMOTE
WELDING
New Products for 2016 Introduction
57
Next Level of Integration - Specialized Beam Delivery
Systems Expand Market Opportunities
Seam Stepper
• Integrated robotic welding unit
addresses large resistance
spot welding market
Welding with Seam
Tracking Sub-system
• Welding unit with seam
tracking capability addresses
pipe and seam welding market
Cladding Heads and 3D
Cutting Heads
• Specialized cladding and 3D
cutting heads for emerging
material processing applications
58
World Leadership in High Power Fiber Lasers
www.ipgphotonics.com
Strategic Growth Projects
Dr. Yuri Erokhin
VP, Strategic Marketing
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
Laser Luminaire: Large Greenfield Opportunity
605/11/2016
Cinema Market Opportunity: Up to $2.4B Over 8-10 Years
SegmentScreen
Count
TAM over
8-10 years
Ultra-Premium
IMAX, Dolby, etc.
Mostly 3D
2,000$200M-
$400M
Very Large
Screens
2D and 3D
5,000$250M-
$450M
Large Screens 10,000$300M-
$600M
Medium Screens 38,000$425M-
$950M
55,000*
screens
$1.2B to
$2.4B**
Very Large
Screens 2D
and 3D
Large Screens
Primarily 2D, some
3D capable
Medium Screens, Mostly 2D
3D Ultra
Premium
Projected Top-Down Laser Luminaire
Market Adoption
Laser
Str
ength
Segm
ents
Fib
er
La
se
rs o
r
dio
de
s
* Remaining 85.000 (+/-) screens WW are small size**Revenue opportunity is exclusive of service
61
Laser Projection is rapidly gaining
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
superior image quality
Laser Opportunities in Signage and Entertainment Markets
2015 Freightliner unveiling autonomous truck - Hoover Dam
promo event. 60 projectors with 1.17M lumen
http://www.barco.com Projection mapping: A map to spectacle
$50M annualized RGB Fiber Laser
Illumination Source opportunity
Creating Technology – design; Barco Entertainment – projection system
62
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 Low Temperature
Poly-Si (LTPS) is key enabler of these
products
$500M market today, dominated by
Excimer Lasers
Flat Panel Display Anneal Market Opportunity
Unique Flat Panel market opportunity
for IPG UV fiber lasers Source: DisplaySearch, 2014
Source: Samsung Display
63
UV Fiber Laser Flat Panel Market Opportunity
Excimer Laser Anneal (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 backplane fiber laser opportunity
3-5x lower operating cost vs. ELA 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
DisplaySearch, Jan., 20th, 2014
*Source: Samsung
By 2018 Samsung Projects Proliferation of LTPS
into High End Tablets
64
Ablates paint from the surface
Vacuum removes 99.9% of residue
Does not require chemicals which produce toxic
sludge or plastic beads
Manual paint stripping requires:
F-16 4 people
16 to 18 people for a C-130
Dept. of Defense current paint stripping costs >
$800 million per year (2015 Air Force LCMC)
Many applications outside of aerospace:
Cleaning of molds, casts, tanks, pipes &
other surfaces
New generation of Nano-Second Pulsed laser
with average power up to 4 kilowatt
Pulsed product limits thermal damage to
cleaned surface
Laser Ablation for Paint Stripping and Surface Cleaning
Sources:
*Potential alternative report for the portable handheld laser small area
supplemental coating removal system, prepared for USAF by SAIC, Feb. 2001
** Penn State Applied Research laboratory, Automated Rotor Blade Stripping
System (ARBSS) study for the USN, 2005
Environmental Benefits:
0
5
10
Media Blast* Solvent* LaserAblation**
Solid
waste
(lb
.) g
enera
ted
Per
1 lb.
