What changed in this filing

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Item 1. Business

2023-02-27 compared with 2022-02-22 · 75 added, 79 removed, 356 unchanged (30% of the section changed)

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Fiber lasers are a type of laser that combine the advantages of semiconductor diodes, such as long life and high efficiency, with the high amplification and precise beam qualities of specialty optical fibers to deliver superior performance, reliability and usability.

Our portfolio of laser solutions are used in materials processing, communications, medical and advanced applications.

Our portfolio of laser solutions are used in materials processing, medical and advanced applications.

We sell our products globally to original equipment manufacturers ("OEMs"), system integrators and end users.

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Our major manufacturing facilities are located in the United States, Germany, Russia and Belarus.

Refer to "Factors and Trends That Affect Our Operations and Financial Results" within Part II Item 7 for trends impacting our reliance on our Russian and Belarus operations.

We have sales service offices and applications laboratories worldwide.

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We began operations in 1990, and we were incorporated in Delaware in 1998.

Our principal executive offices are located at 50 Old Webster Road, Oxford, Massachusetts 01540, and our telephone number is (508) 373-1100.

Our principal executive offices are located at 377 Simarano Drive, Marlborough, Massachusetts 01752, and our telephone number is (508) 373-1100.

Industry Overview

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Although low power fiber lasers were introduced four decades ago, their increased adoption in the last twenty years has been driven primarily by our improvements in their output power levels and cost, as well as their superior performance, lower cost of ownership and greater reliability compared with other laser and non-laser technologies.

We successfully increased output power levels, efficiency and reliability by improving optical components such as diodes and active fibers that increased their power capacities and improved their performance.

We successfully increased output power levels, efficiency and reliability by improving optical components such as diodes and active fibers that increased

their power capacities and improved their performance.

Fiber lasers now offer output powers that exceed those of other laser technologies in many categories.

Our substantial advancements in diode technology, packaging design and other optical

components together with increased production volumes over the last two decades reduced the cost and increased the reliability of our products.

Our substantial advancements in diode technology, packaging design and other optical components together with increased production volumes over the last two decades reduced the cost and increased the reliability of our products.

As a result, the average cost per watt of output power has decreased dramatically and our fiber lasers effectively compete in many applications that used other laser technologies and non-laser solutions historically.

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End Market Applications Principal Products

General manufacturing Flat sheet, tube and 3D cutting Continuous Wave ("CW") lasers (1-40 kW)

Welding, brazing and hardening CW lasers (1-125 kW)

Marking, engraving and printing Nanosecond ("NS") pulsed lasers (10-100 W)

General Manufacturing Flat sheet, tube and 3D cutting Continuous Wave ("CW") lasers (1-50 kW) and IPG systems

Welding, brazing, hardening and cladding CW lasers (1-125 kW) and IPG systems

Surface cleaning and texturing, paint and coating stripping and drying Nanosecond ("NS") pulsed lasers (100-3,000 W), single-mode CW lasers (1-5 kW), diode lasers (1-40 kW) and IPG systems

3D printing CW lasers (200-6,000 W)

Ablation and cleaning NS pulsed lasers (100-3000 W)

Marking, engraving and printing NS pulsed lasers (10-1,000 W) and Quasi-CW ("QCW") lasers (100-2,000 W)

Automotive Cutting of high-strength steel and aluminum CW lasers (1-20 kW)

Welding tailored blanks, frames and auto parts CW lasers (1-50 kW)

Seam welding and brazing CW lasers and IPG systems

Electric vehicle battery processing CW lasers and NS pulsed lasers

Consumer goods Micro welding, cutting and marking Quasi-CW ("QCW") lasers and NS pulsed lasers

Marking of plastic and non-metal material Ultraviolet pulsed lasers

Medical devices Stent, pacemaker and device manufacturing CW lasers, NS and Femtosecond ("FS") pulsed lasers

Energy and Renewable Energy Hardening and welding of pipes CW lasers (4-50 kW)

Cladding of turbine blades and drill bits CW lasers (1-20 kW) and IPG systems

Solar cell processing Green pulsed lasers

Aerospace, rail and shipbuilding Welding titanium, welding/cutting thick plates CW lasers (1-50 kW) and IPG systems

Percussion drilling of parts QCW lasers

Micro electronics Wafer inspection and annealing CW lasers and NS pulsed lasers

Processing of glass, ceramics, sapphire, silicon Picosecond ("PS") and FS pulsed lasers

