John Murphy profiles GSI, a company reaffirming its commitment to the photonics industry
It was not long ago that rumours were circulating that GSI was pulling out of the laser business. It had sold off a couple of laser product lines and it looked as if it was going to concentrate on its scanning business and the semiconductor industry.
All that changed in early July this year when it announced a $360m takeover of Excel Technologies. Although the deal is not set to close until Q3 2008 – and there are plenty of things that could go wrong before then, GSI is paying a good price and everyone expects this merger to happen. The new combined company will double its laser turnover, and photonics will represent 80 per cent of its business.
But within the company it has been no surprise that GSI is committed to the laser business. It has been re-organising to concentrate on its strengths in the industrial laser business, particularly the solid state lamp-pumped lasers, and adding new technology in the form of fibre lasers while disposing of a few smaller legacy product lines. GSI has the laser assets of Excel, including leading CO2 laser maker Synrad and advanced technology and distribution channels from Quantronix and Continuum, making it a major force in the industrial laser market – with a strong technology base going forward into the fibre era and beyond.
Philippe Brak, GSI vice president and general manager of the Laser Division, says: ‘This merger shows that we really want to be a player in the laser industry and broaden our portfolio within it. Excel gives us access to some new technologies that are very complementary – the biggest chunk is probably the CO2 RF. They have a lot of technology that is used in the scientific market, which could have potential in the future for the industrial market. You need to be involved in the early days of these technologies – it always starts somewhere in the lab and it takes a long time to get to industrial applications, but it is useful to have some feed in from the scientific end.
‘A lot of work will have to be done to make the most of the synergies and, in particular, there are things that we can do together in Asia. We have sent out some mixed messages in the past, but this shows that we really do want to focus on the laser business and focus on the areas that we do well, rather than trying to serve everyone. The companies that have been successful in the laser business are the ones that have been focused.’
The laser division of GSI has a slightly complicated history. It is the combination of three companies: JK Lasers, Lumonics Research and Spectron Lasers. Lumonics came first, beginning in Ottawa in 1971 and specialising in pulsed gas lasers. It later moved into marking systems, where it became quite successful, going public in 1980.
In 1982 Lumonics acquired JK Lasers of Rugby, England, and added its expertise in solid state industrial lasers. JK Lasers was another early pioneer of the laser industry, which started life in the research labs of AEI in Rugby. AEI was bought by conglomerate GEC and the laser team did not want to move, so they set up their own company in 1973. It started developing scientific lasers, but then moved into the industrial market with one of the first solid-state lasers.
Lumonics in Rugby was the largest industrial laser company in the world at one point in the 1980s. Lumonics was mainly concerned with marking systems and this attracted the attention of GSI, then known as General Scanning Inc, and the two companies merged in 1999 to become known as GSI Lumonics. While GSI pursued the semiconductor manufacturing systems market, the laser operations were concentrated into the Rugby site and GSI decided to pull out of the high power industrial laser market, leaving it with a somewhat antiquated range of products to make.
In the early 2000s, it decided to have another go at the high power laser business, adding the spectron fibre laser operation, which was based very near the Rugby site.
Having pulled together so many different products from different companies, it soon became clear that a little bit more focus would not go astray. At the beginning of 2008, a new general manager was appointed to the laser division and some significant changes were made.
One of GSI’s main product lines is the JK fibre laser range.
Brak has significant experience in the laser industry, having spent 16 years with Spectra Physics. The new broom resulted in the selling off of most of its gas laser business and the concentration around the JK range of solid state industrial lasers for cutting, welding and drilling – and the new range of fibre lasers. Brak also sought to put more of the company’s energy back into looking after its customers.
Brak says: ‘I really believe in focus. I don’t think we have changed our strategy, but I think we were not executing it. We needed to decide what markets we wanted to be in and focus on them. It was wonderful for me to come in with no history; I was able to change things. People had become attached to things and we were not serving our customers properly.
‘Our core competence is making lasers for manufacturing industry. We were one of the market leaders, but we lost focus and other companies managed to overtake us. But we are now back on track. What we are finding is that customers just want to give us their samples and see how we process their samples, and in 80 per cent of cases we can do it better.
‘We have always had very reliable products; the Lumonics name has always been known as the industrial workhorse that is reliable. What was lost for whatever reason, and I still do not understand why, is the customer focus. I think the people here are really customer-focused, but they got the wrong messages from the management. The technology we use is mature and those products were somehow declared to have no future – but that simply is not true. The market is growing 10 per cent or so every year and the present market share is very small, so there is a long way to go.
