Industrial automation electronics equipment – 2011 outlook

After a terrible 2009 and a promising 2010, indicators look positive for the IAEE industry to show continued growth in 2011 and 2012.

04/20/2011


My annual trip to Hannover, like many others’, was cancelled last year thanks to a volcanic ash cloud that descended over a large part of the British Isles and mainland Europe. My European-based colleagues, who were able to attend via an arduous 18-hour coach and Chunnel journey, described the first few days as being reminiscent of a ghost town. 2009 was a bad year for Hannover, but for the industrial automation electronic equipment (IAEE) vendors, it was the worst. We estimated that market revenues were globally down by nearly 15%, or about $14 billion!

Thankfully, I was able to attend this year and the Messe seemed back to business; my interactions with exhibitors pointed to positive expectations, and this matches our current forecast for the year. 2010 saw a predictable return to growth – after such a depressingly bad 2009, things could hardly have got worse. We estimated that total IAEE revenues, which exclude software and services, fell short of the record 2008 market size but still recovered by a respectable 9.3%. Our prediction for 2011 is for an even stronger year, with 11.4% growth forecast in spite of a difficult start due to the recent tragic events in Japan.

Figure 1: The world market for industrial automation electronics equipment by product type. Courtesy: IMS Research  

Figure 2: Chart comparing growth between the industrial automation electronics equipment industry, machinery production, and real GDP. Courtesy: IMS Research

As anyone who follows this sector knows, the heartbeat of the IAEE market is machinery production (MP). We track that on a quarterly basis, and at the end of year MP had recorded growth of 15.6% in 2010. So why the disconnect: 15.6% MP compared with 9.3% IAEE?

The answer lies in the large project business, which is tied predominantly to process industries. Capital investment drives demand for big capital automation equipment such as DCS and medium voltage motors and drives. These product markets enjoyed growth in 2009 but contracted in 2010. In effect, they suffered their recession a year later. This type of investment is difficult to both turn off and back on, and one shouldn’t underestimate its revenue contribution – nearly $12 billion in the 2008 record year for these three products alone.

Current indicators show these products will come back in a big way in 2011, particularly for motors and drives. Add this to sustained growth for MP – we forecast 8.1% – and 2011 looks to be a bumper year, a record one in fact. We project an IAEE market size of $95.8 billion, suggesting the following year IAEE revenues could surpass the $100 billion mark. That would mean more smiling faces at Hannover 2012, assuming we can get there!



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