ARC: Process automation faces growth decline

Automation supplier revenues continued to fall throughout 2009 as compared to 2008. Dedham, MA-based ARC Advisory Group expects that year-on-year comparisons between 2008 and 2009 will experience a decline, with modest growth in 2010. ARC sees signs that the manufacturing recovery has begun but its continued success depends on the ability of the financial markets to return to normal functioning.

03/01/2010


 

 

 

Automation supplier revenues continued to fall throughout 2009 as compared to 2008. Dedham, MA-based ARC Advisory Group expects that year-on-year comparisons between 2008 and 2009 will experience a decline, with modest growth in 2010. ARC sees signs that the manufacturing recovery has begun but its continued success depends on the ability of the financial markets to return to normal functioning.

 

Small, medium and large businesses have all been strained by the inability to access short-term capital. Many businesses have simply delayed capital equipment expansions, particularly if they manufactured components in the automotive supply chain.

 

Although the short-term forecast for the global automation expenditures for the process industries looks bleak, ARC expects moderate market growth to resume during the latter part of the five-year forecast period. Once the economic turmoil settles, the globalization environment will resume, which will once again cause manufacturing companies to invest in capital expenditures.

 

“Manufacturers will continually face challenges to raise productivity, lower product costs, reduce plant operating expenses, and increase return on investment to compete in the global market. Consequently, capital investments for automation should resume across many industries,” according to senior analyst David Clayton ( dclayton@arcweb.com ), the principle author of ARC’s Automation Expenditures for Process Industries Worldwide Outlook.

 

It is not often that price erosion becomes a major concern in the automation sector. However, industry veterans have experienced double-digit price decreases. There are several reasons for this, but the net effect is that the market will have difficulty growing even in the high single-digit range over the next five years.

 

One element contributing to the price erosion is that controllers are rapidly becoming an automation commodity in some sectors. Differentiation between products, capabilities, and performance factors is rapidly diminishing.

 

With the commoditization of control equipment, many automation suppliers are differentiating themselves by broadening the scope of services offered to include front-end engineering and design, operations, outsourced maintenance and performance improvement. Users and suppliers benefit from a more collaborative relationship. Users can leverage the expertise of suppliers to help manage plant assets across their entire lifecycle. Suppliers can go beyond being just automation providers, enhance their project revenues.

 

With the global economic uncertainty and ongoing lack of consumer demand, manufacturers are putting more thought into whether they should replace or simply repair their automation equipment. Since automation repairs are often less expensive than replacement, it is reasonable to expect to see a jump in repair business during an economic slowdown.

 

To take full advantage of this opportunity, suppliers should make sure that they are in a position to provide repair and maintenance services, not just on their own products, but also on products manufactured by other suppliers.

 

To take full advantage of the relatively high level of industrial and infrastructure growth in regions, suppliers should continue to invest in improving their distribution channels including production facilities, sales, service, and repair locations in developing regions. This can open new markets for conventional and low-cost automation options, breathing new life into these older-generation products, which have been steadily declining as sales of intelligent solutions continue to grow.

 

For more information, go to: www.arcweb.com/res/auto-process.

 



No comments
Consulting-Specifying Engineer's Product of the Year (POY) contest is the premier award for new products in the HVAC, fire, electrical, and...
Consulting-Specifying Engineer magazine is dedicated to encouraging and recognizing the most talented young individuals...
The MEP Giants program lists the top mechanical, electrical, plumbing, and fire protection engineering firms in the United States.
integrated building networks, NFPA 99, recover waste heat, chilled water systems, Internet of Things, BAS controls
40 Under 40; Performance-based design; Clean agent fire suppression; NFPA 92; Future of commissioning; Successful project management principles
BIM coordination; MEP projects; NFPA 13; Data center Q&A; Networked lighting controls; 2017 Product of the Year finalists
Transformers; Electrical system design; Selecting and sizing transformers; Grounded and ungrounded system design, Paralleling generator systems
Commissioning electrical systems; Designing emergency and standby generator systems; VFDs in high-performance buildings
Tying a microgrid to the smart grid; Paralleling generator systems; Previewing NEC 2017 changes
As brand protection manager for Eaton’s Electrical Sector, Tom Grace oversees counterfeit awareness...
Amara Rozgus is chief editor and content manager of Consulting-Specifier Engineer magazine.
IEEE power industry experts bring their combined experience in the electrical power industry...
Michael Heinsdorf, P.E., LEED AP, CDT is an Engineering Specification Writer at ARCOM MasterSpec.
Automation Engineer; Wood Group
System Integrator; Cross Integrated Systems Group
Fire & Life Safety Engineer; Technip USA Inc.
This course focuses on climate analysis, appropriateness of cooling system selection, and combining cooling systems.
This course will help identify and reveal electrical hazards and identify the solutions to implementing and maintaining a safe work environment.
This course explains how maintaining power and communication systems through emergency power-generation systems is critical.
click me