Strong demand for laser welding equipment driven by the booming power battery market.
Laser welding is in the midstream of the industry, and its growth prospects are better than those of cutting and marking laser welding equipment, which is located in the midstream of the industrial chain.
The upstream of the laser industry chain includes optical materials, optical components and equipment, and mechanical parts. The midstream consists of lasers and laser equipment; lasers are the core components of laser equipment, and laser processing equipment mainly includes laser cutting, laser welding, and laser marking equipment. Downstream sectors mainly include lithium batteries, semiconductors, photovoltaics, and consumer electronics.
The laser market has a large potential, with fiber lasers dominating applications, while solid-state lasers are suitable for precision micro-machining. According to Laserfocusworld, from 2017 to 2020, the global laser market size increased from US$13.07 billion to US$16.01 billion, a CAGR of 13.37%. In comparison, the Chinese laser market size grew from US$6.95 billion in 2017 to US$10.91 billion in 2020, a CAGR of 16.22%. From 2017 to 2020, China's share of the global laser market rose from 53.2% to 68.1%. In 2020, industrial lasers accounted for 32.2% of the global laser market, making the industrial sector the main downstream sector for lasers. Based on the gain medium, lasers are mainly classified into fiber lasers, solid-state lasers (excluding fiber lasers), liquid lasers, and gas lasers. In 2020, fiber lasers and solid-state lasers accounted for 52.7% and 16.7% of the industrial laser application market share, respectively, with fiber lasers dominating industrial applications. Compared to fiber lasers, solid-state lasers have advantages such as high peak power and low heat-affected zone, making them suitable for precision micro-machining.
YAG lasers and fiber lasers each have their strengths. YAG lasers are solid-state lasers based on YAG crystals. The advantages of YAG lasers include: ① simultaneous or time-division multi-point welding; ② high peak power, suitable for spot welding; ③ low price, offering a cost advantage. Compared to fiber lasers, YAG lasers have some differences in beam quality and photoelectric conversion efficiency. However, due to the lower peak power of fiber lasers, they do not have a significant advantage over YAG lasers in welding. Depending on the specific application scenario, both YAG lasers and fiber lasers can be used in the welding of power batteries.
Cutting, welding, and marking are the main downstream applications of industrial lasers. In 2020, cutting, welding, and marking accounted for 40.62%, 13.52%, and 12.6% of the laser application market, respectively. After experiencing rapid growth from 2014 to 2017, the laser cutting equipment market has seen increasing competition and is currently in a fierce price war. Marking is now a mature laser application area, and the market is relatively stable. Welding applications benefit from the rise of handheld laser welding and the high prosperity cycle of downstream power batteries, and are expected to maintain a high growth rate in the next few years.
Compared to cutting and marking, laser welding has higher technical requirements. Laser welding has a relatively shorter development history than laser cutting and marking, and the process difficulty is also greater. Laser cutting and laser marking use lasers to destroy the surface or overall structure of a material, while laser welding uses lasers to process, melt, and reconstruct the structure of a material. Material reconstruction, compared to simple material destruction, places higher demands on the laser and processing technology.
Compared to traditional welding, laser welding has significant advantages. Compared to traditional resistance welding, arc welding, and electron beam welding, laser welding offers advantages such as high speed, minimal deformation, less demanding welding environment requirements, high power density, immunity to magnetic fields, applicability to conductive materials, no need for vacuum conditions, and no X-ray generation during the welding process. It is widely used in high-end precision manufacturing, especially in the new energy vehicle and power battery industries. Power batteries involve numerous welding points, are complex, and require high precision. The unique advantages of laser welding can significantly improve battery safety, reliability, consistency, reduce costs, and extend service life.
The laser welding equipment market is experiencing rapid growth. From 2016 to 2020, the Chinese laser equipment market size grew from 38.2 billion yuan to 69.2 billion yuan, with a CAGR of 15.79%. In contrast, the Chinese laser welding equipment market size grew from 4.17 billion yuan to 11.05 billion yuan, with a CAGR of 27.59%, indicating that the laser welding equipment market is growing faster than the overall laser equipment market.
