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State of Manufacturing & Automation in the U.S. Looks Good


July 30, 2008 editorial by Rick Zabel

Last week while attending the U.S. unveiling of Siemens’ exiderdome at Navy Pier in Chicago, I heard a presentation by Andy Chatha, President of ARC Advisory Group. Chatha was addressing a group of German press representatives on the state of the U.S. manufacturing industry. Chatha began by describing the current U.S. business environment as facing many crises; including the weak dollar and the ailing housing, financial, energy, airline and health markets. Chatha stated, "The current economic condition is worse than the crash of 2001."

Chatha went on to identify some key economic factors. With a looming recession, the U.S. is experiencing rising inflation and unemployment. We are also witnessing tremendous political and social pressures to go green, develop alternative fuels and bring manufacturing jobs back. As the baby boomers age and retire, we will continue to see a shortage of skilled human resources. On top of all that, the U.S. has an aging infrastructure (bridges, plants, electric grid) as exemplified by the 35W bridge collapse in Minneapolis one year ago.

Chatha points out that high energy and material prices are realigning the manufacturing landscape. The factories and plants that are located closer to raw materials or customers have a cost advantage. For example, it costs more to ship a ton of iron ore from Brazil to China than the cost of a ton of iron ore alone. High shipping cost is one reason China is no longer the favorite manufacturing destination.

Energy efficiency has become a top priority. Companies are under pressure to develop more energy efficient products and processes, develop alternative energy sources, and adopt more energy efficient technologies.

According to Chatha, the weak dollar and high energy prices are creating opportunities for U.S. manufacturers. The World Economic Forum ranks the U.S. number one in Global Competitiveness. U.S. exports are currently experiencing double-digit growth. Political leaders are motivated to create more manufacturing jobs. Most companies are no longer planning to move production to China or other low-cost countries. Instead, many companies are planning investment in new plants here in the U.S. and Mexico. Take Siemens, for example, who recently broke ground near Chicago, IL, to build a new plant for its drives technologies business. U.S. companies have superior supply chain and logistics management capabilities. And the U.S. innovation machine is still at work creating lower cost products and processes.

Chatha pointed out that the needs and strategies of manufacturers not only vary by vertical industry, but they also vary by region. For example, while the number of greenfield projects in North America and Europe is low, it is high in Asia. While the key decision criterion in North America and Europe is based on relationships, price is more important in Asia. While the needs for automation, solutions and integration are high in North America and Europe, these needs are currently much lower in Asia. Finally, the projected growth rate of automation companies in Asia is 8-10%, more than double the growth rate of North America and Europe (3-4%). Taking a closer look at India, Chatha says the growth rate will be close to 20% over the next ten years. Chatha states, "India is today where China was 10-12 years ago."

Next, Chatha outlined the top 10 strategies for global manufacturers as:
  1. Create a Highly Collaborative Corporate Culture

  2. Embrace Collaborative Design & Manufacturing

  3. Let Your Customers Help You Develop New Products

  4. Adopt Platforms to Simplify Technology Architecture

  5. Connect all Applications using Industry Standards & Web Services

  6. Create a Common Content & Data Library

  7. Build Secure, Synchronized Supply Chain

  8. Outsource Non-Core Operations

  9. Flatten Your Organization

  10. Use Benchmarks for Continuous Improvement
In the automation market over the past few years, we have seen a consolidation of automation product suppliers. Chatha says that trend will continue. Chatha followed that comment with a size and market share summary of a couple of the major automation markets.

In 2007, the global PLC market was $8.9 billion. Global market share for the leading PLC suppliers is as follows:
  • Siemens – 31.3%

  • Rockwell Automation – 22.1%

  • Mitsubishi Electric – 12.7%

  • Schneider Electric – 8.0%

  • Omron – 6.1%

  • B&R Industrial Automation – 3.6%

  • GE Fanuc – 3.5%

  • ABB – 2.1%
In 2007, the global DCS market was $15.1 billion. Global market share for the leading DCS suppliers is as follows:
  • ABB – 17.8%

  • Honeywell – 16.0%

  • Emerson Process Management – 13.2%

  • Siemens – 13.2%

  • Invensys – 12.2%

  • Yokogawa – 10.9%

  • Rockwell Automation – 2.7%

  • Yamatake – 2.4%
Chatha commented that Power is the largest vertical market for DCSs, followed by Gas and Oil. No surprise there!

In 2006, the global PLM (Product Lifecycle Management) market was $7.4 billion. Global market share for the leading PLM suppliers is as follows:
  • Dessault – 19.8%

  • Siemens – 16.3%

  • PTC – 11.8%

  • Autodesk – 6.2%

  • SAP – 5.6%

  • MCS Software – 4.1%

  • Ansys – 3.0%
In closing, Chatha identified the top 10 automation business trends as:
  1. Automation business is booming in developing countries

  2. Demand for supplier services is exploding and automation companies are becoming Main Automation Contractors

  3. Operations Management Platforms have emerged

  4. Wireless technology is injecting a new life into sensors & automation systems

  5. Integrated Automation & Power Systems are emerging

  6. Plant to Business (P2B) connectivity is a must

  7. Digital Manufacturing is a top priority for the Discrete Industries

  8. Asset Lifecycle Management has become a top priority for Asset Intensive Process Industries

  9. Discrete Automation companies are aggressively pursuing process business

  10. Unifying the World of Automation with PLM
If you have any comments or feedback on this editorial, please don’t hesitate to contact me.
 
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