IPG Photonics Corporation The Fiber Laser Company (NASDAQ: IPGP) - - PowerPoint PPT Presentation

World Leadership in High Power Fiber Lasers

www.ipgphotonics.com

IPG Photonics Corporation

The Fiber Laser Company™

(NASDAQ: IPGP)

2016 Investor Day May 11, 2016

World Leadership in High Power Fiber Lasers

www.ipgphotonics.com

Welcome and Overview

Tim Mammen Chief Financial Officer and Senior Vice President

Safe Harbor Statement

The statements in this presentation 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

• f 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.

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Agenda

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Welcome and Overview ………………………………………………………….…….Tim Mammen Current and Future Market Opportunities…………………………………………. Trevor Ness Accessories………………………………………………………………… Felix Stukalin Strategic Growth Projects…………………………………………………Yuri Erokhin Medical……………………………………………………………………… Gregory Altshuler Telecom………………………………………………………………………Mark Cannata Manufacturing Devices and Components……………………………………………….. Eugene Scherbakov Diodes………………………………………………………………………..Alex Ovtchinnikov Break China……………………………………………………………………………………… Trevor Ness Financial Review…………………..…………………………………………………… Tim Mammen Summary and Growth Strategy............................................................................ Valentin Gapontsev Q&A Session Tours and Lunch

IPG Overview

 Global leader in industrial fiber lasers  FY 2015 sales of $901 million; YOY growth of 17%  $4.53 diluted EPS; up 20% YOY  Q1 2016 sales of $207.2 million; YOY growth of 4%  $0.99 diluted EPS; up 2% YOY excluding foreign

exchange transaction loss/gain

 Growing acceptance of fiber lasers replacing traditional lasers  Products are sold to OEMs, systems integrators and end

users for use in many industries

 Global operations with over 3,700 employees

5

Investment Highlights

 Expanding $4.8 billion opportunity for all lasers

 Approximate average annual growth rate of 6%

 Recognized leader in the rapidly growing fiber laser market

 Estimated 12% CAGR from 2015 to 2020

 Significant competitive advantages

 First mover advantage  Performance, product range and reliability  Lowest cost (vertically integrated model)  Strong IP position

 Vertical integration and direct sales model drives industry-leading

margins (54.6% GM in FY 2015, 55.2% GM in Q1 2016)

 Broad geographies, end markets and applications

 Asia & Australia 51%, Europe 33%, North & South America 15%

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The technology leader and most profitable company in the rapidly growing fiber laser market

$- $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 All Lasers Fiber Lasers All Lasers Fiber Lasers 2015 2020 Forecast Materials Processing Advanced Applications Medical 7

Rapidly Taking Share in Large, Existing Laser Markets

$4,800 $1,480 $6,751 $2,600

____________________ Source: Laser Focus World, Industrial Laser Solutions, Strategies Unlimited, Optech Consulting and IPGP estimates. (000)

Fiber, 31%

2015 - Share of Total Laser Market

Fiber, 39%

2020 - Share of Total Laser Market

Materials Processing – Diverse End Uses and Customers

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Automotive General Manufacturing Heavy Industry Oil & Gas Shipbuilding Nuclear Construction Aerospace Shipbuilding Semi/ Electronics Displays Consumer

 Expand addressable market and enhance future growth opportunities by addressing new application and customer specific requirements

Recent & New Product Introductions

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 Marking & Engraving  Cutting  Welding  Fine Processing  Additive Manufacturing  Brazing  Drilling  Welding of Alloys and Specialty Materials  Cladding & Deposition  Ablation  Display & Imaging

 3D-Cinema  Entertainment and Projection

 Micro-processing  Medical Devices  Bio-Medical  Sensing & LIDAR

CURRENT FUTURE

Future Opportunities in Micro-processing

10 Semi/PC Board/Display, $153 Solar/LED/ Other, $367 Excimer/DUV , $719 CO2/EUV , $193 Addressabl e Market, 36% Other Applications, 64%

Significant area of growth for ultra-fast pulsed lasers, and shorter wavelength lasers at the green and ultra-violet wavelengths

Other Applications Provide Potential Additional Longer Term Growth Opportunities

11

____________________ Source: Strategies Unlimited, IPGP estimate of potentially addressable market.

Fiber participation is relatively low in these other applications. Longer term opportunity will depend

• n successful product development and market acceptance of fiber laser products.

2015 2020

(US$ mm)

$192 $161 $67 $455 $372 $628

Displays & Light Shows Sensors, LIDAR & Inspection Mid-IR Spectroscopy R&D Defense Medical

$569 $236 $108 $594 $524 $1,042

IPG’s Defensible Laser Position

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Strong IP Portfolio Vertical Integrated Business Model Manufacturing Scale

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Three Distribution Channels

OEMs/Integrators Direct Sales Representatives

End User End User End User End User End User End User End User End User Factory 1 Factory 2 Factory 3 End User OEM Large Manuf. OEM Integrator

Representatives Direct Sales Direct Sales Direct Sales

Leveraged Sales Model Maximizes Market Reach

World Leadership in High Power Fiber Lasers

www.ipgphotonics.com

Current and Future Market Opportunities

Trevor Ness Senior Vice President, World Wide Sales and Marketing

 IR Lasers  UV Laser  Ultrafast  Visible Fiber Lasers  Systems  Accessories (Felix Stukalin)  Strategic Growth Projects (Dr. Yuri Erokhin)  Medical Applications (Dr. Greg Altshuler)  Telecom (Mark Cannata)

Diverse Product Lines and Market Opportunities

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World Leadership in High Power Fiber Lasers

www.ipgphotonics.com

IR Lasers

IPG Laser Wavelengths, Mode of Operation and Power

Wavelength Mode of Operation Laser Power

Fe:ZnSe/S 3.4 -5.2 mm

IPG manufactures lasers with average power ranging from a few Watts to hundreds of kW (virtually unlimited)

UV ~0.36 mm Ultra-violet Blue, green, yellow , orange and red 0.45-0.73 mm Ytterbium ~1.07 mm Visible Near-Infra-red 400 nm 700 nm 1.5 mm Diode ~0.98 mm Erbium ~1.5 mm Thulium, Holmium ~2 mm Cr:Zn/Se/S 1.8-3.4 mm > 5 mm Mid-Infra-red

• CW: the laser is ON all the time
• Quasi-CW: the laser is modulated in ms to ms range
• Pulsed: the laser is switched on for 10-9 s
• Ultrafast: the laser is switched on for 10-12 t0 10-15 s

Any wavelength, any pulse duration, any average power: ANY APPLICATION

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 Overview: IR fiber lasers are the laser of choice in materials processing applications  Strategy: IPG fiber lasers have the broadest product range, the highest performance and reliability, the lowest cost of ownership and

• ffer unmatched integration capabilities

 Margin Profile: Vertical integration and direct sales model drives industry-leading margins  Growth Targets: Fiber lasers forecast to outpace laser market growth, with CAGR of 15% though 2019

IR Lasers Overview

18 Source: Optech Consulting and IPGP estimates.

IPG’s Core Existing Applications

$1,453 $1,867 $569 $662 $385 $431 $520 $718 $644 $1,323 $278 $352 $219 $333 $144 $183 2015 2020 2015 2020 2015 2020 2015 2020 High Power Marking Fine Processing Micro Processing All Lasers Fiber Lasers

Materials Processing Laser Market

____________________ Source: Laser Focus World, Industrial Laser Solutions, Strategies Unlimited, Optech Consulting and IPGP estimates.