The rapid penetration of new energy vehicles drives high demand for lithium battery laser welding.
Laser welding equipment is widely used in the pre-production, mid-production, and post-production stages of lithium battery manufacturing. As the requirements for energy density, safety performance, and production automation in power batteries gradually increase, higher demands are placed on the precision, safety, and consistency of production equipment. Compared with traditional processing methods, lasers offer numerous advantages, including high precision, high speed, and ease of automation. Lithium battery manufacturing comprises three parts: electrode fabrication (pre-production), cell assembly (mid-production), and post-processing (post-production), all involving the application of multiple laser welding equipment. Specific laser welding applications in the pre-production, mid-production, and post-production stages of lithium battery manufacturing include:
1) Pre-production: Fully automated electrode welding and forming machines and laser electrode forming machines in the electrode fabrication stage;
2) Mid-production: Explosion-proof valve welding, electrode welding, electrode strip welding, adapter welding, cell casing welding, and top cover welding;
3) Post-production: Pack module adapter welding.
Several well-known companies have announced their entry into the 4680 battery market, which is expected to open up new growth opportunities for laser welding equipment. The 4680 battery utilizes tabless technology, featuring numerous tabs on both the positive and negative electrodes, significantly increasing the demand for laser welding equipment compared to prismatic batteries. In the first quarter of 2022, Tesla's Texas factory will deliver the first Model Y vehicles equipped with 4680 batteries. Meanwhile, at Battery Day 2020, Tesla planned to reach a battery production capacity of 100 GWh by 2022; however, considering construction delays, the effective capacity in 2022 is estimated at approximately 5-10 GWh. Besides Tesla, automakers like BMW, and leading battery manufacturers such as Panasonic, LG, and Samsung have also announced their plans to develop large cylindrical batteries.
The penetration of new energy vehicles into traditional gasoline vehicles is accelerating. Benefiting from advancements in battery technology, improvements in smart technology, and infrastructure expansion, coupled with favorable policies from the Chinese government, sales of new energy vehicles in China have grown rapidly. From 2017 to 2021, the CAGR of new energy vehicle sales in China reached 54.9%. From 2017 to the first half of 2022, the penetration rate of new energy vehicles in China rapidly increased from 2.8% to 21.56%.
China's power battery market is growing rapidly. In 2017, China's power battery production and installed capacity were 44.5 GWh and 36.2 GWh, respectively. In 2021, these figures reached 219.7 GWh and 154.5 GWh, respectively. From 2017 to 2021, the CAGR for power battery production was 49.06%, and the CAGR for installed capacity was 43.73%. According to the China Automotive Power Battery Industry Innovation Alliance, China's power battery production and installed capacity are projected to reach 429.5 GWh and 229.9 GWh, respectively, in 2022.
Driven by the booming new energy vehicle market, lithium battery companies are expanding their production capacity. According to incomplete statistics from Battery Network, in the first half of 2022, lithium battery companies such as CATL, BYD, Sunwoda, Zhongchuang Innovation Aviation, and EVE Energy successively announced multiple new construction projects, with a total investment exceeding 439.133 billion yuan and an annual production capacity of 1069 GWh (some projects did not disclose investment amounts and capacity). The single-phase production capacity of the new bases of leading power battery companies is almost all above 10 GWh. The expansion of lithium battery companies will also bring more demand for lithium battery equipment.
Power Batteries: The demand for new laser welding equipment is expected to reach 22.1 billion yuan by 2025. According to GGCI data, global power battery shipments are projected to reach 1550 GWh in 2025 and 3000 GWh in 2030. From 2018 to 2021, China's power battery shipments accounted for 61.3%, 60.9%, 58.4%, and 75.3% of the global total, respectively. Conservative forecasts indicate that China's share will remain at 55% in 2025 and 2030. The estimated investment per GWh of new power battery capacity in 2025 and 2030 is RMB 350 million and RMB 300 million, respectively. Furthermore, according to Lianying Laser's prospectus, laser welding equipment accounts for 5%-15% of power battery production line construction; taking 10%, based on these assumptions, the new demand for laser welding equipment is projected to reach RMB 22.138 billion in 2025 and RMB 23.925 billion in 2030, with a CAGR of 41.01% from 2021 to 2025.