on p
ain
t str
ipped
Paint Stripping Method
Plus 165 lbs of Liquid Waste
65
World Leadership in High Power Fiber Lasers
www.ipgphotonics.com
Medical
Dr. Greg Altshuler
President, IPG Medical
Large Medical Laser and Systems Market
67
($ in Millions)
*Includes Ophthalmic, Surgical, Cosmetic, Dental and Veterinary applications
Source: BCC Research
$4,110
$7,759
$628$1,042
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
$9,000
2015 2020
Laser medical systems*,$MM
Laser sources for medicalsystems**, $MM
**Source: Strategies Unlimited
4-8 Times Larger Opportunity for Laser Medical Systems
Medical Laser Sources by Type
Lamp Pumped SSL35%
CO220%
Eximer laser4%
Fiber laser9%
Diode Pumped SSL
12%
Diode laser20%
2020
Lamp Pumped SSL37%
CO221%Eximer laser
4%
Fiber laser5%
Diode Pumped
SSL16%
Diode laser17%
2015
IPGM believes it can target 20% to 30% growth
Laser Medical Systems use legacy technologies such as flash lamp pumped
and gas lasers with slow transition to new diode and fiber laser platforms
68Source: Strategies Unlimited
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
Fundamental Advantages of Fiber Lasers for Photo-medicine
69
69
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
IPG Medical Overview and Strategy
70
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
Dental Laser Partnership
71
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
Urology Opportunity
72
IPG Consumable Surgical Fiber with proprietary connector
Gum regeneration for periodontology and implantology
New solution with IPG proprietary patent pending fractional dental
laser technology
Dentistry Opportunity
Laser patterns on gum
tissue treatment
Replacement of tissue
grafting
Before Tx 3 w after TxALD 2015, G. Altshuler et al.: Laser
Patterned technology: a new natural method
of tissue regeneration
73
World Leadership in High Power Fiber Lasers
www.ipgphotonics.com
Telecom Products
Mark Cannata
Director, Sales and Marketing, Telecommunications Products
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 amplifiers1
Differentiated Products for Growing Market
75
1 Ovum, Total OC Forecast Spreadsheet: 2014–20, August 2015
Optical Amplifiers for Broadband and CATV
76
IPG EDFAs for FTTH NetworksRF Overlay for CATV delivery
32-port Front Access64-port with integrated WDMs
~10W amplification
OEM EDFAs for CATV NetworksFiber Deep architectures
e.g. RFOG, Node Segmentation
Node EDFA
Head-end CATV EDFA
Optical Transmission - Line Cards, Modules, DWDM Systems
77
IPG DWDM and Optical TransportRepeater-less 40x100G DWDM – 400+ Km
Menara Optical System Modules
100G CFP/CFP2/QSFPData Center / metro / Regional
And DWDM Connectivity
10G OTN XFP
System in a Module
10G SFP+
Vendor Agnostic Plug-and-Play
Addressable Optical Networks Market:
$12.8B in 2016 to $15.4B in 2020
All Growth in 100G+ Line Cards and Pluggable Modules
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
IPG to Enter Large and Growing Optical Pluggable
Systems Market with Menara Acquisition
78
100% of Optical Networks 5yr Growth in 100G Line Cards
79
Ovum, Optical Networks Forecast Spreadsheet: 2015–20, December 2015
2016
$12,830M2020
$15,350M
$2.5B Growth
In 100G+ Transmission Line Cards
Terminals, L2/OTN
switching, $1,973
ROADMs, Amplifiers,
$1,967
10G, 40G TXP, $3,536
100G, >100G MXP/TXP,
$5,360
Terminals, L2/OTN
switching, $2,002
ROADMs, Amplifiers,
$2,531
10G, 40G TXP, $2,915
100G, >100G MXP/TXP,
$7,900
$0.0
$5.0
$10.0
$15.0
$20.0
$25.0
2012 2013 2014 2015 2016 2017 2018 2019 2020
Re
ven
ue
($
bn
)
Optimistic Most likely Pessimistic
Growing Telecom Opportunity
80
-
20,000.00
40,000.00
60,000.00
80,000.00
100,000.00
120,000.00
140,000.00
160,000.00
Current Business With Menara 3-5 Year Opportunity
Telecom Acquisition Adds Scale to Business and Expands 3-to-5 Year Growth Opportunity to between $100 million and $150 million
World Leadership in High Power Fiber Lasers
www.ipgphotonics.com
Manufacturing: Devices and Components
Dr. Eugene Scherbakov
Managing Director, IPG Laser GmbH and SVP, Europe
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
Proven Vertical Manufacturing Drives Leading Results
82
Vertical Integration Drives Significant Benefits
83
Major Global Production Facilities
Total: 57,000 sq.m.
Clean Rooms: 10,000 sq.m.
Employees: 1,400
Total: 38,600 sq.m.
Clean Rooms: 10,000 sq.m.
Employees: 1,113
Total: 50,000 sq.m.