Opportunity for Continued Fiber Laser Market Share Gain is Significant

(US$ mm)

(Excludes lithography)

New Applications

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$462 $967 $182 $356 $591 $364 $219 $180 0% 10% 20% 30% 40% 50% 60% 70% 80% $- $200 $400 $600 $800 $1,000 $1,200 $1,400 2015 2020 2015 2020 Cutting Welding & Other High Power Fiber Lasers All Other Lasers Fiber Market Share

Fiber Laser Penetration of High Power Applications

7% 9% 17% 40% 27%

Welding Applications

Power Train Tube Welding Car Body Scanner Welding Car Body Seam Welding / Brazing Other

81% 3% 16%

Cutting Applications

Flat Sheet Cutting Tube Cutting 3D Cutting

(US$ mm)

Welding Opportunity - potentially much more significant

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IR Laser Applications

Welding

Additive Manufacturing

Cladding Cutting Brazing Drilling Marking Surface Treatment

21

High Power Cutting

Market estimated at 7,500 systems per year. Underlying growth rate est. at 5-7% per annum

• World leader with commanding market

position with room to grow

• Total market size expanding; ease of use,

lower cost, higher power trends

• Fiber penetration estimated at 35% in Y15

with potential to grow to 80% by Y2020

81% 3% 16%

Cutting Applications

Flat Sheet Cutting Tube Cutting 3D Cutting

Source: Strategies Unlimited & IPGP estimate 22

Y15 High Power Laser Cutting

Fiber Disk/OtherFiber CO2

High Power Cutting

• Approximately 30 major OEMs
• Total market size of kW scale

machines approximately 7,500 units, forecast to grow at CAGR

• f 5-7% through 2020; over

10,000 machines

• Fiber forecast to grow to 80%

market share by 2020, remainder CO2 & Disk

• Estimate 60-70% IPG share of

industry sales achievable by 2020

• Some fiber opportunity not

available to IPG due to OEM

• wn laser/competition

Source: IPGP estimate

35.2% 55.6% 9.2%

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High Power Welding

Remote Welding Laser Seam Stepper Spot Welding Seam Welding Braizing (aesthetic, roofs, trunks) Fine Welding

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Introduction – Laser Welding Market

Source: Optech Consulting, Sep. 2015; Strategies Unlimited Mar. 2016; IPG estimates 100,000,000 200,000,000 300,000,000 400,000,000 500,000,000 600,000,000 2015 2019

Welding Market USD - Laser Sources

CAGR 7%

500 1,000 1,500 2,000 2,500 3,000 2015 2019

Global HP Laser Welding Market - Analysis by units (excl. Surface Treatment)

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Niche Welding Applications

Transitions in Welding – Medium and Long Term

High Strength Steel Aluminum Titanium Alloys Thick Materials Automotive Aerospace Construction Heavy Equipment Railways Shipbuilding Transportation & Storage

Decreasing cost of laser welding, new laser welding technologies, know-how, software & algorithms

In many instances strength of the laser weld > welded material Diverse Materials Diverse Industries Limited Materials Aircraft Autos Bridges Buildings Pipelines Rails Railcars Ships Storage Tanks Trucks Diverse Products FUTURE

CURRENT

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High Power CW Welding

• TAM – Expecting to grow to 2,200 units by Y19

(conservative estimate)

• Estimated CAGR of 6-7%, expected to outpace market

growth for 2016 ~10-15%

• Welding covers a wide industry cross section that

encompasses aerospace, construction, consumer appliances, furniture, heavy industry and automotive

• Opportunities include CO2 displacement, new braising

technologies, new remote welding solutions, penetration of new industries and flagship customers Auto Welding -

• ther

Source: Strategies Unlimited, Optech Consulting and IPGP estimates.

38.5% 61.5% IPG has strong traction within automotive segment. Over 850 HP lasers installed in welding applications with automotive end users globally. 2015

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• 2D currently undergoing testing, prototypes to

apps labs and test customers this quarter

• 3D alpha testing expected in Q3’16,

prototypes in Q3’16

• New IPGWeld software and the scan

controller seamlessly interfaces to IPG lasers and scanning systems

• With the addition of the application software,

IPG is able to offer a complete remote welding solution to Integrators and OEMs

• Target to capture 50% of industry sales,

incremental $45-$50M

Market size scanning ~380 lasers in Y15, our sales <30%. Expect to grow as we roll out an integrated total product that we can support, at a competitive price point.

New High Power Scanning (Remote Welding)

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High Power Scan head

New Product Introductions: High Power Scan head

Launch: Q2 2016 Market Opportunity*: $140M estimated by Y19 Strategy: Customer testing from Q2 in multiple geographies

$90 $90 $140 $140 2015 2019 (E)

Market Opportunity*

(US$ mm) *Source: Optech/IPG

[Product Image]

Description: Scan head for high speed welding in 2D and 3D for use with kW class lasers Applications/Markets: Automotive; body in white, seat welding, battery welding Advantages: Ease of use, lightweight, competitively priced, 2D & 3D IPG is able to provide complete solution laser + beam delivery + chiller + software

29

New Product Introductions: Trifocal Brazing

Launch: Launched Q2 Y15, several large automotive manufacturer wins, multiple global engagements Market Opportunity*: Market size estimated at 140 units, growing to 380+ by Y20 Strategy: Rapid deployment globally to become technology of choice for brazing

$3 $34.5 4.5 $65 $65 2015 2019 (E)

Market Opportunity*

(US$ mm) Source: Optech Consulting, Sep. 2015; Strategies Unlimited Mar. 2016; IPG estimates

Description: IPG's new YLS-5000-BR trifocal laser brazing allows cleaning of the base metal parts improving filler material flow, resulting in reproducible brazed joint with increased strength and better appearance Applications/Markets: Brazing of Electrogalvanized Material, Automotive manufacturing Advantages: Unique three beam approach, cleaning and braising. Highly reproducible brazed joint with increased strength and better appearance

Trifocal Brazing

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Unique Quasi-CW Fiber Lasers

• Medical Devices
• Micro welding
• Computer

Components

• Deep Engraving
• Drilling (aerospace)
• Cutting
• Spot Welding
• Batteries
• Seam Welding
• QCW has grown strongly in past 3 years to $56M in Y15
• Market opportunity to displace YAG remains with 5000+

per annum still produced in China. Expect 20-30% of market to transition to QCW

• Unique technology with high peak power, has typically

displaced old YAG lasers which are large, inefficient and unreliable

• Target to grow to $100M by Y20

Fine welding, brittle material cutting, high power drilling

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Pulsed Lasers

Main market application marking & engraving across most/all industries, ablation, cleaning, micro-processing

• Increased competition in low power

pulsed market; erosion of ASP’s

• IPG working in higher power

applications, sales up 20% in Q1 with good pricing/margin

• New integrated marking platform

(laser + scan head + software) gaining traction

• Opportunities in higher power

applications growing; coatings removal, cutting applications

1-100 W, 1-200 ns, up to 1 mJ

• Low Divergence
• High Beam Quality

New 100 W to 5 kW, 100-600 ns, 10- 100 mJ

• High Throughput
• High Pulse Energy

Strategy – Defend volume market, expand applications and trend to high power

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World Leadership in High Power Fiber Lasers

www.ipgphotonics.com

UV Fiber Lasers

New Product Introductions: UV Fiber Lasers

Launch: Ready for introduction Market Opportunity*: >$110 million

Low Power UV Laser

$110 $110 $140 $140 2015 2019 (E)

