It will be a challenging year in 2009 for the suppliers of two automation mainstays—programmable logic controllers (PLCs) and distributed control systems (DCSs). But according to research from ARC Advisory Group Inc. (www.arcweb.com), Dedham, Mass., the longer term market outlook for both categories looks more promising. ARC recently released separate studies on the market for each of these controller types.
The PLC market experienced healthy growth in 2008, but is expected to contract severely in 2009, ARC said. In spite of the current gloom and doom in the global economy, the market growth will resume in 2010 and beyond. Manufacturing and infrastructure industries will invest in automation to save energy, increase productivity, and upgrade existing facilities once the economic turmoil settles. As a result, the worldwide market for PLCs is expected to grow over the next five years, according to the ARC study, titled “Programmable Logic Controller Worldwide Outlook.”
Last year was not a bad year for automation, with the manufacturing sector initially insulated from the economic trouble that started in the United States at the end of 2007. But when the sector began to feel the pain and contracted severely, the PLC market experienced a sharp slowdown at the end of last year.
“While a severe contraction period is expected in 2009, automation demand is expected to start turning around beginning in 2010 as the manufacturers face increasing global market pressures. PLCs, which are used across all major discrete and process industries, will enjoy growth as the new economy creates increased demand,” according to ARC Senior Analyst Himanshu Shah, the principal author of the report.
The globalization environment will once again cause manufacturing companies to invest in creating new capacities in developing economies for various industries such as chemical, cement, electrical power, and pharmaceutical. Building automation will also experience growth as commercial, industrial, and residential building projects resume around the world and strive for increased energy saving.
Governments of many countries around the world are injecting money though various stimulus packages to prop up their economy. These packages include major investments in construction projects as well as infrastructure industries, including power and water & wastewater. These programs are expected to create new demands for automation equipment such as PLCs in many industries.
Once China and India resume their gross domestic product (GDP) growth, it will create demand for a broad range of products, driven by increased consumer consumption and additional infrastructure projects. This will increase the demand for more automation in the oil and gas, metals and mining, and cement and glass industries, as well as many other segments of the process and discrete industries, ARC said.
In the other ARC report, titled ARC’s “Distributed Control Systems Worldwide Outlook,” the research firm said that the global DCS market will continue to find growth in the midst of a global recession, largely because of an increased focus on the part of process automation suppliers on the services business. While 2009 and 2010 look to be challenging years, particularly for the North American, European, and Japanese markets, the opportunity to drive growth in services remains substantial and will continue to drive growth in the overall DCS market well into the next decade, according to ARC.
“Services continue to be the fastest-growing segment of the overall DCS market. Growth in the operations or after market services segment is much greater than that of project services, although project services also continue to grow due to the increasing popularity of the Main Automation Contractor or MAC concept, where the automation supplier, typically the DCS supplier, takes full responsibility for all the automation related aspects of a project,” said ARC Research Director Larry O’Brien, the principal author of the report.
From the retiring wave of baby boomers in North America to the shortfall of qualified engineers in Asia and other parts of the world, the labor shortage is the primary factor behind growth in demand for services and will propel growth in the overall DCS market for the foreseeable future, according to ARC.
In many ways, the current economic crisis has made the situation worse, with more waves of layoffs and early retirements. Meanwhile, the ranks of new graduates lining up to fill these positions is increasingly slim. In a recent interview, for example, a major refining company stated that it had lost 2,500 years of experience last year when 100 operators retired at one site, each with an average of 25 years of experience. As further evidence, a major chemical company analyzed its plant demographics and found one of its largest plants would lose 75 percent of its operating staff to retirement by the end of this decade.
Demand for value-added services has never been higher, as end-users strive to extract every last ounce of performance out of their plants in the face of constrained personnel resources and a wave of retiring engineers, ARC said. Demand has been particularly strong for outsourced maintenance and performance-related services such as loop monitoring.
Within the process industries, there is the potential to reduce energy consumption, raw material usage, and work force requirements in literally millions of installed control loops. In addition, these control loops form the foundation for safe and reliable operations. However, in a typical plant, more than half of all loops are actually increasing variability, thus negatively affecting quality, throughput, and return on automation (ROA). Even if a process were running at optimal economic conditions, performance deterioration occurs from numerous sources, such as changes in business strategies, modifications in operating conditions, and equipment wear.
ARC Advisory Group Inc.