ARC Sees Moderate Growth Ahead, Especially in Asia

ARC Advisory Group (www.arcweb.com) sees improving numbers in both the automation space in general and fieldbus businesses in particular in the next year, with the strongest growth taking place in Asia. According to reports issued last month, based on the growth in incoming orders for new project business seen throughout the year, the research firm expects a rebound to healthy growth for automation shipments to many of the "hot" developing countries for 2011. It also expects many of the developed regions to rebound back to moderate health in 2011 as many suppliers have seen their aftermarket business come back on line.  "Consequently, ARC feels the global automation markets are on track to return to pre-recession shipment levels in 2011," according to ARC senior analyst David Clayton.

ARC also predicts that the worldwide market for fieldbus solutions in the process industries is expected to grow at an above average compounded annual growth rate (CAGR) for the next five years. As the lifecycle benefits of fieldbus solutions become more apparent, fieldbus has become more accepted in a wider range of industries and by greater numbers of end users.

Strongest Growth in Asia

The global automation index saw a sizeable jump in Q4 2010, generating a value of 198; a 12-point increase over the Q3 2010 value of 186.  The index continued to grow in Q1 2011, registering a value of 205; a seven point increase from Q4 10.

Although the global index is still expanding, it is growing at a decreasing rate and only one regional index—Asia—witnessed growth in Q1 2011. This decreasing growth rate in the global index is the result of stagnant first quarter growth in the U.S. index, a significant decrease in the European index, and strong growth in the Japanese index because first quarter growth was strong in Japan before the March 11 earthquake and tsunami.

The growth from Q1 2010 to Q1 2011 is nearly 20% in the global and U.S. indices, 21% in the Asian index, and 14% in the European index.  Even though these numbers are encouraging, the double digit YoY growth rates are more heavily influenced by the weak 2010 results than the strong showing in Q1 2011.

But the global manufacturing economy is not out of the woods yet. Although it seems on track to return to pre-recession shipment levels in 2011, risks remain. High oil prices due to growing demand from emerging nations and continuing political turmoil in the Middle East could upset growth.  U.S. unemployment rates continue to be a deterring factor, as does the European debt crisis.

Due to the numerous risks still present and the lag between orders and final shipment for new project business, short-term prospects for the market range widely by region and industry.  While most sectors are expected to experience positive growth over the forecast period, growth in the oil and gas and electric power markets will drive the overall market growth positively in 2011 and beyond. 

Trends in the fieldbus markets reflect the same dynamics. The greatest growth will come from the emerging markets of China and India. With a CAGR of over 24%, Asia will be the fieldbus growth engine, similar to that of the process automation industry. Latin America is expected to experience the next highest growth rate of over 10%; however, the region still accounts for just a small percentage of the total fieldbus market. The developed regions are expected to have less than average growth, particularly in North America. However, as suppliers develop improved retrofit fieldbus solutions and end users continue with migration projects, ARC expects fieldbus will be implemented more rapidly in these regions.

Surprising Lessons

The ARC fieldbus study, "Fieldbus Solutions for the Process Industries Worldwide Outlook" by senior analyst Kevin Crisafulli, also reveals some surprising lessons for end users who have implemented fieldbus solutions.  "The primary value proposition of fieldbus was initially thought to be reduced wiring, simplification of and reduction of installation, and reduced commissioning costs," says Crisafulli. "However, to the contrary, end users reveal that they are actually realizing greater benefits on the operational expenditure side of their processes from quality improvements because of bi-directional digital communication and improved process efficiency due to linked intelligent devices capable of remote diagnostics."

Good asset management solutions also appear to be an essential part of the value proposition of a fieldbus deployment. Remote diagnostics and maintenance capabilities continue to be primary selection criteria for those that purchase fieldbus control systems.

Crisafulli's report says that successful suppliers must emphasize their strengths in this area as a means to differentiate themselves from their competition. This point is important now more than ever as end users continue to decrease their engineering and maintenance departments.

The report also suggests that there is a dichotomy in operations between "as built" and "as designed." Users may have a vision of their ideal implementation, but in actuality, most do not fully utilize the asset management capabilities of fieldbus when used in conjunction with a process asset management (PAM) application. The reality is many users are still spending too much time focusing on the initial cost of a project and reductions in capital spending than on the process improvements and operating expense reductions that can be achieved by coupling PAM applications and fieldbus solutions.

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