Market Opportunity*

(US$ mm) *Source: IPG Estimates

Description: Laser marking module with 2-axis scanner integrated with IPG UV laser Applications/Markets: UV marking for white plastics and cabling; electronics, aerospace Advantages: IPG’s Complete UV Marking Module Provides Ease-of-Integration, High Performance and Reliability to Integrators and OEMs at a competitive cost point

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World Leadership in High Power Fiber Lasers

www.ipgphotonics.com

Ultrafast Fiber Lasers

 Pico and femto pulses enable microprocessing and medical applications  Key process areas are micro cutting, scribing, 3D micro-milling, micro hole drilling and blind hole machining, laser lift-

• ff, selective material removal and ultrafine

marking  Typical industries include production of consumer and appliances, semiconductor industry, medical device manufacturing and medical procedures  Leverage IPG fiber laser technology into the $130+M ultrafast laser market segment by developing compelling new lasers differentiated by performance, form factor and total cost of ownership

Ultrafast Lasers

Ultrafast lasers have short pulses of pico (10-12 s) to femtosecond (10-15 s) duration, pulse duration so short that little of no thermal damage occurs when laser interacts with materials.

36

New Product Introductions: Picosecond Fiber Lasers

Launch: Ready for introduction Market Opportunity*: $190 million annual industrial picosecond laser market opportunity Strategy: IPG will accelerate ultrafast market growth by providing robust, easy to integrate economical fiber lasers

Industrial Picosecond IR Laser

$190 $190 $300 $300 2015 2019 (E)

Market Opportunity*

(US$ mm) *Source: Strategies Unlimited

Description: Air-cooled, rack-mountable chassis featuring remote head produces 50 µJ pulses at high repetition rate totaling >50 Watts average power Applications/Markets: Sapphire scribing (LED)/cutting (watch glass), high strength glass cutting (smartphone/tablet), thin film ablation (display/electronics) Advantages: Compact, affordable, reliable picosecond laser

37

New Product Introductions: Femtosecond Fiber Lasers

Launch: Initial units available Market Opportunity*: >$600 million annual industrial femtosecond laser market opportunity Strategy: IPG’s robust, affordable fiber lasers will enable femtosecond laser processing to enter the mainstream

Industrial Femtosecond IR Laser

$620 >$1B 2015 2019 (E)

Market Opportunity*

*Source: Strategies Unlimited

Description: Air-cooled, rack-mountable chassis featuring remote head produces 500 femtosecond pulses at high repetition rates totaling >10 Watts average power Applications/Markets: Medical (Laser Eye Surgery), Scientific, Ultra-precise micromachining Advantages: Compact, affordable, reliable femtosecond laser

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World Leadership in High Power Fiber Lasers

www.ipgphotonics.com

Visible Fiber Lasers

 Overview: IPG provides visible fiber lasers in many wavelengths, including red, yellow,

• range, green. These sources can be utilised in many application areas such as

materials processing, medical and entertainment. For example green wavelength has distinct advantages for fine processing of highly reflective metals like Copper, gold and platinum  Strategy: Penetrate emerging micro applications and enable new applications through the introduction of visible fiber lasers with unprecedented performance levels  Competition: IPG Green Fiber lasers provide unprecedented levels of average power with reasonable pulse energy in a rack-mountable industrial footprint with an elegantly compact remote laser head

Green Fiber Lasers Overview

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New Product: High-Power High Rep Rate Green Fiber Laser

Launch: Expected Q3 2016 Market Opportunity: Kilowatt-class HRR green laser creates a new market segment Strategy: IPG is partnered with leading OEMs in the PCB, Aerospace and Semi Equip industries to pioneer new applications

High-Power Quasi-CW Green Fiber Laser

<$ <$1 2015 2019 (E)

Market Opportunity*

(US$ mm) *Source: IPG Internal Data

Description: Rack-mountable 500 Watt single mode laser providing 1.5 nano second pulses at high 150 MHz repetition rate through a compact remote head Applications/Markets: Emerging applications in reflective metal welding and drilling, wafer and glass panel annealing Advantages: Unprecedented level of single-mode green power

$10-20

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New Product: Nanosecond Green Fiber Laser

Market Opportunity*: $250M annual micro materials laser market in Semi, PCB and Solar Strategy:

IPG partners with leading micro materials processing companies to pioneer new high pulse energy green applications

High Pulse Energy Green Nanosecond Fiber Laser

$263 $263 $451 $451 2015 2019 (E)

Market Opportunity*

(US$ mm) *Source: Strategies Unlimited, 2016 Worldwide Laser Report

Description: Rack-mountable 100 Watt nanosecond laser providing up to 500 milliJoule pulse energy through a compact remote head Applications/Markets: Solar Cell thin film ablation and wafer dicing, precision via drilling for microelectronics PCBs Advantages: Unique combination of throughput and precision stemming from high pulse energy and short 1.5 nanosecond pulse width

42

World Leadership in High Power Fiber Lasers

www.ipgphotonics.com

Laser Systems

Resonators Lasers Process Heads

Adding Value Through Integration

INTEGRATED LASER, ACCESSORIES AND CONTROLLER TO DRIVE LASER, OPTICAL PROCESSING AND ROBOT

$15-$20K $50K to $1.0 million $4-$10K $10- $20K $8-$100K

COMPLETE SYSTEMS $200k to $5 million +

Amplifiers Chillers and Power Supplies

$3K

Couplers, Switches & Delivery Fibers

$5-40K $4-$10K

44

 Overview: IPG manufactures complete integrated systems for welding, cladding, cutting, drilling. The systems are typically customised solutions i.e. 50kW laser welding cell with IPG laser, welding head, control software for US customer welding rockets. We integrate the industry’s best lasers with IPG high precision motion systems, optics, beam switches, processing heads and software.  Strategy: Penetrate new applications for lasers and expand product portfolio through the development and introduction of specialized laser-based systems to meet the specific needs of manufacturing end users whose requirements are not met by standard systems or in certain geographic areas where fiber laser systems are not currently available  Growth Targets: Target to develop systems business of $200M + by 2020

Laser Systems – Developing New Applications and Opportunities

45

Laser Systems Overview

New system platforms offering specific laser and beam delivery tailored to specific applications

Small format 2D cutting Small format multi-axis welding, cutting & drilling Micromachining Multi-axis welding, cutting & drilling Multi-axis pipe welding system Tube and Profile Welding Laser Seam Stepper Orbital Pipe Welding

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 Laser Equipment:

– YLS-50000-CT 50 KW Welding Laser – IPG FLC D50 Welding Head – LC170 Chiller

 Motion System

– 6-Axes Robot, 10 ft reach – 10 ft linear track – Rotary worktable 22 ton 8 ft dia – Tip/Tilt 2-axes positioner

Robotic Laser Processing System

Application: Welding Aerospace Components

• Example. Seam welding 1 inch thick copper

High Power Automated Welding System

47

5-Axis Pipe Welding System

New Product Introductions: Laser Systems

Launch: First system delivered in Q1 2016 Market Opportunity: Large application area with zero penetration by lasers today Description: Multi-axis high power fiber laser pipe welding system Applications/Markets: Pipelines, construction Advantages: High productivity vs incumbent technology

48

Macro and Micro Laser Systems Market

38% 9% 2% 19% 10% 11% 10%

Macro and Micro Laser Systems 2015 - Approximately $9.6 Billion*

Cutting Welding & Brazing Other High Power Micro-processing Excluding DUV & EUV Fine Cutting, Welding & Drilling Marking Other Low Power

