ARC says worldwide DCS market may have peaked in 2006

  • July 31, 2007
  • ARC Advisory Group
  • News
Dedham, Massachusetts; July 31, 2007: The Distributed Control Systems (DCS) market experienced unprecedented growth in 2006, increasing by over 14% compared to 2005 and it is expected to continue growing at a healthy rate through 2011, according to a new ARC Advisory Group study. Does 2006 represent the peak year for growth in the market? It is too early to tell halfway through 2007, but indications are that growth could approach the levels of 2005-2006, but will probably not exceed it. ARC Advisory Group expects the current growth phase of the global market for automation to last through the next several years. While the overall market remains strong and will continue to grow, odds are we will not see the stellar growth in the automation marketplace that we saw between 2005 and 2006, and the demand side economic indicators seem to agree with this assessment. Asia is still a powerhouse and opportunities continue to abound in the Middle East, Eastern Europe, and Latin America, but the developed markets, such as North America and Western Europe, are beginning to show signs of sluggishness.“In the long-term, our view of the market is still positive due to continued high energy prices, the growing demand for energy globally, and the continued need on the part of manufacturers to improve plant operations, meet regulatory requirements, and modernize an ageing installed base,” according to Research Director Larry O’Brien, the principal author of ARC’s “Distributed Control Systems Worldwide Outlook.” Services Remain the Number One Growth Business for AutomationAutomation suppliers continue to benefit from strong demand for automation services across the entire spectrum of the plant lifecycle and the scope of nearly all automation products and applications. In an automation market that is already riding the crest of a growth cycle, automation services are at the top of that crest and benefiting from several converging factors that will provide ever increasing market growth through the next five years. Fieldbus Contributes to Growth in Automation SystemsFieldbus solutions are being deployed in greater numbers. As the lifecycle benefits of fieldbus solutions become more apparent, fieldbus is becoming more accepted in a wider range of industries and by greater numbers of end users. Fieldbus solutions are being deployed in more large plants and for critical applications and in some instances it is becoming a corporate standard for many manufacturers. This is consistent with a user base that is no longer evaluating fieldbus technology, but actively implementing it on a large scale. Initially, the primary advantage of fieldbus was thought to be reduced wiring, installation, and commissioning costs. However, the results of ARC’s 2006 Fieldbus User Survey contradict this thinking with respondents citing little to no savings on the Capital Expenditure side of the equation. Yet, the survey does reveal that users are actually realizing greater benefits on the Operational Expenditure side in the form of quality improvements because of bi-directional digital communication and improved process efficiency due to linked intelligent devices that are capable of remote diagnostics. Asia Continues to Drive Global MarketBoth China and India are poised for significant long-term growth. Both countries are increasing their focus on manufacturing for export, in addition to developing infrastructure, investing in basic industries, and in training personnel to operate automation plants. China is still the primary catalyst for global growth in the automation industry. ARC expects that China will be the single biggest geographical market for automation products and services in 20 years. China's value-added industrial output rose 18.1% versus the same period last year, which was faster than expected. World Bank has raised its growth expectations for the China economy to 10.4% for 2007, versus its previous forecast of 9.6%. The China economy expanded by 11.1% in the first quarter causing the government to view the rapid growth in industry as a potential problem as the fears of overheating increase. The government has already indicated that it will take measures to tighten not only its monetary policy, but will tighten approval for investment projects, increase energy costs, and will also cut export rebates to deter “wasteful spending on factories.” China already started a campaign last month to curb overheating in industries such as Steel, Primary Metals, and Cement, which are heavy energy users and polluters. The National Development and Reform Commission may also target other high-energy consumption industries. The Indian economy continues to boom and the manufacturing sector is no exception. Industrial production increased by 13.6% in April, primarily driven by significant increases in manufacturing. The index of industrial production grew by 13.6% in April 2007 compared to the same period in 2006, while manufacturing increased 15.1% and electricity generation increased by 8.7%. About ARC: Founded in 1986, ARC Advisory Group has grown to become the Thought Leader in Manufacturing and Supply Chain solutions. No matter how complex your business issues, our analysts have the expert industry knowledge and first-hand experience to help you find the best answer. We focus on simple yet critical goals: improving your return on assets, operational performance, total cost of ownership, project time-to-benefit, and shareholder value. Learn More

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