Seam welding and brazing CW lasers( 1-20 kW) and IPG systems

Electric vehicle battery and motor manufacturing CW and QCW lasers, NS pulsed lasers and IPG systems

Consumer Goods Micro welding, cutting and marking QCW and NS pulsed lasers

Marking of polymers and other non-metals Infrared ("IR"), green and ultraviolet ("UV") pulsed lasers

Medical Devices Stent, pacemaker and other medical device manufacturing CW, NS , Picosecond ("PS") and Femtosecond ("FS") pulsed lasers and IPG systems

Energy/Renewable Energy Hardening and welding of tubes and pipes CW lasers (4-50 kW) and IPG systems

Cladding of turbine blades and drill bits CW lasers (1-20 kW)

Solar cell processing Green NS pulsed lasers

Aerospace, Rail and Shipbuilding Welding/cutting thick steel plates, titanium CW lasers (1-50 kW) and IPG systems

Percussion drilling of aerospace parts QCW lasers (1-2 kW)

Surface cleaning and texturing, paint and coating stripping and drying NS pulsed lasers (100-3,000 W), single-mode CW lasers (1-5 kW), diode lasers (1-40 kW) and IPG systems

Micro Electronics Wafer inspection and annealing, disk mastering, flat panel display, LED lift-off Ultraviolet CW and NS pulsed lasers

Processing of glass, ceramics, sapphire, silicon, diamond, Teflon, PCB, CFRP and other non-metals IR, green and UV NS pulsed lasers, PS and FS pulsed lasers, QCW lasers

Other Markets

End Market Applications Principal Products

Aerospace and defense Directed energy Single-Mode CW lasers, amplifiers and diodes

Scientific Sensing, spectroscopy and research Mid-infrared, FS and other lasers

Medical procedures General surgery, urology and soft tissue Thulium and FS lasers

Skin, wrinkle/hair removal, dental Erbium and diode lasers

Communications Datacom and telecom network infrastructure Optical transceivers

Terrestrial and satellite broadband Optical amplifiers and raman lasers

Aerospace and Defense Directed energy Single-mode CW lasers, amplifiers and diode lasers

IR countermeasures, thermal imaging Mid-IR NS pulsed lasers

Medical Procedures Surgery, urology and soft tissue Mid-infrared, thulium, FS and laser systems

Therapeutic procedures Diode lasers

Aesthetic procedures - skin, wrinkle/hair/tattoo removal Erbium, thulium, green lasers

Dental procedures Diode lasers

Diagnostic procedures Mid-infrared and FS

OEM Instrument Manufacturing Biomedical analytical instruments, metrology, disinfection/sterilization, environmental and security monitoring, quantum computing FS, PS, NS and CW lasers, Mid-infrared, IR, visible and UV lasers

Scientific Academic research:

sensing, imaging, microscopy, spectroscopy, quantum optics Mid-infrared, IR, visible and UV lasers;

diode, FS, PS, NS and CW lasers, linearly polarized and single frequency lasers and amplifiers

We design and manufacture a broad range of high-performance fiber lasers and amplifiers.

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These lasers may be CW, QCW or pulsed.

Our pulsed line includes NS, PS and FS lasers.

Our pulsed line includes nanosecond, picosecond and femtosecond lasers.

We offer lasers with different gain mediums and wavelengths.

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For the 2022, 2021 and 2020 fiscal years, laser and non-laser systems accounted for 11%, 9%, and 8%, respectively, of revenues.

Other Products

We produce optical amplifiers, which are predominantly deployed in broadband networks, ranging from milliwatts to up to 1,500 watts of output power from 1 to 2 microns in wavelength.

We offer erbium-doped fiber amplifiers ("EDFAs"), Raman amplifiers and integrated communications systems that incorporate our amplifiers.

We also offer ytterbium and thulium specialty fiber amplifiers and broadband light sources that are used in advanced applications.

Our fiber amplifiers offer some of the highest output power levels and highest number of optical outputs in the industry.

We also sell optical transceiver and transponder modules for communications applications.

These optical subsystems provide the interface for interconnecting electronic equipment including Ethernet switches, IP routers and DWDM/SONET/SDH optical transport systems within telecommunications, cable multi-system operator ("MSO") and data center networking applications.

We broadly classify our principal end markets as material processing, advanced applications, communications and medical procedures.