Clean Rooms: 8,000 sq.m.
Employees: 1,100
Production Facility and
World Headquarters
Oxford, MA
IPG Laser Facility
Burbach, Germany
NTO Facility
Fryazino, Russia
84
Vertical Integration & Production Location
Fab Operations
Semiconductor Wafer Growth
Diode Processing, Chip Mounting
& Burn-In
Laser diode
Packaging
Up to 120-watts
Optical Preform
Silica based glass
MCVD method
Dope with rare
earth ions
Fiber Draw
Draw towers
Fiber Block
Modules
Up to 2000 Watts
Final Assembly
Coupling
Final burn in
Shipment
Components
Bragg Gratings
Isolators, Couplers
Deep in technology
Deep in experience
Optical Delivery
Systems: Welding
& Cutting Heads,
Scanners, process
fibers
US, Germany & RussiaUS
Germany & Russia
US & Russia
Germany & Russia
US, Germany & Russia
US, Germany & Russia
US, Germany & Russia
US, Germany & Russia
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
10 20 100 200 400 600 1000 2000 4000 5000 8000 10000 15000 20000 50000
Output Power [W]
IPG offers more than 510 different fiber lasers for micro and
macro applications!
2015 - First 6kW ECO laser
WPE>50%2013 - First 100kW HPL
87
NTO Sales 2013-2015 at Internal Transfer Prices
88
0.0
20.0
40.0
60.0
80.0
100.0
120.0
140.0
160.0
180.0
200.0
2013 2014 2015
HP Lasers LP Lasers Systems Laser Heads
Telecom Medicine Components
($ in millions)
$109
$129
$173
Components Production: Fibers
386180
384578
728823 793 834
66
6756 192
497
418
200
402
644
795879
985
1,331
0
200
400
600
800
1,000
1,200
1,400
2008 2009 2010 2011 2012 2013 2014 2015
To
tal
len
gth
, km
Active Fibers NTO IRE-Polus
IPG Laser GmbH
1,554575
1,4302,712 2,500 3,129 3,403
4,2181,541 2,134
3,388 3,7133,600
6,120
7,800
3,095
985
3,564
6,1006,213
6,729
9,523
12,018
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
2008 2009 2010 2011 2012 2013 2014 2015
To
tal
len
gth
, km
Passive Fibers NTO IRE-Polus
IPG Laser GmbH
89
Components Production: Fiber Blocks
6,813 5,353 8,276 10,457 12,839 13,456 13,031 14,263
15,756
4,133
24,480
32,27834,838
41,032
52,600
79,570
22,569
9,486
32,756
42,735
47,677
54,488
65,631
93,833
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
2008 2009 2010 2011 2012 2013 2014 2015
Qu
an
tity
, p
cs
Year
Fiber Blocks: Production in Germany and Russia
NTO IRE-Polus
IPG Laser GmbH
90
817 1,020 1,214 1,125
5,785
2,951
6,011 5,640
7,697 7,434 6,616
6,578
-
-
2,637 4,011
5,334 6,181 7,940
11,579
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
2008 2009 2010 2011 2012 2013 2014 2015
Qu
an
tity
of L
ase
rs, p
cs
Pulsed Lasers. Production in US, Germany and Russia.
IPG Photonics
IPG Laser GmbH
NTO IRE-Polus
Pulsed Lasers Production
91
5,916
3,159
9,246
10,468
14,05114,829
15,681
18,604
High Power Lasers (P > 1KW)
92
352 461 724 886 1,051
164 191 413
842 947
1,398
2,015
2,758
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
2008 2009 2010 2011 2012 2013 2014 2015
Qu
an
tity
of L
ase
rs, p
cs
High Power Lasers. Production in US, Germany and Russia.
IPG Photonics
IPG Laser GmbH
NTO IRE-Polus
259276
590
1,266
1,518
2,241
3,021
3,883
Low- & Mid-power Lasers (P < 1KW)
93
939 827 1,043 1,230 1,518 1,755
3,441
1,083
694 1,454
1,583 1,635
1,957
2,759
3,616 634
1,677
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
2008 2009 2010 2011 2012 2013 2014 2015
Qu
an
tity
of L
ase
rs, p
cs
IPG Photonics
IPG Laser GmbH
NTO IRE-Polus
1,259
1,647
2,3172,686 2,940
3,652
5,148
8,734
Low- & Mid-power Lasers. Production in US, Germany and Russia.
