Forecasters Downgrade Process Control Prospects
Back in 2008, IMS Research took a distinctly low key approach to the release of its first survey of the world DCS market eschewing even to produce a press release. As a result the first INSIDER heard of it was through one of our own readers while our limited knowledge of the content had to rely largely on what could be gleaned from casual conversation. This time round, IMS has been a little more forthcoming, albeit with a release that includes just two numbers, neither of which is an estimate of the current size of the market.
Such reticence may be due in part to the fact that one of those numbers, the forecast figure for the overall market size in 2014 – in excess of $17.2 billion – is no less than $2.3billion or nearly 12% less than the market size it was predicting for 2012 just 18 months ago. As we observed back in 2008, a billion here and a billion there and soon you're talking real money. IMS market research analyst Marc Fernandez would no doubt agree with Nobel laureate Neils Bohr, to whom is attributed the nostrum that "Prediction is very difficult, especially if it's about the future!"
Even so IMS' prediction is still rather more modest than the market size ARC was forecasting in its own DCS Worldwide Outlook back in June of last year. At the time ARC was going through a period of self denial in which all numbers were carefully excised from press releases relating to its reports. However, a certain amount of extrapolation from the previous year led us to conclude that it was expecting the market to be worth some $18 billion in 2012 and $19 billion in 2013.
One reason for the discrepancy may be ARC's emphasis on the growing importance of services, which it suggested now account for 50% or more of the overall market. IMS by contrast, at least in its press release, makes no mention of services, instead choosing to present its analysis purely on the basis of market sector, from which it concludes that power, oil & gas, refining and petrochemicals and water & wastewater will be the major contributors to what growth there is over the next few years, with the power industry's share of the market alone predicted to grow by some $1.5 billion over the forecast period.
Increasing investment in alternative forms of energy will add a further boost, claims Fernandez. "As existing oil reserves are consumed, there is a growing need for governments and energy companies to invest in new technologies and plants dedicated to producing alternative forms of energy. This requires increased investment in distributed control systems to not only ensure operations are monitored and controlled efficiently, but also to maximize return on investment and increase productivity," he said.
Following close on the heels of the IMS DCS report is ARC's own "Automation Expenditures for Process Industries Worldwide Outlook." While again keeping the actual numbers to itself, it notes that automation supplier revenues continued to fall throughout 2009 compared with 2008, with order activity falling off dramatically in the third quarter.
Suppliers are now said to be reporting business conditions showing signs of improvement but a return to even moderate market growth is not expected until the latter part of the five-year forecast period. ARC senior analyst David Clayton is nevertheless confident about the long-term future. "Manufacturers will continually face challenges to raise productivity, lower product costs, reduce plant operating expenses and increase return on investment (ROI) to compete in the global market. Consequently, capital investments for automation should resume across many industries," he opined.
One key factor constraining growth is 'price erosion' – deflation to you and me – which is said to have reached double-digit levels in some areas and is attributed, at least in part, to the commoditization of controllers. Differentiation between products, capabilities and performance factors is rapidly diminishing, ARC claims. The strategies it recommends to automation vendors to overcome these problems are pretty much what it recommended in 2009 : increase service capabilities; leverage high-growth global regions; support device interoperability; develop SIL-rated instruments; and help customers fully to utilize intelligent field devices.
To that might be added, diversify into the food and beverage sector if its "Automation Expenditures for Food and Beverage Industry Worldwide Outlook" is any guide. The sector, says ARC, is one of the least impacted by the global economic recession, with much current automation deployment focussed on projects that reduce energy consumption, waste and cost and enhance margins and product safety.
The PLC Market
IMS' PLC market studies originate in its Shanghai office, which perhaps explains the emphasis on the Chinese and other emerging market economies. Its most recent summary of the world PLC market concluded that the market in Asia would grow the fastest up to 2013, and a new report on the Chinese market expands on this theme with the suggestion that the proportion of domestically produced PLCs will rise slightly from a current market penetration of 5%, despite most Chinese users favouring foreign brands.
Local suppliers are tending to put more effort into supplying machine builders with simpler commoditized products.
Who leads the Chinese market? Seventy-five percent of respondents to a recent user survey said they were using Siemens products in their PLC-based control systems while, in terms of units sold, Siemens is estimated to have more than a 50% share of the market. Users asked what they considered the most important attributes when specifying a control system cited reliability and high performance as the two most important factors. Most important supplier attributes were 24-hour technical support, the existing supplier relationship and the brand name. Hardly surprising then that the principal reasons given for choosing Siemens were performance and brand name.
The same survey also looked at PC-based systems and came up with much the same results. The percentage of respondents using Siemens PC-based control systems "exceeded nearly 50%," which presumably is an optimistic way of saying it was just under 50%!
Early stage recovery
Globally the PLC market is in the early stages of recovery, according to a new outlook document from IMS entitled "What's Ahead for the PLC Market in 2010." With manufacturing industry recovering more slowly than the general economy, the investment driver in PLCs is coming more from a desire to enhance machine productivity and become more energy-efficient. Once the economic situation recovers, more upgrades of existing facilities and more process optimization can be expected, it is claimed.
Modular PLCs will still be the most significant part of the PLC family, generating the largest proportion of PLC revenues, but compact PLCs, typically aimed at high-volume, less engineering-intensive OEM applications, will continue to find favor in the rapidly developing regions of China, Eastern Europe, Russia, India and Latin America. High-end modular PLCs will continue to evolve into fully fledged automation controllers, penetrating the hybrid and process strongholds of the DCS.