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Automation sales will surge by 6.2% in 2013 to hit $170bn

21 June, 2013

The global market for industrial automation equipment (IAE) will expand by 6.2% this year to reach around $170bn, helped in part by a manufacturing recovery in the first quarter, says a new report* from IMS Research, now part of IHS.

The outlook for 2013 contrasts with the “anaemic” market conditions of 2012, which were aggravated by the interdependence of the world’s industrial markets. “Weak demand in some regions hit the exports of others, causing revenue from IAE to grow by only 3.7%,” reports Jenalea Howell, IHS’ research manager for industrial automation.

In addition, following two years of strong growth in China, overcapacity in several industrial markets led shipments to fall by more than 2%.

However, conditions have now improved all around, says IHS. Leading indicators – such as machinery orders and manufacturing activity – point to an increasing demand for industrial products over the next six months. Moreover, progress in the Chinese, European and US markets during the first half this year is fuelling confidence of renewed vigour in the IAE sector.

Manufacturing indices for China indicate that a slow and steady improvement that began in September 2012 has continued during the first five months of 2013. China is also reporting that inventory replenishment has restarted in equipment markets, following extremely low levels last year.

Meanwhile, in Europe, increases in German machine-tool orders also point toward a growth in demand.

Signs of economic health are also springing up in the US, where greater growth stemming from a variety of factors – ranging from increasing natural gas exploration and production, to strengthening housing markets and exports – will help propel demand for industrial automation equipment.

The global interdependence that hampered market expansion last year will be a boon this time around, says IHS, especially because growth in the US will not be a essential to fostering expansion of the global IAE market. The US no longer needs to buoy up the rest of the world – at least not for this year, according to Howell.

The market slowdown in 2012 has created a more cautious approach to spending in the automation sector, as many fear the prospects of another recession and investors are now more aware of market risks. Perhaps heeding the lessons of a spendthrift past, many industrial automation companies are now holding record levels of cash and could use this to support lean inventory operations, if the need arises.

Industrial automation suppliers are also changing their pricing structures and market strategies rapidly in response to the cautious spending, IHS reports. While, in the past, they sought to reach only specific sectors of industry, many are now venturing into areas beyond their traditional spheres of activity in the quest for growth.

For instance, several Western suppliers are releasing products in the mid-tier price range to serve cost-sensitive markets. At the same time, domestic Chinese manufacturers are developing more sophisticated products to compete more effectively in areas traditionally served by Western players.

However, IHS warns that this trend has a downside. It says that less functional products entering the market will also have an impact and this could slow down revenue growth in future.

* The World Market for Industrial Automation Equipment – 2013 assesses the market for industrial automation equipment in the EMEA region, the Americas and Asia. In it, IHS predicts unit shipments, average prices and revenues through to 2016.

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