*Source: Strategies Unlimited, Optech Consulting and IPG Photonics estimates

49

World Leadership in High Power Fiber Lasers

www.ipgphotonics.com

Accessories

Felix Stukalin Senior Vice President, U.S. Operations

CUTTING WELDING MARKING

Laser System Lasers & Chillers Couplers, Switches & Delivery Fibers Cutting Heads

Typical Laser System Architecture

Welding Heads Integrated Modules Scan Heads Pulsed Laser Controller + Software

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Strategic Rational

 Significant greenfield revenue opportunity  Facilitates higher power laser sales through integrated subsystem solution  Enables new laser material processing applications through optimized beam delivery and process control  Captures more value from laser processing by integrating lasers, with beam delivery, controllers, software and process monitoring

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 Product Development of Laser Process Heads

– Develop product platforms for highest volume applications – Leverage expertise into more specialized and new applications

 IPG Differentiators

– Achieve highest quality through technological superiority

• In-house high power optics and coating capability
• Extensive testing with high power laser
• Advanced application expertise

– Offer superior performance though integration with laser source – Provide lower cost through vertical integration

IPG Strategy

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 Value

– Cutting and welding heads are sold at 10% of laser price – Advanced process heads are sold at 30% to 50% of laser price – Marking heads are sold at 30% of laser price – Sensors and advanced features are sold at significant premium – IPG can offer better value to IPG customers

 Performance

– Power of IPG fiber lasers advanced faster than process heads – Existing offering have power limitations above 20 - 30 kW for welding and above 6 kW for cutting – IPG in-house optics technology and sealed designs solve power limitations

 Sales and Service

– One-stop shop from IPG for the laser, processing head and application – Enhanced opportunity for advanced applications development – Service and warranties are aligned with integrated solution – Service and support benefits from IPG’s worldwide infrastructure

Major IPG Opportunity for Integrated Heads

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 Total available in 2015 ~$150M, projected 2020 ~$280M to $300M  Targeting >60% market penetration by 2020 ~$180M

– IPG currently provides 100% in Switches and Process Fibers – IPG current share is less then 10% in Process Heads and Scanners

Total Available Market* – Accessories Sold with IPG Lasers

TAM 2015 2020E

TOTAL $150M $280M-$300M Welding heads $35M $80M Cutting heads $50M $80M Scanning heads $30M $60M Beam Switches $22M $45M Process Fibers $13M $25M

*Market size estimate by IPG

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Recent Products Introduced in 2015

• Highest power handling in the

Industry – 12kW

• Ultra-stable capacitive height

sensing

• Hermetically sealed design
• Motorized Focus and Pierce

Sensing options

CUTTING WELDING SCANNING WELDING

• Wobble and Seam Tracking

combined in one product

• Unique Product
• Provides improved weld quality

and better visual finish

• Variety of Wobble shapes at a

frequency of 300Hz

• Power Handling of up to 12kW
• Remote Scanning

Applications

• Plug & Play with QCW or

CW lasers

• Up to 2kW laser power

handling

• Calibrated Scan Field

IPG CUTTING HEAD WOBBLE & SEAM TRACKING MODULE MID-POWER SCANNING SYSTEM

• Optimized for welding applications
• f up to 50kW
• Hermetically sealed design
• Provides unmatched results in

penetration depth

50kW WELDING HEAD

35mm+ of penetration depth in SST at 50kW 56

• Highest power handling in the

Industry – 15kW

• Ultra-stable capacitive height

sensing

• Hermetically sealed design

CUTTING WELDING MARKING REMOTE WELDING

• IPG Wobbler design is now

available in a compact and lightweight architecture

• Wobble frequencies of up to

1000Hz

• Power Handling of up to 6kW
• Integrated Module
• Optimized for Marking

applications

• Completely sealed

design

• Includes Controller and

Software

IPG HP CUTTING HEAD D30 WOBBLE & SEAM TRACKING MODULE UV INTEGRATED MARKER

• Highest power handling in

the Industry – 15kW

• Hermetically sealed design
• Through the lens vision
• Plug and Play with IPG

Lasers

• Available with IPG Controller

and IPGWeld software

2D/3D REMOTE WELDING

New Products for 2016 Introduction

57

Next Level of Integration - Specialized Beam Delivery Systems Expand Market Opportunities

Seam Stepper

• Integrated robotic welding unit

addresses large resistance spot welding market

Welding with Seam Tracking Sub-system

• Welding unit with seam

tracking capability addresses pipe and seam welding market

Cladding Heads and 3D Cutting Heads

• Specialized cladding and 3D

cutting heads for emerging material processing applications

58

World Leadership in High Power Fiber Lasers

www.ipgphotonics.com

Strategic Growth Projects

• Dr. Yuri Erokhin

VP, Strategic Marketing

 Industry Trend

– Major cinema players upgrading image quality and overall moviegoer experience, opportunities in other entertainment and signage markets – Transitioning projectors from Xenon Bulb to laser luminaires

 Opportunity

– ~$200M annualized IPG revenue potential beginning to ramp in 2017

 IPG Solution

– Key Differentiators versus laser diode based illumination alternatives:

• Improved image quality: higher brightness & contrast, lower speckle
• Increased optical efficiency of next gen projector designs
• Reduced overall Cost-of-Ownership

– Leverages IPG existing fiber laser technologies – Successful product introduction at CinemaCon-2016  Significant interest from leading projector makers and high-end theater operators

Laser Luminaire: Large Greenfield Opportunity

60 5/11/2016

Cinema Market Opportunity: Up to $2.4B Over 8-10 Years

Segment Screen Count TAM over 8-10 years Ultra-Premium IMAX, Dolby, etc. Mostly 3D 2,000 $200M- $400M Very Large Screens 2D and 3D 5,000 $250M- $450M Large Screens 10,000 $300M- $600M Medium Screens 38,000 $425M- $950M 55,000* screens $1.2B to $2.4B**

Very Large Screens 2D and 3D Large Screens Primarily 2D, some 3D capable

Medium Screens, Mostly 2D

3D Ultra Premium

Projected Top-Down Laser Luminaire Market Adoption

Laser Strength Segments

Fiber Lasers or diodes

* Remaining 85.000 (+/-) screens WW are small size **Revenue opportunity is exclusive of service

61

 Laser Projection is rapidly gaining traction in signage and entertainment

– High impact advertising campaigns – Theme parks and museums – Architectural projection mapping – Concerts, other performances

 Laser projectors enable lower costs, easier field installation and superior image quality

Laser Opportunities in Signage and Entertainment Markets

2015 Freightliner unveiling autonomous truck - Hoover Dam promo event. 60 projectors with 1.17M lumen

http://www.barco.com Projection mapping: A map to spectacle

$50M annualized RGB Fiber Laser Illumination Source opportunity

Creating Technology – design; Barco Entertainment – projection system

62

 FPD market segments are undergoing disruptive structural shifts: – Accelerated growth of high resolution smartphone displays – iPhone adopts OLED displays in 2018 – High-Res OLED tablets

 Laser Annealed Low Temperature Poly-Si (LTPS) is key enabler of these products  $500M market today, dominated by Excimer Lasers

Flat Panel Display Anneal Market Opportunity

Unique Flat Panel market opportunity for IPG UV fiber lasers

Source: DisplaySearch, 2014 Source: Samsung Display

63

UV Fiber Laser Flat Panel Market Opportunity

 Excimer Laser Anneal (ELA) is an incumbent LTPS process  ELA process (excimer) suffers from high cost, both initial capital requirements and high ongoing equipment maintenance  96% of LCDs (by area) still fabricated

