China competition impacts revenues of Coherent, IPG.
Pricing pressure from China has impacted the revenues of two major materials processing players, Coherent and IPG Photonics.
Coherent reported a net loss of $3.1m for its third quarter results, with revenues down 30 per cent year-on-year to $339m. The company plans to consolidate its high-power fibre laser (HPFL) operations and continue its emphasis on moving its fibre laser focus from cutting to joining and welding applications.
A major factor underlying these decisions comes from increasing pressure from low-cost Chinese competitors that are set to take a larger market share, according to CEO John Ambroseo. 'In materials processing, headwinds strengthened during the quarter due to a combination of weakening macro demand, continued pressure from tariffs and aggressive discounting in China from domestic and foreign competitors,' Ambroseo remarked.
Coherent will now relocate the manufacturing and engineering of its HPFL products at its Hamburg, Germany, facility to its Tampere, Finland, location and exit a portion of its HPFL business in fiscal 2020. The actions should save the firm $24m in annual running costs.
The last several quarters has seen Coherent move away from fibre cutting applications, Ambroseo told investors, putting greater emphasis on welding and joining, where invention and process IP is still being created. This is largely down to cost competition, noted Ambroseo, and so the company is concentrating on areas where it can maintain more realistic pricing.
IPG's revenues decreased 12 per cent year-on-year, to $364m, as revealed in its second quarter results. This decrease came as a result of lower sales in cutting and 3D printing applications, the company reported.
Sales of its high power continuous-wave (CW) lasers, representing 59 per cent of total revenue, decreased 20 per cent year-on-year.
While sales of its high power CW lasers at 10 kilowatts or greater increased 16 per cent year-on-year, sales of other high-power lasers declined. Echoing remarks by Coherent's Ambroseo, IPG stated this was a result of a weaker demand environment in China and Europe and lower average selling prices.
By region, sales decreased 19 per cent in China, 22 per cent in Europe and 10 percent in Japan, but increased 34 per cent in North America based on a year-on-year basis.
'Data points relating to the health of manufacturing economies in our largest regions have weakened over the last three months,' said CEO Dr Valentin Gapontsev. 'Furthermore, the competitive environment remains challenging, due in part to the recent slowdown in industry demand levels. As a result, we expect pricing headwinds related to the competitive environment to continue. We expect growth in our innovative new products, accessories and complete systems to partially offset softness in our core business as these solutions gain further acceptance in the market,' he said.
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|Title Annotation:||FOCUS: BUSINESS & RESEARCH|
|Date:||Aug 1, 2019|
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