China gains market share
The Technology Business Day at AKL’26 – International Laser Technology Congress in Aachen focused on the photonics markets in Europe, the U.S., and China. Read about the key trends here.
A battered vintage car, smashed against a giant battery. The apparent total loss symbolizes the new U.S. administration’s policy reversal, the consequences of which for the laser industry were vividly illustrated by Dr. Henrikki Pantsar, Managing Director and Vice President of Sales Laser Technology at TRUMPF Inc., in his presentation on “The Current Situation and Outlook for the U.S. Laser Market.”
Prior to the change in administration, the transition to electromobility was considered the most important driver for industrial laser applications. However, the rollback of CO₂emission targets, the scrapped $7.5 billion program for charging infrastructure expansion in favor of a refocus on fossil fuels, the withdrawal of tax incentives for purchasing electric vehicles, and many other measures have brought the transformation momentum to a standstill. Investments by the U.S. automotive industry have plummeted. Manufacturers and suppliers are writing off billions in investments in the stalled future market. Tariffs are adding to the uncertainty. A return to greater willingness to invest is not expected until after 2027.
Remarkable resilience in the U.S. laser technology market
According to Pantsar, the fact that photonics in the U.S. remains comparatively stable despite all this is due to the massive expansion of data centers. The race for market share in AI is causing them to spring up like mushrooms across the US. Over $40 billion flowed into new data centers in 2025 alone, with the investments coming in a complete manner from the seven major tech conglomerates. Globally, investments in new data centers will total $7.3 trillion by 2023. For photonics, this boom is becoming a key market driver. Whether in the production of semiconductors, EUV-structured AI chips with feature sizes as small as two nanometers, optical data transmission—including ever-smaller, more powerful connectors— photonic chips, or in the manufacturing of stationary batteries to buffer the enormous energy demand, or in the cutting of primarily metallic hardware—from server enclosures and racks to shelving and cooling systems—lasers are the tool of choice.
Pantsar’s presentation provided an overview of the increasingly diverse and sophisticated laser applications in wafer manufacturing and highly complex chip packaging. Lasers are used to process a wide variety of materials in these fields, enabling manufacturers not only to create more precise structures but also to increasingly replace relatively expensive silicon with more affordable glass. In joining technology, lasers also serve as drivers for faster, more precise, and more reliable manufacturing processes. Macroscopic metalworking—that is, the cutting, drilling, stamping, and welding of the sheet metal that largely makes up the inner workings of server farms—is already a domain of the laser. The diversity of applications and the high precision requirements, coupled with meticulous quality control, make this market so interesting for photonics.
Finding an ant in Manhattan
This applies not only in the U.S., where the data center boom is currently even compensating for the lack of investment momentum in the automotive industry—and is thus helping photonics achieve astonishing resilience despite all political uncertainties. It also applies to the German and European markets, which Dr. Stefan Ruppik, Global VP & General Manager of Coherent’s CO2 & Fiber Lasers Business Unit, highlighted in his presentation. He, too, emphasized the role of AI data centers with their need for sub-nanometer-precise process technology and quality control. In-process defect inspection of 300-mm-diameter wafers with nanometer-scale structures is now equivalent to the task of completing a complete scan of the New York borough of Manhattan in 20 seconds—and not only finding a single ant but also identifying its species. This is only possible because lasers with increasingly shorter wavelengths in the UV range around 266 nm are used for this purpose, scanning the nanostructures on the wafers at breakneck speed. To inspect wafers with a 2 nm feature size at such high speeds, even shorter wavelengths will soon be required.
Ruppik cited the rapidly growing production of OLED screens, the rising demand for cooling technology for data centers, and the two future markets of fusion and quantum technology—in which laser technology and photonic solutions play a central role—as further revenue drivers. Even though headwinds are certainly being felt in the European market at present, the long-term outlook remains positive. This is because lasers have now become the standard solution for increasingly complex technological challenges in many industries. With ever-increasing power, shorter pulse durations, more flexible wavelengths, and increasingly affordable acquisition costs, laser technology will not only maintain its role as a driver of progress but will continue to expand it. The Coherent expert sees photonics continuing on a sustained growth trajectory.
China expands its leading role
However, a look at the Chinese market by Dr. Bo Gu raised the question of exactly where this growth curve will play out in the future. The laser market there continues to grow at an average annual rate of 7 percent. The steadily improving quality throughout the entire manufacturing chain is also driving growth in fiber lasers. Especially in the domestic market, manufacturers from China are now taking the lead. For fiber lasers in the 1–6 kW power range, their market share is already over 98 percent. Across all power ranges, it exceeds 87 percent. Accordingly, imports are declining sharply. Domestic suppliers are also gaining ground rapidly in the markets for ultrashort-pulse lasers and laser cutting systems. In many cases, their sales are growing at double-digit rates—and their export activities are becoming increasingly successful as well.
Bo observes five megatrends in China’s laser industry: the rapid substitution of imports; the collective internationalization of suppliers and their resulting strong increase in export orientation; increased engagement in complex application fields with higher margins; and the expanding use of laser technology—previously employed primarily in the civilian sector—in military applications—a trend also confirmed by the other speakers regarding Europe and the U.S. Gu cited excellent access to capital as the fifth megatrend, meaning the industry has no trouble financing its sustained growth. Nor do they have to anticipate sudden policy U-turns regarding subsidies. Rather, China is using the situation to consistently expand its leadership role in the future market of electromobility. Manufacturers now source the lasers used in the production of batteries and electric drives from domestic suppliers.