• n a-Si will transition to high mobility

backplane  fiber laser opportunity  3-5x lower operating cost vs. ELA expands OLED to next generation smartphone, tablet and laptop displays  >$300M IPG opportunity  IPG patent pending processes under evaluation with three major WW Flat Panel Manufacturers

DisplaySearch, Jan., 20th, 2014

*Source: Samsung

By 2018 Samsung Projects Proliferation of LTPS into High End Tablets

64

 Ablates paint from the surface  Vacuum removes 99.9% of residue  Does not require chemicals which produce toxic sludge or plastic beads  Manual paint stripping requires:  F-16 4 people  16 to 18 people for a C-130 

• Dept. of Defense current paint stripping costs >

$800 million per year (2015 Air Force LCMC)  Many applications outside of aerospace:  Cleaning of molds, casts, tanks, pipes &

• ther surfaces

 New generation of Nano-Second Pulsed laser with average power up to 4 kilowatt  Pulsed product limits thermal damage to cleaned surface

Laser Ablation for Paint Stripping and Surface Cleaning

Sources: *Potential alternative report for the portable handheld laser small area supplemental coating removal system, prepared for USAF by SAIC, Feb. 2001 ** Penn State Applied Research laboratory, Automated Rotor Blade Stripping System (ARBSS) study for the USN, 2005

Environmental Benefits:

5 10 Media Blast* Solvent* Laser Ablation** Solid waste (lb.) generated Per 1 lb. on paint stripped Paint Stripping Method

Plus 165 lbs of Liquid Waste

65

World Leadership in High Power Fiber Lasers

www.ipgphotonics.com

Medical

• Dr. Greg Altshuler

President, IPG Medical

Large Medical Laser and Systems Market

67

($ in Millions)

*Includes Ophthalmic, Surgical, Cosmetic, Dental and Veterinary applications Source: BCC Research

$4,110 $7,759 $628 $1,042 $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 $9,000 2015 2020 Laser medical systems*, $MM Laser sources for medical systems**, $MM

**Source: Strategies Unlimited

4-8 Times Larger Opportunity for Laser Medical Systems

Medical Laser Sources by Type

Lamp Pumped SSL 35% CO2 20% Eximer laser 4% Fiber laser 9% Diode Pumped SSL 12% Diode laser 20%

2020

Lamp Pumped SSL 37% CO2 21% Eximer laser 4% Fiber laser 5% Diode Pumped SSL 16% Diode laser 17%

2015 IPGM believes it can target 20% to 30% growth

Laser Medical Systems use legacy technologies such as flash lamp pumped and gas lasers with slow transition to new diode and fiber laser platforms

68

Source: Strategies Unlimited

 All spectrum of wavelengths for safer and more effective selective photothermolysis and tissue surgery  Pulse width from CW to picosecond and femtosecond  High-quality laser beam enables tight focusing of energy for precise and safe surgery and delivery of laser energy to tissue through ultra-thin quartz fiber  Low cost compare with old laser technology  Small system size, air cooling  High reliability, no water and lamp replacement - low ownership cost  Opportunity for dramatic improvement of existing laser medical applications and development new medical technologies

Fundamental Advantages of Fiber Lasers for Photo-medicine

69

69

 Overview:

– IPG Medical provides turn-key solutions for development and manufacturing

• f lasers and laser-based medical systems

– ISO 13485 certified and FDA registered manufacturer (2016) – Research and development in Marlboro (USA) and Fryasino (Russia) – Production of components and final product in Fryasino (Russia) and final product for US market in Marlboro (USA)

 Strategy:

– IPG’s unique fiber lasers new game-changing products which are more efficient, safe and cost-effective and enable new medical procedures – Penetrate new medical applications, such as urology (BPH and Lithotripsy), aesthetic (hair removal, vascular and pigment, skin texture and tightening, body contouring, tattoo), dental (surgery and tissue regeneration),

• phthalmology, through the development and introduction of new products

– Approach the market in partnership with leading medical device companies in particular fields or direct distribution in selective field and territory

 Growth Targets:

– We target medical opportunities from $70M - $150M in 2020

IPG Medical Overview and Strategy

70

 IPG:

– Conducts joint research, design and development of the new product platform for professional dental use – Manufactures laser console and application modules on exclusive basis

 Biolase:

– Commercializes the final medical products with Biolase accessories in the professional dental field under Biolase brand – Exclusive, performance-based distribution rights

 Expected revenue beginning in 2016

Dental Laser Partnership

71

 New IPG products based on QCW Tm fiber laser: laser for Lithotripsy and Benign Prostatic Hyperplasia & Lithotripsy would replace flash-lamp pumped Ho:YAG laser platforms with more than 10,000 installed base  2 times faster speed of human stone dusting with significantly lower retropusion than current “gold standard” Ho laser has been demonstrated in vitro study (Super Pulse Tm Laser for Lithotripsy, ASLMS Annual Meeting 2016)  First product would be launched in 2016 in Russia pending regulatory approval  US and worldwide market would be approached in partnership with leading urology partner with product launch in 2018

Urology Opportunity

72

IPG Consumable Surgical Fiber with proprietary connector

 Gum regeneration for periodontology and implantology  New solution with IPG proprietary patent pending fractional dental laser technology

Dentistry Opportunity

Laser patterns on gum tissue treatment Replacement of tissue grafting

Before Tx 3 w after Tx

ALD 2015, G. Altshuler et al.: Laser Patterned technology: a new natural method

• f tissue regeneration

73

World Leadership in High Power Fiber Lasers

www.ipgphotonics.com

Telecom Products

Mark Cannata Director, Sales and Marketing, Telecommunications Products

 Product Line Today

– Optical amplifiers and Raman lasers – Optical transmission and DWDM systems

 Markets/Customers

– Fiber-based Fiber to the Home (FTTH) and Cable TV (CATV)

• Arris, Calix, Portugal Telecom

– Ultra-long haul

• ABB, Saudi Electricity Company, Rostelecom

 IPG Differentiators

– Highest power amplifiers, any wavelength/any power Raman – Proprietary signal processing system technology for ultra-long haul telemetry and DWDM applications – Eliminates mid-span optical regeneration in long-haul links – Provides industry’s highest density amplification with the lowest electrical power utilization

 Amplifier Market Size

– $520M (2016) growing to $630M (2020)1; 15% CATV amplifiers / 85% transport amplifiers1

Differentiated Products for Growing Market

75

1 Ovum, Total OC Forecast Spreadsheet: 2014–20, August 2015

Optical Amplifiers for Broadband and CATV

76

IPG EDFAs for FTTH Networks

RF Overlay for CATV delivery

32-port Front Access 64-port with integrated WDMs

~10W amplification

OEM EDFAs for CATV Networks

Fiber Deep architectures e.g. RFOG, Node Segmentation

Node EDFA Head-end CATV EDFA

Optical Transmission - Line Cards, Modules, DWDM Systems

77

IPG DWDM and Optical Transport

Repeater-less 40x100G DWDM – 400+ Km

Menara Optical System Modules

100G CFP/CFP2/QSFP

Data Center / metro / Regional And DWDM Connectivity

10G OTN XFP System in a Module 10G SFP+ Vendor Agnostic Plug-and-Play

Addressable Optical Networks Market: $12.8B in 2016 to $15.4B in 2020 All Growth in 100G+ Line Cards and Pluggable Modules