Scale in High Power Laser Sales
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
2007 2008 2009 2010 2011 2012 2013 2014 2015
>500W
>1KW
IPG has shipped more than 19,000 lasers with output power of
more than 500-watts since 2007
94
Rapid Penetration of the Laser Market Across All Products
95
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
2007 2008 2009 2010 2011 2012 2013 2014 2015
Approximately 160,000 IPG lasers in the field since 2007
Total Units Sold
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
Automotive – IPGL
96
Automotive – Outlook for HP Lasers
Auto HP units for joining forecast to
grow from 718 in 2015 to 1,200 in 2019
IPG targeting to grow sales in joining
from ~50% to 65% through superior
technology, technical differentiation,
applications wins, regional excellence
and strong commercial position
Opportunity is $200M+ by 2019 (mid
and HP welding, cutting and ablation)
Existing market forecast could have
strong upside from electric vehicles
0
200
400
600
800
1000
1200
2015 2019
Total IPG
Growth in HP Lasers for
Automotive Joining
97
World Leadership in High Power Fiber Lasers
www.ipgphotonics.com
Manufacturing: Diodes
Dr. Alexander Octchinnikov
SVP, Components
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
IPG Diode Manufacturing: Significant Competitive Barrier
99
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
Ongoing Strategic Initiatives and Cost Improvements
100
Total Worldwide Facilities:
~135,000 sq. ft. production floor area and ~750 employees
Diode Manufacturing Steps and Facilities World Wide
Front-End U.S. Germany Russia
Wafer Fab Operation
Wafer Growth (MBE) ─ ─
Wafer Processing ─ ─
Facet Passivation and Coating ─ ─
Chip-On-Submount AssemblySubmount Manufacturing
─ ─COS Assembly
Back-End U.S. Germany Russia
Test and Burn-InScreening out low-reliability lots
and individual devices
PackagingManufacturing of various types of
pumps
101
Requires most technical expertise
and capabilities
– Highly qualified technical staff,
proprietary designs, equipment and
technology ensure industry best diode
performance and reliability
Capital Intensive
Ensures redundant high-volume
manufacturing operation
– Over-capacity in MBE and Wafer
Processing equipment
– Strategic stock of MBE-grown qualified
wafers
FRONT-END: Wafer Fab Operation – Oxford, MA
102
Scale of OperationIPG assembles over 0.5 million Chip-On-Submount
each month
Vertical IntegrationIPG manufactures submounts internally
AutomationManufacturing is based on automated equipment
(some built in-house), and proprietary processes
Paperless Manufacturing Production processes are fully DB-traceable:
translates to higher yields and little direct labor
FRONT-END: Chip-On-Submount Assembly – Oxford, MA
103
These advantages result in high yield, little direct labor and subcomponent cost;
thus IPG manufacturing is cheaper than off-shore contract manufacturing
PurposeKey operation to screen out “weak devices”
to ensure long-term reliability of pumps
ScaleIPG has industry’s largest TEST/BI facility:
over 100,000 COS devices are tested
simultaneously
Competition Barrier to EntryAll TEST/BI equipment has been designed
and manufactured internally for a fraction of
an open market price
Long-term BenefitEvery COS used in IPG Fiber Lasers
undergoes rigorous screening by burn-in:
elevated temperature and elevated current
BACK-END: Test & Burn-In Operation in
US, Germany and Russia
104
TEST/BI operation ensures high reliability of DIODE pumps:
Contributes to low cost of ownership of Fiber Lasers, and
Minimizes IPG need for field service
Packaging is the most labor-intensive part of pump
manufacturing and the most “value-added” operation
Facts about IPG Packaging operation:
Pioneered commercialization of single emitter pumping
over 20 years ago
Produces industry’s most efficient pumps
All automated equipment and processes used in PKG
operation:
– Designed and manufactured internally for a fraction of open
market analogues’ cost, and
– More productive than commercially available analogues
Cost of subcomponents:
IPG is the only company in the industry that
manufactures all micro-optics and packages mechanical
subcomponents internally
– More than 90% of BOM are internally manufactured parts
and components
BACK-END: Packaging Operation in
US, Germany and Russia
105
PLD130
PLD70
PLD40
PLD40 3 COS 40 W CW
PLD70 6 COS 60 W CW
PLD130 12 COS 120 W CW
PLD80 6 COS: new design > 70 W CW: Q2
PLD90 6 COS: next design; new package > 80 W CW: H2
Most commonly used pumps
New pumps: introduced through 2016
Labor ProductivityIPG continues to increase PACKAGING
labor productivity through wider robots
utilization and automation
Internal development and manufacturing
of automation equipment
BACK-END: Packaging Manufacturing Cost in
US, Germany and Russia
106
Manufacturing Cost of IPG PACKAGING operation is lower than
overseas contract manufacturing
1.00
1.28
1.56
2.00
2.35
0.00
0.50
1.00
1.50
2.00
2.50
2011 2012 2013 2014 2015
Labor Productivity Improvement
in PKG Operation
High volume production levels of pump diodes, proprietary processes
and use of unique chip and package designs allows IPG to increase
yields, lower component costs and assure high quality
Summary: Diode Production a Significant Advantage
____________________
Source: IPGP estimates.