We broadly classify our principal end markets as material processing, advanced applications, communications a nd medical procedures.

With the sale of sale of our telecom transmission product lines to Lumentum Holdings Inc.

in August 2022, we no longer intend to target communications as a principal market.

The following table shows the allocation of our net sales (in thousands) among our principal markets:

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Materials processing $ 1,291,262 90.3 % $ 1,325,404 90.7 % $ 1,082,478 90.2 %

Advanced applications 69,257 4.8 % 63,859 5.3 % 40,779 3.1 %

Medical procedures 70,402 4.9 % 42,936 2.9 % 31,243 2.6 %

Advanced applications 54,308 3.8 % 69,257 4.8 % 63,859 5.3 %

Communications 13,575 1.0 % 23,263 1.6 % 23,144 1.9 %

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Materials Processing

The most significant materials processing applications for fiber lasers are cutting, welding and brazing, marking and engraving, additive manufacturing such as 3D printing and ablation.

Other applications include precision processing, surface treatment, drilling and annealing.

Cutting and Welding Applications.

The most significant materials processing applications for fiber lasers are cutting, welding and brazing, marking and engraving, cleaning and stripping, solar cell manufacturing, additive manufacturing such as laser sintering, 3D printing and ablation.

Other applications include precision processing, drilling and annealing.

Cutting, Welding and Brazing Applications.

Laser-based cutting technology has several advantages compared to alternative technologies.

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Laser cutting technology is a non-contact process that is easy to integrate into an automated production line and is not subject to wear of the cutting medium.

We sell low, mid and high power ytterbium fiber lasers for laser cutting.

We sell mid and high power ytterbium fiber lasers for laser cutting.

Our high power pulsed lasers are used in thin foil cutting applications in electric vehicle battery production.

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We also offer a real-time weld monitoring system to determine weld quality in an integrated solution.

Our LightWELD product line offers a handheld laser welding system that is easier to learn and operate than traditional solutions and offers high process consistency.

Our products are used also for laser brazing of visible joints in automobiles such as tailgates, roof joints and columns.

Brazing is a method of joining sheet metal by using a melted filler material similar to soldering but requiring higher temperatures.

Historically, metalworking has been performed with processes that remove material to produce component parts.

The development of 3D printing technology enables the production of three-dimensional objects from digital design data through an additive manufacturing process, which builds up components in layers using materials that are available in fine powder form.

3D printers take advantage of improvements in computing power and motion and process control to deposit a range of materials, including metals, plastics and composite materials, accurately at high speed.

Within metal-based 3D printing processes that include laser metal deposition (LMD) and selective laser melting (SLM), a laser beam is used to fuse metallic powder at points defined by computer-generated design data.

3D printing permits highly complex structures, with a high degree of customization capability and significantly less waste than subtractive manufacturing processes.

Marking and Engraving.

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In contrast to conventional acid etching and ink-based technologies, lasers can mark a wide variety of metal and non-metal materials, such as ceramic, glass and plastic surfaces, at high speeds and without contact by changing the surface structure of the material or by engraving.

Laser marking systems can be easily integrated into a

customer's production process and do not subject the item being marked to mechanical stress.

Laser marking systems can be easily integrated into a customer's production process and do not subject the item being marked to mechanical stress.

In addition, we make high powered lasers for ablation and cleaning applications.

Historically, metalworking has been performed with processes that remove material to produce component parts.

3D printing permits highly complex structures, with a high degree of customization capability and significantly less waste than subtractive manufacturing processes.

Micro-materials processing.

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In photovoltaic manufacturing, our lasers etch and perform edge isolation processes.

The aerospace industry requires precise manufacturing of engine parts so that cooling is effective and aerospace manufacturers use lasers to conduct percussion drilling.

The aerospace industry requires precise manufacturing of engine parts so that cooling is effective and aerospace manufacturers use lasers for percussion drilling of fine holes.

Processing of plastics and semi-conductors require short pulse and high energy lasers, in the green, UV and mid-IR wavelengths.

Medical Procedures

We sell our commercial fiber and diode laser modules, subassemblies and complete systems to medical device manufacturers that incorporate our products into their devices.

Our ultrafast, CW and QCW ytterbium, erbium, thulium fiber and hybrid lasers with average power from 1 to 200 watts, and diode laser systems can be used in various medical and biomedical applications.