 Product Line Tomorrow (with Menara)

– Patented “System in a pluggable module” integrating all line card functions; “transponder-less transport” – Short Reach to Ultra-Long Reach, 1G to 100G+ DWDM for all network segments

 Markets and Customers

– Major network operators, CATV MSOs, Data, Wireless – Optical network equipment manufacturers

 Large and Growing Optical Line Card Market Opportunity

– 100G+ market growing from $5.4B in 2016 to $8B by 2020

 IPG + Menara Differentiators

– Vertically integrated transponder technology- optics, ASICs, manufacturing – ASIC with patented mixed-mode coherent & multilevel 100G+ signal processing – Plug-and-play functionality with all vendor transmission and switching equipment – Optimized DWDM solutions with transponder blade elimination – Software Defined Network control

 Synergies

– Vertical integration of IPG’s optical transmission solutions – Add new addressable markets for IPG’s telecom portfolio – Leverage IPG’s resources to accelerate time to market, lower cost, expand Menara’s current markets

IPG to Enter Large and Growing Optical Pluggable Systems Market with Menara Acquisition

78

100% of Optical Networks 5yr Growth in 100G Line Cards

79

Ovum, Optical Networks Forecast Spreadsheet: 2015–20, December 2015

2016 $12,830M 2020 $15,350M $2.5B Growth In 100G+ Transmission Line Cards

Terminals, L2/OTN switching, $1,973 ROADMs, Amplifiers, $1,967 10G, 40G TXP, $3,536 100G, >100G MXP/TXP,

$5,360

Terminals, L2/OTN switching, $2,002 ROADMs, Amplifiers, $2,531 10G, 40G TXP, $2,915 100G, >100G MXP/TXP,

$7,900

$0.0 $5.0 $10.0 $15.0 $20.0 $25.0 2012 2013 2014 2015 2016 2017 2018 2019 2020 Revenue ($bn) Optimistic Most likely Pessimistic

Growing Telecom Opportunity

80

• 20,000.00

40,000.00 60,000.00 80,000.00 100,000.00 120,000.00 140,000.00 160,000.00 Current Business With Menara 3-5 Year Opportunity

Telecom Acquisition Adds Scale to Business and Expands 3-to-5 Year Growth Opportunity to between $100 million and $150 million

World Leadership in High Power Fiber Lasers

www.ipgphotonics.com

Manufacturing: Devices and Components

• Dr. Eugene Scherbakov

Managing Director, IPG Laser GmbH and SVP, Europe

 Vertically integrated volume manufacturing provides cost and technology advantages  Leverages scientific and manufacturing expertise in different locations to develop new technologies and implement low cost high volume manufacturing  Capitalizes on labor intensive component and finished product manufacturing in lowest cost geographic locations  Benefits from proximity to large end markets and customers  Manufactures in strategic locations where there is strong IP protection  Manufactures close to customers, providing excellent service

Proven Vertical Manufacturing Drives Leading Results

82

Vertical Integration Drives Significant Benefits

83

Major Global Production Facilities

Total: 57,000 sq.m. Clean Rooms: 10,000 sq.m. Employees: 1,400 Total: 38,600 sq.m. Clean Rooms: 10,000 sq.m. Employees: 1,113 Total: 50,000 sq.m. Clean Rooms: 8,000 sq.m. Employees: 1,100

Production Facility and World Headquarters Oxford, MA IPG Laser Facility Burbach, Germany NTO Facility Fryazino, Russia

84

Vertical Integration & Production Location

Fab Operations Semiconductor Wafer Growth Diode Processing, Chip Mounting & Burn-In Laser diode Packaging Up to 120-watts Optical Preform Silica based glass MCVD method Dope with rare earth ions Fiber Draw Draw towers Fiber Block Modules Up to 2000 Watts Final Assembly Coupling Final burn in Shipment Components Bragg Gratings Isolators, Couplers

Deep in technology Deep in experience

Optical Delivery Systems: Welding & Cutting Heads, Scanners, process fibers US, Germany & Russia US Germany & Russia US & Russia Germany & Russia US, Germany & Russia US, Germany & Russia US, Germany & Russia US, Germany & Russia 85

Core Technologies Manufactured at IPG’s Facilities

Core Technologies U.S. Germany Russia Diode Fab/Front End  Laser Diode Packaging    Active and Passive Fibers   Laser Crystals   Fiber & Bulk Gratings    Fiber Couplers & Combiners   Fiber Blocks & Modules    Bulk and Micro Optics.  Thin Film Coatings   Laser Assembly    Laser Systems Assembly    Optical Heads & Scanners  

86

IPG's Commercial Products

10 20 100 200 400 600 1000 2000 4000 5000 8000 10000 15000 20000 50000

Output Power [W]

IPG offers more than 510 different fiber lasers for micro and macro applications!

2015 - First 6kW W ECO O laser WPE> E>50% 2013 - First 100kW kW HPL

87

NTO Sales 2013-2015 at Internal Transfer Prices

88

0.0 20.0 40.0 60.0 80.0 100.0 120.0 140.0 160.0 180.0 200.0 2013 2014 2015 HP Lasers LP Lasers Systems Laser Heads Telecom Medicine Components ($ in millions)

$109 $129 $173

Components Production: Fibers

386 180 384 578 728 823 793 834 66 67 56 192 497 418 200 402 644 795 879 985 1,331 200 400 600 800 1,000 1,200 1,400 2008 2009 2010 2011 2012 2013 2014 2015 Total length, km

Active Fibers

NTO IRE-Polus IPG Laser GmbH

1,554 575 1,430 2,712 2,500 3,129 3,403 4,218 1,541 2,134 3,388 3,713 3,600 6,120 7,800 3,095 985 3,564 6,100 6,213 6,729 9,523 12,018 2,000 4,000 6,000 8,000 10,000 12,000 14,000 2008 2009 2010 2011 2012 2013 2014 2015 Total length, km

Passive Fibers

NTO IRE-Polus IPG Laser GmbH 89

Components Production: Fiber Blocks

6,813 5,353 8,276 10,457 12,839 13,456 13,031 14,263 15,756 4,133 24,480 32,278 34,838 41,032 52,600 79,570 22,569 9,486 32,756 42,735 47,677 54,488 65,631 93,833

10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 100,000 2008 2009 2010 2011 2012 2013 2014 2015 Quantity, pcs Year

Fiber Blocks: Production in Germany and Russia

NTO IRE-Polus IPG Laser GmbH 90

817 1,020 1,214 1,125 5,785 2,951 6,011 5,640 7,697 7,434 6,616 6,578

• 2,637

4,011 5,334 6,181 7,940 11,579

• 2,000

4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 20,000 2008 2009 2010 2011 2012 2013 2014 2015 Quantity of Lasers, pcs

Pulsed Lasers. Production in US, Germany and Russia.

IPG Photonics IPG Laser GmbH NTO IRE-Polus

Pulsed Lasers Production

91

5,916 3,159 9,246 10,468 14,051 14,829 15,681 18,604

High Power Lasers (P > 1KW)

92

352 461 724 886 1,051 164 191 413 842 947 1,398 2,015 2,758

• 500

1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 2008 2009 2010 2011 2012 2013 2014 2015 Quantity of Lasers, pcs

High Power Lasers. Production in US, Germany and Russia.

