Strong recovery after downturn – World PLC market in 2011 and future perspective
As a core industrial automation product, the market for PLCs is generally characterized as being a mature one, and thus tends to grow slowly each year. The financial crisis in 2009 broke this pattern; nearly all PLC manufacturers were hit hard as the market lost roughly one quarter of its revenues. The second quarter of 2010 marked the first major point of recovery, as the market shot up again much quicker than expected. According to IMS Research’s PLC Quarterly Tracker, since the second quarter of 2010, quarter-to-quarter growth has remained above 15% in EMEA and Americas, and above 40% in Asia Pacific. By the end of 2010, the world PLC market size is estimated to have surpassed its 2008 level, almost as if the recession never happened. This represents a much faster recovery than most other automation equipment markets, where 2008 levels are not expected to be beaten until the end of 2011.
The global PLC market experienced strong growth in 2010, and this has continued well into 2011. However, the growth rate has varied quite significantly by region.
Asia, excluding Japan, is no doubt the shining star. Even during the recession, PLC revenues perhaps fell by only 1%, and in 2010 revenues in this region grew by more than 50%. China, with its vast and growing manufacturing base contributed much of this. The fact that it is the biggest builder of machinery in the world helped; in 2010, the manufacturing of textile machinery and rubber machinery in China showed extraordinary growth. In addition, end-users in renewable energy, infrastructure and construction became a boon for PLC manufacturers, with some of the 4 trillion CNY economic stimulus package ending up in their pockets.
Japan has always performed quite differently from the Rest of Asia. After two years’ decline in 2008 and 2009, the Japanese market finally turned positive in 2010 with more than 30% growth in revenues. The recovery of LED, and display-related electronics industries, as well as energy industries and those making devices to reduce emissions, helped to boost demand for PLCs.
The Americas also performed quite well, with more than 30% growth over 2009. The US is the dominant PLC market, accounting for more than 60% of the regional total. Large end-user projects as well as booming domestic demand, such as in the food and beverage machinery sector, helped the strong recovery. Similarly, Latin America, accounting for much less of the market, still managed 10% growth, because of many new project starts.
Compared with other regions, EMEA (Europe, Middle East and Africa) fared somewhat worse; but the PLC market still grew by more than 10%. Some countries are still struggling with the recession. Spain and Greece, among others, face sovereign debt problems and a crisis in house construction. This influences demand for PLCs in certain important industries, such as building automation. However, other countries, and most notably Germany with the help of the resurgence of its own machinery markets, have led the EMEA market to recovery.
Asia will continue to be the main contributor to PLC market development. China is now the most significant global machinery producer, largely because of its position as the world’s primary manufacturing base. The recent recovery of EMEA and the Americas has driven strong export demand and, in spite of the recovery seemingly faltering amid a flurry of recent negative news, this will continue in the longer term. This export demand, coupled with blooming domestic needs, will inspire new automation plant investment and construction. Further, while automation demand in India is relatively lower, there are end-user projects performing quite well in the region, such as automotive. Overall, the potential market for India is huge, suggesting much room for growth developments. Based on these factors, China and India will lead the developments for PLCs in Asia Pacific with a relatively high growth in 2011, projected to be nearly 20%; future annual growth is anticipated to be in the double digits over the next four years.
Historically the US has represented the main driving force in the Americas region, and it enjoyed a strong recovery in 2010. However, it is no longer the only country in the Americas that will contribute significantly to this region’s future development. Brazil, as the one of the most important countries in Latin America, is a rapidly emerging market for automation equipment. Its strength in end-users, notably within the oil and gas industry, coupled with the upcoming Olympic Games in 2016, will stimulate further automation developments and infrastructure investments. Having said this, the US will remain the core contributor for future PLC developments in the Americas. The overall market is projected to enjoy a growth rate of 11.5% in 2011; afterwards it is projected to return to more stable growth at the single digit level.
Western Europe is the most important market for EMEA, as Germany led the way and was the first country coming out of the recession. Germany will continue to be the market leader in the PLC market and be the main driving force for future demand. Greece and Spain, as mentioned in previous graph, are still struggling with their sovereign debt. However, because these two countries are not major markets for PLCs, they aren’t expected to significantly affect the entire EMEA development. The emerging markets in Eastern Europe, where automation level is relatively low but growth is rapid, will make up for some of the negative growth regions. As the EMEA market is mature, the PLC growth in EMEA will be relatively slow at 10.4% growth in 2011. Similar to the Americas, this region is expected to retain a single digit growth rate over the next few years.
Summarizing these points, growth at the world level in 2011 is projected to be 12.5%. As we can see from Figure 2, changes in the market mix have favoured the Asia Pacific. Thus, it can be foreseen that international PLC manufacturers will not only want to stabilize market position in their own domestic markets, but also put more emphasis on targeting the Asia Pacific region.