We have also developed and are now selling medical laser systems and consumable fiber applications, including benign prostatic hyperplasia and lithotripsy, as an OEM and, in certain territories, as an IPG-branded product.

Aesthetic applications addressed by IPG lasers include skin rejuvenation, hair removal, and treatment of pigmented and vascular lesions.

Advanced Applications

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Communications

We design and manufacture optical amplifiers and optical transceiver and transponder modules for communications applications.

IPG's fiber amplifiers are deployed in some of the world's largest broadband networks, supporting high speed data, voice, video on demand and high definition television applications.

We provide a broad range of high power products for these applications including erbium doped fiber amplifiers and Raman lasers.

We also produce optical transceiver and transponder modules based upon proprietary tunable lasers, silicon photonics integrated circuits and mixed signal coherent DSP-ASIC designs, intended to simplify optical networks and reduce customer capital costs.

These configurable modules are designed to operate at 10G, 100G and 200G coherent transmission rates, with higher speed modules under development.

These products are deployed in data center networks, service provider optical networks, and communications networks of oil and gas utilities.

Medical Procedures

We sell our commercial fiber and diode laser modules, subassemblies and complete systems to OEMs that incorporate our products into their medical products.

Our ultrafast, CW and QCW ytterbium, erbium, thulium fiber lasers, diode laser and hybrid lasers with average power from 1 to 200 watts and diode laser systems can be used in various medical and biomedical applications.

We have also developed and are now selling medical laser systems and consumable fibers for surgical applications, including benign prostatic hyperplasia and lithotripsy, as an OEM and, in certain territories, as an IPG-branded product.

Aesthetic applications addressed by IPG lasers include skin rejuvenation, hair removal, and treatment of pigmented and vascular lesions.

Prior to the sale of our telecom transmission product lines to Lumentum Holdings Inc.

in August 2022, we designed and manufactured optical amplifiers and optical transceiver and transponder modules for communications applications for deployment in data center networks, service provider optical networks, and communications networks of oil and gas utilities.

We no longer intend to target communications as a principal market.

Our products are based on our proprietary technology platform that we have developed and refined since our formation.

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We believe that our large portfolio of specialty active and passive optical fibers has a number of advantages as compared to other commercially available optical fibers.

Using our knowledge of optical fibers, we recently extended our product line by manufacturing fibers for medical uses in connection with our proprietary medical laser systems.

Semiconductor Diode Laser Processing and Packaging Technologies

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We are engaged in research projects to expand the spectral range of products that we offer.

We are investing our research and development funds on laser systems, products for medical applications, and telecommunications products and components.

We are investing our research and development funds on laser systems and products for medical applications.

We have assembled a team of scientists and engineers with specialized experience and knowledge in fiber lasers and amplifiers, materials science, optics, critical components, testing and manufacturing process design, and laser application development.

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We incurred research and development costs of approximately $116.1 million, $139.6 million and $126.9 million for the years ended December 31, 2022, 2021 and 2020, respectively.

We expect to continue our commitment to research and

development and to introduce new products, systems and complementary products.

See Item 7, "Management's Discussion and Analysis of Financial Condition of Results of Operations."

We expect to continue our commitment to research and development and to introduce new products, systems and complementary products.

See Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations."

Intellectual Property

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In addition, we make some of the automated production systems, tools and fixtures and testing systems that we use in our own manufacturing processes.

Over the last several years, we added additional production capabilities, including multi-wafer growth reactors, diode test stations, fiber preform and fiber drawing equipment and low, mid and high power laser production and testing, in order to increase our capacity as well as reduce the risks associated with our production processes.

Over the last several years, we added additional production capabilities, including multi-wafer growth reactors, diode test stations, fiber preform and fiber drawing equipment and mid and high power laser production and testing, in order to increase our capacity as well as reduce the risks associated with our production processes.

We operate our own semiconductor foundry for the production of multi-mode single-emitter diodes.

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Once our fiber laser products are designed into an OEM system, the OEM's sales force markets its systems, allowing us to leverage our sales capability through the OEM sales channels because the OEMs typically have several sales persons in locations other than where our sales offices are located.

We have sales offices in the countries in which we have major manufacturing:

United States, Germany and Russia.

We have sales and service offices and application development centers in the Americas, Europe and Asia.

To a lesser extent, we market through agreements with independent sales representatives and distributors, although we do use such channels more widely for our new LightWELD product.