-40%
-20%
0%
20%
40%
60%
80%
100%
120%
-
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
2009 2010 2011 2012 2013 2014 2015
% C
han
ge i
n P
ackag
ed
Dio
de C
ost
Teste
d C
hip
s P
rod
uced
Diode Production and Cost Trends
Tested Chip Production Cost/watt % decrease (base yr 2009) Annual cost decrease %
107
World Leadership in High Power Fiber Lasers
www.ipgphotonics.com
China
Trevor Ness
Senior Vice President, World Wide Sales and Marketing
Broad Established Presence in Growth Market
109
Shenyang
Beijing
Shanghai
Shenzhen
Wuhan
Micro Process Application Lab
• 10 year presence
• ~150 employees servicing customers in 17 locations.
• Broad Geographic Coverage – close to customers
• Best service and support in the industry drives sales
NingboChengdu
Jinan
Remote service station
Branch office/application lab/service station
Qingdao
NanjingSuzhou
Chongqing
NingDe
Hangzhou
Guangzhou
ZhengZhou
Headquarter
Central warehouse
Automotive application
lab
Sheet Metal cutting
application lab
TAM in China
110
Total addressable market for IPG is $916M , IPG has 36% sales position –
big enough space for growth.
20
40
60
80
100
120
140
160
180
200
220
142
203
104
M$
147
240
260
280
300
320
288
Marking/
Engraving/
Cleaning
Micro
processing
Micro
welding
HP welding
/ adhesive
manufacture
Cutting
(metal/
non-metal)
Resource:
Input from major IPG
Chinese OEMs
Beam Delivery
System
32
Diverse and Growing End Markets Drive Laser Sales
111
Welding:
• Automotive: seat welding, body in white, electric vehicles (productivity and weight reduction trends)
• Heavy industry: locomotive, oil and gas, pipe lines
• Emerging applications replacing traditional non-laser welding: white goods, elevator manufacturers,
cabinet/furniture
• New applications to drive production efficiency
– Remote welding, scanner welding and trifocal braising
Cutting and Welding Optical Heads:
• Optical head; IPG is growing its penetration into a large opportunity, selling optical heads into
cutting, welding and scanning applications
• $32M annual addressable market in China)
Cutting:
• Fiber laser has significant and growing share vs other sources
• Hundreds of OEMs
• OEMs expect underlying annual growth of 10%
• Significant installed base of 12K+ expected to be replaced by fiber laser during next 2-3 years
• IPG is well positioned with strongest product portfolio, superior quality, highest reliability and largest
service coverage
Chinese industry is intent on adopting advanced technologies to enhance
manufacturing capability
Diverse and Growing End Markets Drive Laser Sales
112
Marking and Engraving:
• High power pulse fiber laser (>=100w)
– Cleaning/cutting, engraving, mold making
– Display applications
Emerging Applications:
• Additive manufacturing
• Cleaning and ablation
Fine and Micro Processing:
International and Chinese local electronic brands are accelerating adaption
of laser process: quality and efficiency improvements
QCW lasers are entering new applications (micro-welding replacing YAG)
and new customers
UV and Pico second laser are quickly adopted on a large scale: marking
and precise cutting of brittle materials
Manufacturing
– Low cost manufacturing in Russia
– Highest volume vertically integrated producer
Cost and product solution
– Broadest product range
– High-end and low-end offerings
– Vertical integration drives lowest cost
Service and support
– Unrivaled service capabilities drives sales
Future Strategies
113
World Leadership in High Power Fiber Lasers
www.ipgphotonics.com
Financial Review
Tim Mammen
Chief Financial Officer and Senior Vice President
115
Investment Highlights 2014 – 2015 Revenue growth ~17%
17% CAGR from 2011 to 2015
Highly diversified revenue stream and business model
Customers, powers, geographies, applications
Vertically integrated model driving gross margin
High return on R&D and SG&A drives strong operating margins
Strategically focused and efficient R&D that creates value
Track record of profitability and financial discipline
Strong return on invested capital (excluding cash)
43% in 2015
Financial Highlights
Sales and Gross Margin Growth
116
____________________
(1) Gross margin includes stock-based compensation of $2.2mm, $3.2mm, $4.2mm, $5.3mm, $1.2mm and $1.4mm for
2012, 2013, 2014, 2015, Q1 2015 and Q1 2016, respectively.