‘We also needed to add technology, and it is true that we are in catch-up mode on fibre technology, but if you have good products in an existing market that is growing steadily, then what you need is customer focus.’
Brak says that his initial impression of the company was that it needed to get away from lamp-pumped lasers and that fibre lasers were the future in the industrial market. On paper, the fibre laser is an interesting proposition because of space, power supply and consumable problems simply go away. But what he has found is that the customers are much less interested in the technology and more in the practicalities of using the laser in their production lines.
He says: ‘I have been in the laser industry for 22 years and I thought, when I took over this opportunity, that lamp pump lasers could never be successful. So I started going to customers to find out why they were still buying these lasers.
‘To my surprise, I found that when I spoke to customers they saw things very differently. Yes they had to replace the lamps three or four times a year, but it takes 15 minutes and we are running production 24/7. When we have to replace the diode, it may be only once a year, but we are down for a few days – and it is so costly to have the production line down that they stick to the older technologies and they can preventively change the lamps. That is why the market is still growing.
‘But in the future, you will have 300,000 hours or more lifetime and you may never have to replace components. I think in the future, fibre lasers will form a real threat. Fibre lasers are not the answer to everything, because a lot of welding operations use pulsed lasers, so there is no real alternative. Ultimately, we will replace our older technology with our own fibre lasers, so we are in a very good position for growth.’
GSI has facilities around the globe, including a recently-opened sales and service centre in China.
Interestingly, IPG, the brand leader for fibre lasers, has recently invested in developing its own CO2 laser technology to compete in the estimated $1bn a year market for cutting and polymer applications where gas lasers are still the kings.
Brak believes that the key to GSI’s success in the industrial market is that the company has been in it for a long time and understands both what customers are doing and the conditions under which they do them. It is not selling an interesting scientific instrument, it is selling a tool to do a job on an industrial scale.
He says: ‘We have a major advantage in application knowledge, because we have been entrenched with our industrial customers for 25 years. Our customers do not particularly care what the laser is. They want to achieve certain efficiencies, certain speeds and certain results. Often our lasers are very similar to our competitors’, but we have expertise in our products because we have knowledge, going back many years, of how to make them work better in the industrial application. Whether there is a fibre laser at the heart of it is to a certain extent irrelevant. What we add is the stuff around it like the software, the delivery, making it rugged and easy to integrate, the process tools and so on.
‘I always used to think that a laser was the device that produced the light, but since I came to GSI I learned that there is something attached to it like a weld head, a scan head or a cutting head. It’s still part of a system and it needs to be integrated into a production line. We make tools – but the engine of the tool is light and these are mounted on handling systems. The success is in the tool not the laser; you need to deliver the beam to the target. GSI understands the difference between a laser and a tool.’
The tough part of being a tool manufacturer is that the customers want to see the tool in action before they buy. This means that most sales are made through application centres where the customer submits a sample of the job and makes a decision based on what has been demonstrated.
Most of its customers are very large manufacturers, in automotive, electronics or medical industries. They tend to have their own integration teams and they buy the tool and build it into their own production lines. There is also a second tier of customers who work with integrators to build projects. The integrators usually make specialised sub systems and just plug the GSI laser in. There is a third tier of OEM customers, who usually buy a laser without any beam delivery and just build it into their device. Brak believes that GSI has not been actively promoting its name in the market and many people do not realise that they have a GSI laser in their application. When Brak joined the company he was surprised to find there was no marketing department, which is something he has changed, and he has also appointed people with designated responsibility for markets, and product managers with responsibility for product lines.
The company has also opened a sales and service operation in China with a large number of local people hired and trained. There are plans to open an application centre in China.
He says: ‘We had a big sales operation with very good people in the US, who had more than 25 years of experience, but in recent years the customer base has largely moved to Asia. We have made some changes and have put a lot more resources into Asia, because we need to be close to our customers and be able to speak to them in their own language.’
Geographical coverage for sales and service has also been reviewed. Brak believes that there is a lot of potential for joint working with other parts of the present GSI Group, which has offices in many Asian countries. The merger with Excel opens up even more opportunities, because its industrial laser manufacturers already have a significant sales, spares and service operation in Asia.
Assuming the merger completes later this year, GSI will emerge with a very strong line-up of products in the industrial laser market with a lot of opportunities to leverage geographical coverage. As with most mergers, it is likely that there will be some rationalisation. It is anybody’s guess whether any sites will be consolidated, but there may be a small overlap in targeted customers.
Excel kept three laser companies under separate names and in separate locations, because each one was serving a different market segment. Either way, GSI has assembled an interesting pile of building blocks out of which it can build a significant player in the laser business in the future.