The laser control system is in the middle of the whole industrial chain, playing a similar role as brain and driver. With the upgrading of manufacturing industry and technological progress, laser technology has gradually been popularized to the downstream of consumer electronics, industrial manufacturing, medical biology, etc., which is used for marking, cutting, welding, cladding and micro processing. Optical components and numerical control systems have always been the two fields occupying the core of the industrial value chain. The control system is responsible for making decisions, implementing and driving, and cooperating with laser hardware to form a complete set of laser processing equipment. From the perspective of direct upstream, laser control system suppliers need to interface with chip manufacturers, PCB manufacturers and relevant wire suppliers. From the perspective of current domestic substitution, some chips can be localized, but some still rely on international suppliers such as Texas Instruments. PCB and wire are basically home-made, with sufficient supply and transparent price.
The whole industrial chain is highly prosperous, and the compound growth rate is outstanding. Industrial lasers are widely used in electronics, machinery, metallurgy, light industry and other fields, and their use scenarios and process types are increasingly diversified. From the perspective of the growth rate of the whole industry scale, the prospective industry research gives a CAGR forecast of 20% for the market scale of China's industrial laser industry in the next five years. We believe that as the value of the whole industrial chain continues to increase, the control system, as the brain of laser equipment, will undoubtedly grow. Considering the rising complexity of processing, its value is also expected to make a breakthrough.
The control system accounts for a small proportion of the cost, but its profitability is outstanding. From the perspective of cost distribution, laser, bed and other basic hardware account for a relatively high proportion, accounting for about 40% and 30% respectively. However, due to the cost of raw materials/components, their gross margins are relatively low, and some mature products are fiercely competitive, so the bargaining power of manufacturers is relatively general. On the contrary, the operation control system has a low proportion in the overall cost, but it has high technical barriers and user stickiness, few competitors, and high gross profit margin, showing a good profit attribute in the value chain.
Taking the data disclosed by companies in the industry in 2021 as an example, the gross profit margin of its laser processing control system business is 72%. After adding up its hardware business, the overall gross profit margin reaches 60.1%. The overall gross profit margin of Bachu Electronics is as high as about 80%, although it has decreased month on month, it still performs well. Weihong's business composition is more complex, covering 3C, laser, cutting and other fields, and its hardware products are relatively rich, so its comprehensive gross profit is relatively low, but still higher than that of other parts suppliers in the industrial chain, such as lasers, laser heads, mechanical arms, etc.
Source: Hua'an Securities
