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Introduction to IPG Photonics INVESTOR GUIDEBOOK James Hillier Vice President of Investor Relations © 2019 IPG Photonics TABLE OF CONTENTS Mission and Strategy 4 Company Overview 7 Laser 101 11 IPG Fiber Laser Technology and its Advantages 15 Vertical Integration Strategy 22 Applications and Products 28 Markets Served 31 Metal Cutting 33 Metal Joining (Welding and Brazing) 35 Laser Systems 38 Additive 39 New Markets (Ultrafast, Green, Ultraviolet, Cinema, Medical) 40 Communications 42 Global Presence 43 Key Financial Metrics 33 Customers 49 Company History 50 ESG (Environmental, Social and Governance) 53 Management Team and Board of Directors 59 © 2019 IPG Photonics 2 Safe Harbor Statement The statements in this guidebook 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. 3 PRODUCTS ACROSS ALL INDUSTRIES are made better AND at lower cost with IPG FIBER LASERS 4 Revolutionizing the Laser Industry Traditional Lasers Ultra High Power Carbon Dioxide (CO2) Continuous Wave (CW) Lasers High Peak Power Lasers with Quasi CW (QCW) Option Adjustable Mode Beam and QCW Lasers Lamp-Pumped Nd: YAG High Power Nanosecond Pulsed Pico and Femtosecond Pulsed . Expensive . Inefficient . Higher Productivity . Efficient . Bulky . Frequent Maintenance . Compact . Minimal Maintenance . Unreliable . Costly Consumables . Reliable . No Consumables . Difficult to Operate . Not Scalable . Robust . Scalable © 2019 IPG Photonics 5 OUR MISSION Making our FIBER LASER technology the tool of choice in mass production © 2019 IPG Photonics 6 Key Takeaways Global market leader in Vertical integration, fiber laser technology manufacturing scale across multiple end and technology markets and applications driving best-in-class margins Expanding multi-billion Industry-leading dollar addressable earnings and cash flow market opportunity © 2019 IPG Photonics 7 Industrial Lasers for Materials Processing $100 Billion CUTTING WELDING BRAZING DRILLING $50 Billion Non-Laser Machine Tools $0 Billion Laser Systems 2008 2010 2012 2014 2016 2018 2020 2022 CLADDING ADDITIVE MFG MARKING SURFACE TREAT. Source: Oxford Economics, Optech Consulting and IPG Photonics Corporation © 2019 IPG Photonics 8 The Pioneering Force Behind Fiber Lasers IPG Photonics Overview IPG Photonics is the inventor and world’s leading producer of high-power fiber lasers, which enable greater precision, higher-speed processing, more flexible production methods and enhanced productivity within industrial, semiconductor, instrumentation, medical, scientific, defense and entertainment applications. Fiber lasers 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. IPG has continually pioneered the development and commercial production of numerous unique technologies related to fiber lasers combining deep materials science expertise and process know-how with a vertically-integrated business model. The company produces all key components of its fiber laser technology in-house, enabling: (1) better performing, higher quality solutions; (2) faster product development; (3) more efficient production methods with high yields throughout the process; (4) industry-low product delivery times; and (5) rapid ongoing cost reduction with an industry-best margin profile. IPG’S HISTORY OF INNOVATION 2004: first 1 kW 2008: first 5 kW 2000: first 100 W 2014: first kW class 1990: IPG first to propose single-mode and 10 kW single-mode fiber laser high-power fiber laser single-mode fiber laser multi-mode fiber laser fiber lasers with wall and 50 kW multi-mode plug efficiency >45% solution at OSA fiber laser Conference, first 1993: first single-mode 2002: first single 5 W fiber laser pumping solution powered emitter diode pumping 2018: introduction of by multi-mode diodes and and 1 kW, 2 kW and 6 first 3 kW continuous wave lasers 2006: 2010: first QCW 200-500 mW erbium-doped kW ytterbium fiber with QCW-mode and single-mode fiber laser lasers with 1.5 kW fiber amplifier lasers adjustable mode beam single-mode beam quality 1990 2018 2001: first erbium 2009: first high-brightness 2017: first 120 doped fiber laser 2005: first 2kW single-mode 100 W fiber-coupled laser kW multi-mode diode and 10 kW fiber laser 1996: first 10 W single- for medical 2003: first multi-chip and 20kW multi-mode fiber 1991: first 2 W mode fiber laser and applications on submount diode lasers and 40 W/110 W single-mode fiber laser 2013: first 100 single-mode nanosecond pulsed packages thulium doped fiber lasers fiber laser ytterbium fiber laser for medical applications kW multi-mode fiber laser © 2019 IPG Photonics 9 The Pioneering Force Behind Fiber Lasers Leading Technology Development Distributed Side Pumping Acousto-Optic Crystal Technology uniquely enables fiber lasers with high beam Thin film Technologies employ unique crystal growth processes quality, superior electrical efficiency and a includes highly-reflective and anti-reflective to produce acousto-optic modulators (used completely monolithic design without alignment coatings and narrow line filters of industry- in pulsed lasers) and other components not or vibration concerns and with no free space leading quality and performance. available in the commercial market. optics (more on slide 10). Laser Diodes Active Optical Fiber produce multi-mode laser diodes that are Volume Bragg Gratings produce active optical fiber of varying core more efficient than competing solutions. leading-edge technology for diameter with higher efficiency, lower loss and Today we produce more than 10 million tested pulse compression within ultrafast pulsed greater protection against photo darkening diode chips, significantly more than the next and light scattering than competing solutions. fiber lasers. largest producer of these diode chips. Assembly, Splicing, Testing Distributed Single Emitter Nonlinear Crystals employ low-loss assembly and splicing Pumping Solution crystal growth technology for producing techniques throughout our core technologies nonlinear crystals for visible and UV allows for significantly higher coupling and while utilizing unique IPG-designed testing lasers with uniquely low absorption and wall-plug efficiency, along with greater solutions that improve reliability at a near 100% high-quality material yield vs. reliability vs. diode bar technology. significantly lower cost per channel than competing technologies with ~50-70% commercially available solutions. material yield. © 2019 IPG Photonics 10 Laser 101 What is a Laser? An optical amplifier that converts energy into highly concentrated beams of light by stimulated emission of Light photons (light particles) from excited matter. The unique properties of laser light enable more powerful, precise and flexible processing within numerous industries and applications. Amplification by (1) Optical Resonator Stimulated Emission of (2) Gain Medium (6) Laser Beam Radiation (4) High Reflector (3) Energy Source (5) Output Coupler How a Laser Works A laser consists of: (1) an optical resonator, typically two mirrors between which a coherent light beam travels in both directions; (2) a gain medium material within the resonator with properties that allow light amplification by stimulated emission; and (3) an energy source of light or electric current that excites atoms in the gain medium, known as pumping. Light in the gain medium travels back and forth between the two mirrors – the (4) high reflector and the (5) output coupler – being amplified each time. The output coupler is partially transparent, allowing some of the photons or (6) laser beam to exit. Types of Lasers Lasers are often categorized by the type of gain medium (gas, crystal, fiber, semiconductor) but are also distinguished according to: (1) wavelength of operation
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