IPG Photonics Corporation (NASDAQ:...

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World Leadership in High Power Fiber Lasers www.ipgphotonics.com IPG Photonics Corporation The Fiber Laser Company™ (NASDAQ: IPGP) 2016 Investor Day May 11, 2016

Transcript of IPG Photonics Corporation (NASDAQ:...

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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

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World Leadership in High Power Fiber Lasers

www.ipgphotonics.com

Welcome and Overview

Tim Mammen

Chief Financial Officer and Senior Vice President

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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.

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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

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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

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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%

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The technology leader and most profitable

company in the rapidly growing fiber laser market

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$-

$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

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Materials Processing – Diverse End Uses and Customers

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Automotive

General Manufacturing

Heavy Industry

Oil & Gas

Shipbuilding

Nuclear

Construction

Aerospace

Shipbuilding

Semi/

Electronics

Displays

Consumer

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Expand addressable market and enhance future growth opportunities by

addressing new application and customer specific requirements

Recent & New Product Introductions

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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

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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

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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

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IPG’s Defensible Laser Position

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Strong IP Portfolio

Vertical Integrated Business Model

Manufacturing Scale

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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

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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

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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

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World Leadership in High Power Fiber Lasers

www.ipgphotonics.com

IR Lasers

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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

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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.

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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

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$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

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IR Laser Applications

Welding

Additive ManufacturingCladding

Cutting Brazing Drilling

Marking Surface Treatment

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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

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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%

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High Power Welding

Remote Welding

Laser Seam StepperSpot Welding

Seam Welding Braizing (aesthetic,

roofs, trunks)

Fine Welding

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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

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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

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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

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• 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)

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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

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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

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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

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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

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World Leadership in High Power Fiber Lasers

www.ipgphotonics.com

UV Fiber Lasers

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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

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World Leadership in High Power Fiber Lasers

www.ipgphotonics.com

Ultrafast Fiber Lasers

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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.

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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

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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

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World Leadership in High Power Fiber Lasers

www.ipgphotonics.com

Visible Fiber Lasers

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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

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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

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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

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World Leadership in High Power Fiber Lasers

www.ipgphotonics.com

Laser Systems

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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

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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

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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

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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

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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

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World Leadership in High Power Fiber Lasers

www.ipgphotonics.com

Accessories

Felix Stukalin

Senior Vice President, U.S. Operations

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CU

TT

ING

WE

LD

ING

MA

RK

ING

Laser System Lasers & Chillers Couplers, Switches &

Delivery Fibers

Cutting Heads

Typical Laser System Architecture

Welding Heads

Integrated ModulesScan HeadsPulsed Laser Controller +

Software

51

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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

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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

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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

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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

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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

CU

TT

ING

WE

LD

ING

SC

AN

NIN

G

WE

LD

ING

• 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

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• Highest power handling in the

Industry – 15kW

• Ultra-stable capacitive height

sensing

• Hermetically sealed design

CU

TT

ING

WE

LD

ING

MA

RK

ING

RE

MO

TE

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

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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

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World Leadership in High Power Fiber Lasers

www.ipgphotonics.com

Strategic Growth Projects

Dr. Yuri Erokhin

VP, Strategic Marketing

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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

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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

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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

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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

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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

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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

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World Leadership in High Power Fiber Lasers

www.ipgphotonics.com

Medical

Dr. Greg Altshuler

President, IPG Medical

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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

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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

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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

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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

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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

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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

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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

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World Leadership in High Power Fiber Lasers

www.ipgphotonics.com

Telecom Products

Mark Cannata

Director, Sales and Marketing, Telecommunications Products

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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

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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

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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

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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

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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

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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

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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

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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

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Vertical Integration Drives Significant Benefits

83

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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.

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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

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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

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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

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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

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World Leadership in High Power Fiber Lasers

www.ipgphotonics.com

Manufacturing: Diodes

Dr. Alexander Octchinnikov

SVP, Components

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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

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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

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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

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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

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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

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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

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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

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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

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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

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World Leadership in High Power Fiber Lasers

www.ipgphotonics.com

China

Trevor Ness

Senior Vice President, World Wide Sales and Marketing

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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

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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

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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

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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

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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

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World Leadership in High Power Fiber Lasers

www.ipgphotonics.com

Financial Review

Tim Mammen

Chief Financial Officer and Senior Vice President

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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

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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

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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)

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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

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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

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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

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World Leadership in High Power Fiber Lasers

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Summary and Growth Strategy

Dr. Valentin Gapontsev

Chief Executive Officer and Chairman of the Board

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World Leadership in High Power Fiber Lasers

www.ipgphotonics.com

Q&A