IPG Photonics IPG Laser GmbH NTO IRE-Polus 259 276 590 1,266 1,518 2,241 3,021 3,883

Low- & Mid-power Lasers (P < 1KW)

93

939 827 1,043 1,230 1,518 1,755 3,441 1,083 694 1,454 1,583 1,635 1,957 2,759 3,616 634 1,677

• 1,000

2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000 2008 2009 2010 2011 2012 2013 2014 2015 Quantity of Lasers, pcs IPG Photonics IPG Laser GmbH NTO IRE-Polus 1,259 1,647 2,317 2,686 2,940 3,652 5,148 8,734

Low- & Mid-power Lasers. Production in US, Germany and Russia.

Scale in High Power Laser Sales

• 1,000

2,000 3,000 4,000 5,000 6,000 7,000 2007 2008 2009 2010 2011 2012 2013 2014 2015 >500W >1KW

IPG has shipped more than 19,000 lasers with output power of more than 500-watts since 2007

94

Rapid Penetration of the Laser Market Across All Products

95

• 5,000

10,000 15,000 20,000 25,000 30,000 35,000 2007 2008 2009 2010 2011 2012 2013 2014 2015

Approximately 160,000 IPG lasers in the field since 2007

Total Units Sold

 IPG is already an important player in automotive welding field; ~$108M revenue in 2015 (primarily for welding, some cutting)  Potential upside in automotive welding is substantial

– Many OEMs are just starting to use fiber lasers – Huge potential substitution for spot/ arc/ other joining technologies – Move to lightweight materials creates opportunities for fiber lasers – Strong growth potential in electric vehicle batteries – Many new products; trifocal braising, high power scan head, three beam LSS aid application and market growth

 However- this is a difficult and time consuming market to penetrate

– Requires extensive design in work with auto OEMs – Long preproduction time frames – Competition with other joining techniques

Automotive – IPGL

96

Automotive – Outlook for HP Lasers

 Auto HP units for joining forecast to grow from 718 in 2015 to 1,200 in 2019  IPG targeting to grow sales in joining from ~50% to 65% through superior technology, technical differentiation, applications wins, regional excellence and strong commercial position  Opportunity is $200M+ by 2019 (mid and HP welding, cutting and ablation)  Existing market forecast could have strong upside from electric vehicles

200 400 600 800 1000 1200 2015 2019

Total IPG

Growth in HP Lasers for Automotive Joining

97

World Leadership in High Power Fiber Lasers

www.ipgphotonics.com

Manufacturing: Diodes

• Dr. Alexander Octchinnikov

SVP, Components

 Most technically advanced, highest volume and lowest cost in the industry  Key Benefits:

– Cost control: Advantage of internal manufacturing – Quality control: Key subcomponents manufactured internally – Technology/IP control: Significant process know how, trade secrets & strong patent protection – Unprecedented flexibility: Rapid product development and introduction into volume production

 Scale and Scope:

– Full vertical integration: Not a single manufacturing step or key subcomponent is outsourced – High-volume manufacturing: IPG is largest manufacturer of high power pump laser diodes – Highly automated robotic manufacturing: Most automation processes and equipment are designed and manufactured in-house

IPG Diode Manufacturing: Significant Competitive Barrier

99

 Enhancing vertical integration  Capitalizing on next-generation pumps

– Increases output power per chip and reliability – Lowers manufacturing cost volume of packaged diodes

 Improving utilization of existing global facilities Result: Driving down cost and maintaining significant competitive advantage

Ongoing Strategic Initiatives and Cost Improvements

100

Total Worldwide Facilities: ~135,000 sq. ft. production floor area and ~750 employees

Diode Manufacturing Steps and Facilities World Wide

Front-End U.S. Germany Russia

Wafer Fab Operation Wafer Growth (MBE)  ─ ─ Wafer Processing  ─ ─ Facet Passivation and Coating  ─ ─ Chip-On-Submount Assembly Submount Manufacturing  ─ ─ COS Assembly

Back-End U.S. Germany Russia

Test and Burn-In Screening out low-reliability lots and individual devices    Packaging Manufacturing of various types of pumps   

101

 Requires most technical expertise and capabilities

– Highly qualified technical staff, proprietary designs, equipment and technology ensure industry best diode performance and reliability

 Capital Intensive  Ensures redundant high-volume manufacturing operation

– Over-capacity in MBE and Wafer Processing equipment – Strategic stock of MBE-grown qualified wafers

FRONT-END: Wafer Fab Operation – Oxford, MA

102

 Scale of Operation

IPG assembles over 0.5 million Chip-On-Submount each month

 Vertical Integration

IPG manufactures submounts internally

 Automation

Manufacturing is based on automated equipment (some built in-house), and proprietary processes

 Paperless Manufacturing

Production processes are fully DB-traceable: translates to higher yields and little direct labor

FRONT-END: Chip-On-Submount Assembly – Oxford, MA

103

These advantages result in high yield, little direct labor and subcomponent cost; thus IPG manufacturing is cheaper than off-shore contract manufacturing

 Purpose

Key operation to screen out “weak devices” to ensure long-term reliability of pumps

 Scale

IPG has industry’s largest TEST/BI facility:

• ver 100,000 COS devices are tested

simultaneously

 Competition Barrier to Entry

All TEST/BI equipment has been designed and manufactured internally for a fraction of an open market price

 Long-term Benefit

Every COS used in IPG Fiber Lasers undergoes rigorous screening by burn-in: elevated temperature and elevated current

BACK-END: Test & Burn-In Operation in US, Germany and Russia

104

TEST/BI operation ensures high reliability of DIODE pumps:

 Contributes to low cost of ownership of Fiber Lasers, and  Minimizes IPG need for field service

Packaging is the most labor-intensive part of pump manufacturing and the most “value-added” operation Facts about IPG Packaging operation:

 Pioneered commercialization of single emitter pumping

• ver 20 years ago

 Produces industry’s most efficient pumps  All automated equipment and processes used in PKG

• peration:

– Designed and manufactured internally for a fraction of open market analogues’ cost, and – More productive than commercially available analogues

 Cost of subcomponents: IPG is the only company in the industry that manufactures all micro-optics and packages mechanical subcomponents internally

– More than 90% of BOM are internally manufactured parts and components

BACK-END: Packaging Operation in US, Germany and Russia

105

PLD130 PLD70 PLD40

PLD40 3 COS 40 W CW PLD70 6 COS 60 W CW PLD130 12 COS 120 W CW PLD80 6 COS: new design > 70 W CW: Q2 PLD90 6 COS: next design; new package > 80 W CW: H2 Most commonly used pumps New pumps: introduced through 2016

Labor Productivity

IPG continues to increase PACKAGING labor productivity through wider robots utilization and automation Internal development and manufacturing

• f automation equipment

BACK-END: Packaging Manufacturing Cost in US, Germany and Russia

106

Manufacturing Cost of IPG PACKAGING operation is lower than

• verseas contract manufacturing

1.00 .00 1.28 .28 1.56 .56 2.00 .00 2.35 .35 0.00 0.50 1.00 1.50 2.00 2.50 2011 2012 2013 2014 2015

Labor Productivity Improvement in PKG Operation

High volume production levels of pump diodes, proprietary processes and use of unique chip and package designs allows IPG to increase yields, lower component costs and assure high quality

Summary: Diode Production a Significant Advantage

____________________ Source: IPGP estimates.

• 40%
• 20%

0% 20% 40% 60% 80% 100% 120%

• 1,000,000

2,000,000 3,000,000 4,000,000 5,000,000 6,000,000 2009 2010 2011 2012 2013 2014 2015 % Change in Packaged Diode Cost Tested Chips Produced

Diode Production and Cost Trends

Tested Chip Production Cost/watt % decrease (base yr 2009) Annual cost decrease % 107

World Leadership in High Power Fiber Lasers

www.ipgphotonics.com

China

Trevor Ness Senior Vice President, World Wide Sales and Marketing

Broad Established Presence in Growth Market

109 Shenyang



Beijing Shanghai Shenzhen

 

Wuhan



Micro Process Application Lab

• 10 year presence
• ~150 employees servicing customers in 17 locations.
• Broad Geographic Coverage – close to customers
• Best service and support in the industry drives sales

Ningbo Chengdu Jinan

Remote service station



Branch office/application lab/service station

Qingdao Nanjing Suzhou Chongqing NingDe Hangzhou Guangzhou ZhengZhou

Headquarter Central warehouse Automotive application lab Sheet Metal cutting application lab

TAM in China

110

Total addressable market for IPG is $916M , IPG has 36% sales position – big enough space for growth.