$562.5
$648.0
$769.8
$901.3
$199.0 $207.2
54.2%52.5% 54.1% 54.6% 54.2% 55.2%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
$0
$100
$200
$300
$400
$500
$600
$700
$800
$900
$1,000
2012 2013 2014 2015 Q1 2015 Q1 2016
Gross Margin(1)
(%)Sales ($ mm)
Revenue ($mm) Gross Margin
Operating Leverage Improvement
117
$562.5
$648.0
$769.8
$901.3
$199.0 $207.2 $208.9 $218.1
$283.8
$342.0
$82.0 $70.0
37.1%33.7%
36.9% 38.0%
41.2%
33.8%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
$0
$100
$200
$300
$400
$500
$600
$700
$800
$900
$1,000
2012 2013 2014 2015 Q1 2015 Q1 2016
Operating Margin(1)
(%)Sales & Operating Income(1) ($mm)
Revenue ($mm) Operating Income ($mm) Operating Margin____________________
(1) Operating income includes stock-based compensation of $8.6mm, $11.7mm, $15.2mm, $19.0mm, $4.1mm and $5.0mm for
2012, 2013, 2014, 2015, Q1 2015 and Q1 2016, respectively.
(2) Operating margin includes FX gains/(losses) of $2.6mm, $8.8mm and ($5.0mm) for 2015, Q1 2015 and Q1 2016, respectively.
(2)
(2)
(2)
Strong Cash and Liquidity Position
Long-term CapEx target <10% of revenue
Investments in product and manufacturing technology development,
capacity expansion and sales and service infrastructure
118
($ in thousands) As of December 31, 2015 As of March 31, 2016
Cash and cash equivalents $582,532 $613,692
Short-term investments $106,584 $126,273
Total assets $1,453,429 $1,550,100
Revolving line-of-credit facilities -- --
Long-term debt, including current portion $19,667 $19,167
Stockholders' equity $1,259,528 $1,345,856
A Diverse Mix with Year-over-Year Growth
119
$135.3
$344.1
$53.8
$13.3 $21.5
$131.6
$426.1
$81.0
$13.2
$34.9
$124.8
$499.6
$99.5
$13.8
$56.5 $28.6
$118.2
$22.6 $3.0 $8.6
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
$500
$550
Pulsed High-Power Medium-Power Low-Power QCW
($US mm)
IPG Sales by Product Lines
2013 2014 2015 YTD 2016
Investment Highlights
Expanding $4.8 billion opportunity for all lasers Approximate average annual growth rate of 6%
Recognized leader in the rapidly growing fiber laser market Estimated 12% CAGR from 2015 to 2020
Significant competitive advantages First mover advantage
Performance, product range and reliability
Lowest cost (vertically integrated model)
Strong IP position
Vertical integration and direct sales model drives industry-leading
margins (54.6% GM in FY 2015, 55.2% GM in Q1 2016)
Broad geographies, end markets and applications Asia & Australia 51%, Europe 33%, North & South America 15%
120
The technology leader and most profitable
company in the rapidly growing fiber laser market
World Leadership in High Power Fiber Lasers
www.ipgphotonics.com
Summary and Growth Strategy
Dr. Valentin Gapontsev
Chief Executive Officer and Chairman of the Board
World Leadership in High Power Fiber Lasers
www.ipgphotonics.com
Q&A
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