The laser equipment industry is fragmented, giving laser manufacturers a greater advantage.
The domestic laser equipment market is relatively fragmented, prompting laser companies to seek differentiated development.
Lianying Laser and Raycus Laser possess strong competitive advantages in YAG lasers and fiber lasers, respectively. In YAG lasers, compared to Han's Laser and HGLaser, Lianying Laser has a significant advantage in energy control, which is beneficial for achieving better welding results. In continuous fiber lasers, Raycus Laser and Chuangxin Laser have leading technical specifications, with Raycus Laser holding a higher market share. In pulsed fiber lasers, JPT's technical specifications are more advanced, placing it at the forefront domestically.
The domestic laser equipment market is fragmented, with the top five (CR5) accounting for only 22%. There are numerous downstream applications for lasers, and over 300 domestic laser processing equipment companies, most of which are small in scale. In 2021, the top five companies in the Chinese laser equipment market were Han's Laser, HGLaser, Hymuxing, Lianying Laser, and Yawei, with market shares of 14%, 3%, 2%, 2%, and 1% respectively, totaling 22%. Overall, the concentration of the Chinese laser equipment market remains low.
The domestic laser macro-processing market is large, with many competing companies; the precision micro-processing field has high technological barriers, resulting in fewer competing companies in its sub-sectors. Laser processing is divided into two main categories based on the size of the processed products: macro-processing and precision micro-processing. Macro-processing mainly targets thicker sheet metal applications such as automotive and shipbuilding, while precision micro-processing is concentrated in fields with high precision requirements, such as semiconductors, displays, 3C products, and medical devices. Given the larger macro-processing market, this sector is highly competitive, with companies like Han's Laser and HGLaser (both with revenues exceeding 5 billion RMB) and Lianying Laser and Haimuxing (with revenues between 500 million and 1 billion RMB). In the precision micro-processing sector, Han's Laser, as a leading laser processing equipment manufacturer, has involvement in precision processing in fields such as photovoltaic lithium batteries, semiconductors, displays, and 3C products. Overall, the precision micro-processing sector has relatively fewer competing companies in its sub-sectors due to its high technological barriers. Regarding lasers, companies with revenues of 20 billion RMB and Chuangxin Laser are both concentrated in the fiber laser field.
Three key competitive factors: vertical integration upstream, high R&D investment, and securing major downstream clients.
In-house production of lasers is key to cost reduction. Lasers are the core component of laser equipment. The performance of the laser directly affects the quality and effectiveness of laser processing equipment. Equipment companies that can in-house produce lasers not only reduce costs but also have greater flexibility in customization. This flexibility manifests in the ability to iterate design solutions more flexibly based on downstream needs, enabling communication and interaction between the laser and the laser equipment. This allows for timely and smooth feedback of downstream customer requirements to the research and development and improvement of lasers and processing technologies, resulting in a powerful integrated synergy effect. Leading laser equipment companies such as Han's Laser, HGLaser, Hymustar, and Lianying Laser have all achieved partial in-house production of lasers, with Lianying Laser having a relatively high in-house production rate, reaching 77.7% in 2019.
Conclusion
The rapid penetration of new energy vehicles into traditional gasoline vehicles has led major power battery manufacturers to continuously expand their production capacity, driving up demand for power battery welding equipment.
Laser welding is another rapidly growing application following laser marking and cutting. Laser welding can be widely used in the automotive, lithium battery, 3C, and aerospace industries. Currently, its penetration rate is still relatively low, indicating significant growth potential for the laser welding industry, which is expected to grow into a market comparable to laser cutting.
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