Global Roland Berger study on the automation industry: Low growth until 2015 – China developing into the key market
by: Roland Berger Strategy Consultants
China is already the biggest market for automation technology (8% annual growth), while hardly any growth has been seen in established markets like Germany, the US and Japan.
|The automation industry saw its strongest sustained growth from 2004 to 2007, with business expanding at around 9% per year. But the financial crisis brought this boom to a juddering halt. The ensuing slump has been massive. The market has shrunk by around 18% against the 2007 figure. The industry can only expect to grow by 1.5% per year until 2015. These findings flow from a global study on automation sector trends up to 2015 in which Roland Berger Strategy Consultants surveyed 120 experts around the world. The conclusion: Established markets like Germany, the US and Japan are crawling along with low single-digit growth, while China continues to surge ahead at around 8% per year. Indeed, China has replaced the US as the world's largest national market for automation. In terms of global demand, the growth drivers for automation now include the energy sector along with oil and gas. While the market for process automation will return to 2007 levels by 2012, the Roland Berger experts don't expect the production automation segment to recover until 2014. And here, automation for vehicle production, a sector particularly hard hit by the crisis, is unlikely to rally until 2015.
"Basically, there is no panacea for bringing the automation industry back to pre-crisis levels," says Dr. Martin Eisenhut, Partner and head of the Engineered Products & High Tech Competence Center at Roland Berger Strategy Consultants. "The industry underwent a historic boom from 2004 to 2007, when annual growth reached around 9%. But it is now having to come to terms with much lower growth rates over the next few years." As one of the world's major high-tech sectors, the automation industry turns over EUR 238 billion and employs some 1.7 million people.
Market trend: Only China growing – and overtaking the US
While established markets like the US and Japan have been stagnating or even shrinking in recent years, China has shown rapid double-digit growth in automation. This trend can be expected to continue into the future, now at about 8% per year: "China has overtaken the US as the biggest market. Chinese demand has helped cushion the industry from the worst impacts of global downturn," says Astrid Latzel, Project Manager at Roland Berger. Hope for better times to come is also linked to rising demand from the energy sector, including oil and gas. Another important sector is steel production. Here, the focus has shifted to Asia, a region that continues to gain importance alongside Europe. "Automation suppliers must align their global value chain to the regional shifts in their customer industries," Latzel notes. "Strong mechanical engineering centers are emerging in Asia alongside those in Europe."
In the wake of the global financial crisis, the automation market was hit, after a six-to-twelve month delay, with a 13% decline over 2007. "Process automation has benefited from the stabilizing effect of non-cyclical industries such as energy and pharmaceuticals," adds Latzel. "However, even process automation will not reach 2007 levels before 2012, while production automation is unlikely to recover by 2014." The longest road to recovery will be in vehicle production. Here, the deep structural problems will prevent a return to 2007 levels before 2015.
Trends: Energy efficiency and information consistency
"Energy efficiency is now the dominant topic for managers in both the process and the production automation fields," says Eisenhut. "It is spurring new application focuses for software products, intelligent control systems, low-consumption components and services." Process automation can make a major contribution to improving energy efficiency. Other key technological trends will be machine safety and information consistency. "Information consistency is the basis for achieving all the optimization potentials offered by the collation and analysis of operating data," Eisenhut explains.
A sustainable business model is crucial
The long boom from 2004 to 2007 saw a massive expansion of portfolios and capacities. In the crisis, automation suppliers have had to cut costs drastically and adjust capacities downwardly. The task for these companies is now to establish a sustainable business model for the near future. Exactly which strategic growth path should be followed depends on their starting position. "For those producing complex components, the solution may lie in lean products or in a high degree of vertical integration," says Eisenhut. "On the other hand, system producers could find that the way forward lies in optimizing vertical integration and in active product lifecycle management." In the crisis, there are stronger pressures on the manufacturers to position themselves clearly in the market. The list of strategic options is long – ranging from market entry in China to launching lean products and from global pricing to optimizing the global production footprint.