We typically provide one to five-year parts and service warranties on lasers and amplifiers.

To a lesser extent, we market through agreements with independent sales representatives and distributors, although we do use such channels more widely for our LightWELD product.

We typically provide one to five-year parts and service warranties on lasers.

Most of the Company's sales offices provide support to customers in their respective geographic areas.

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Some of our customers have developed products for their own use which are competitive to our products.

Such vertical integration could reduce the market opportunity for our products.

Such vertical integration by our customers could reduce the market opportunity for our products.

Many of our fiber laser competitors are increasing the output powers of their fiber lasers to compete with our products.

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Competitive Pay and Benefits .

IPG’s compensation programs are designed to align the compensation of our employees, who operate in a highly competitive and technologically challenging environment, with IPG’s business performance and to provide the proper incentives to attract, retain and motivate employees to achieve superior performance.

provide the proper incentives to attract, retain and motivate employees to achieve superior performance.

The structure of our compensation programs balances incentive earnings for both short-term and long-term performance.

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We also generally provide equity grants and an employee stock purchase plan to salaried employees consistent with geographic compensation practices and subject to regulatory compliance.

These programs each further align our employees’ financial interests with the performance of the business and the interests of our stockholders.

These programs further align our employees’ financial interests with the performance of the business and the interests of our stockholders.

• We generally provide annual increases and incentive compensation based on merit.

• We purchase compensation data from a compensation and benefits consulting firm to allow us to ensure we provide competitive compensation in each of the geographic locations in which we operate.

• We align our executives’ annual and long-term equity compensation with our stockholders’ interests by linking realizable pay with stock performance and operating metrics.

• We align our executives’ annual and long-term equity compensation with our stockholders’ interests by linking realizable pay with operating metrics and stock performance.

• We provide comprehensive benefit options designed to retain our employees and support their families in living healthier and more secure lives.

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Our retention at the technical, professional and executive levels is high.

Throughout 2020 and 2021, amidst global uncertainty and turmoil resulting from the COVID-19 pandemic, we introduced a number of special initiatives to minimize the impact upon our employees to safeguard the health and safety of them and their communities.

These initiatives included compensation programs designed to provide a source of income to employees who needed to be absent from work as a result of the pandemic and enhanced “appreciation pay” to recognize the significant contributions of hourly employees who continued to work on-site.

Over the last three years, amidst global uncertainty and turmoil resulting from the COVID-19 pandemic, we introduced a number of special initiatives to minimize the impact upon our employees to safeguard the health and safety of them and their communities.

Throughout the pandemic, we believe our employees took immense pride in the shared purpose of making products that supported the world’s critical supply chains within a wide range of essential businesses and services including medical devices, transportation, communications, packaging and agriculture.

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Our net sales can fluctuate from quarter to quarter with general economic trends, specific industry cycles, holidays in foreign countries such as Lunar New Year in the first quarter of our fiscal year and the timing of capital expenditures by our customers.

Historically, our net sales have generally been higher in the second half of the year than in the first half of the year, although that trend did not occur in 2019 due to a decrease in capital equipment spending in Europe and China caused by slower macro-economic growth and uncertainty caused by the trade war between the United States and China.

Historically, our net sales have generally been higher in the second half of the year than in the first half of the year.

Government Regulation

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Treasury Department’s Office of Foreign Assets Control’s trade and economic sanctions programs, the U.S.

Department of State’s Nonproliferation Sanctions and International Traffic in Arms Regulations, as well as those of the European Community and

Germany, which we collectively refer to as Trade Controls.

Department of State’s Nonproliferation Sanctions and International Traffic in Arms Regulations, as well as those of the European Community and Germany, which we collectively refer to as Trade Controls.

We further discuss the impact of such Trade Controls under " Risk Factors " in Item 1A " — We must comply with and could be impacted by various export controls and trade and economic sanctions laws and regulations that could negatively affect our business and may change due to diplomatic and political considerations outside of our control".

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Availability of Reports

Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to such reports are available free of charge on our web site at www.ipgphotonics.com as soon as reasonably practicable after such reports are electronically filed with, or furnished to, the Securities and Exchange Commission ("SEC").

Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to such reports are available free of charge on our website at www.ipgphotonics.com as soon as reasonably practicable after such reports are electronically filed with, or furnished to, the Securities and Exchange Commission ("SEC").

The SEC maintains an internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC at www.sec.gov.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business