20 40 60 80 100 120 140 160 180 200 220

142

203 104

M$

147

240 260 280 300 320

288

Marking/ Engraving/ Cleaning

Micro processing Micro welding HP welding / adhesive manufacture Cutting (metal/ non-metal)

Resource: Input from major IPG Chinese OEMs

Beam Delivery System

32

Diverse and Growing End Markets Drive Laser Sales

111

Welding:

• Automotive: seat welding, body in white, electric vehicles (productivity and weight reduction trends)
• Heavy industry: locomotive, oil and gas, pipe lines
• Emerging applications replacing traditional non-laser welding: white goods, elevator manufacturers,

cabinet/furniture

• New applications to drive production efficiency

– Remote welding, scanner welding and trifocal braising

Cutting and Welding Optical Heads:

• Optical head; IPG is growing its penetration into a large opportunity, selling optical heads into

cutting, welding and scanning applications

• $32M annual addressable market in China)

Cutting:

• Fiber laser has significant and growing share vs other sources
• Hundreds of OEMs
• OEMs expect underlying annual growth of 10%
• Significant installed base of 12K+ expected to be replaced by fiber laser during next 2-3 years
• IPG is well positioned with strongest product portfolio, superior quality, highest reliability and largest

service coverage

Chinese industry is intent on adopting advanced technologies to enhance manufacturing capability

Diverse and Growing End Markets Drive Laser Sales

112

Marking and Engraving:

• High power pulse fiber laser (>=100w)

– Cleaning/cutting, engraving, mold making – Display applications Emerging Applications:

• Additive manufacturing
• Cleaning and ablation

Fine and Micro Processing:  International and Chinese local electronic brands are accelerating adaption

• f laser process: quality and efficiency improvements

 QCW lasers are entering new applications (micro-welding replacing YAG) and new customers  UV and Pico second laser are quickly adopted on a large scale: marking and precise cutting of brittle materials

 Manufacturing

– Low cost manufacturing in Russia – Highest volume vertically integrated producer

 Cost and product solution

– Broadest product range – High-end and low-end offerings – Vertical integration drives lowest cost

 Service and support

– Unrivaled service capabilities drives sales

Future Strategies

113

World Leadership in High Power Fiber Lasers

www.ipgphotonics.com

Financial Review

Tim Mammen Chief Financial Officer and Senior Vice President

115

Investment Highlights

 2014 – 2015 Revenue growth ~17%  17% CAGR from 2011 to 2015  Highly diversified revenue stream and business model  Customers, powers, geographies, applications  Vertically integrated model driving gross margin  High return on R&D and SG&A drives strong operating margins  Strategically focused and efficient R&D that creates value  Track record of profitability and financial discipline  Strong return on invested capital (excluding cash)  43% in 2015

Financial Highlights

Sales and Gross Margin Growth

116

____________________ (1) Gross margin includes stock-based compensation of $2.2mm, $3.2mm, $4.2mm, $5.3mm, $1.2mm and $1.4mm for 2012, 2013, 2014, 2015, Q1 2015 and Q1 2016, respectively.

$562.5 .5 $648.0 .0 $769.8 .8 $901.3 .3 $199.0 .0 $207.2 .2 54.2% 52.5% 54.1% 54.6% 54.2% 55.2% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% $0 $100 $200 $300 $400 $500 $600 $700 $800 $900 $1,000 2012 2013 2014 2015 Q1 2015 Q1 2016

Gross Margin(1) (%) Sales ($ mm)

Revenue ($mm) Gross Margin

Operating Leverage Improvement

117

$562.5 .5 $648.0 .0 $769.8 .8 $901.3 .3 $199.0 .0 $207.2 .2 $208.9 .9 $218.1 .1 $283.8 .8 $342.0 .0 $82.0 .0 $70.0 .0 37.1% 33.7% 36.9% 38.0% 41.2% 33.8% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% $0 $100 $200 $300 $400 $500 $600 $700 $800 $900 $1,000 2012 2013 2014 2015 Q1 2015 Q1 2016 Operating Margin(1) (%) Sales & Operating Income(1) ($mm)

Revenue ($mm) Operating Income ($mm) Operating Margin

____________________ (1) Operating income includes stock-based compensation of $8.6mm, $11.7mm, $15.2mm, $19.0mm, $4.1mm and $5.0mm for 2012, 2013, 2014, 2015, Q1 2015 and Q1 2016, respectively. (2) Operating margin includes FX gains/(losses) of $2.6mm, $8.8mm and ($5.0mm) for 2015, Q1 2015 and Q1 2016, respectively.

(2) (2) (2)

Strong Cash and Liquidity Position

 Long-term CapEx target <10% of revenue  Investments in product and manufacturing technology development,

capacity expansion and sales and service infrastructure

118

($ in thousands)

As of December 31, 2015 As of March 31, 2016

Cash and cash equivalents $582,532 $613,692 Short-term investments $106,584 $126,273 Total assets $1,453,429 $1,550,100 Revolving line-of-credit facilities

• Long-term debt, including current portion

$19,667 $19,167 Stockholders' equity $1,259,528 $1,345,856

A Diverse Mix with Year-over-Year Growth

119

$135.3 $344.1 $53.8 $13.3 $21.5 $131.6 $426.1 $81.0 $13.2 $34.9 $124.8 $499.6 $99.5 $13.8 $56.5 $28.6 $118.2 $22.6 $3.0 $8.6

$0 $50 $100 $150 $200 $250 $300 $350 $400 $450 $500 $550

Pulsed High-Power Medium-Power Low-Power QCW

($US mm)

IPG Sales by Product Lines

2013 2014 2015 YTD 2016

Investment Highlights

 Expanding $4.8 billion opportunity for all lasers

 Approximate average annual growth rate of 6%

 Recognized leader in the rapidly growing fiber laser market

 Estimated 12% CAGR from 2015 to 2020

 Significant competitive advantages

 First mover advantage  Performance, product range and reliability  Lowest cost (vertically integrated model)  Strong IP position

 Vertical integration and direct sales model drives industry-leading

margins (54.6% GM in FY 2015, 55.2% GM in Q1 2016)

 Broad geographies, end markets and applications

 Asia & Australia 51%, Europe 33%, North & South America 15%

120

The technology leader and most profitable company in the rapidly growing fiber laser market

World Leadership in High Power Fiber Lasers

www.ipgphotonics.com

Summary and Growth Strategy

• Dr. Valentin Gapontsev

Chief Executive Officer and Chairman of the Board

World Leadership in High Power Fiber Lasers

www.ipgphotonics.com

Q&A