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Engineering Industry Reports and Surveys
News Release from: ARC Advisory Group
Edited by the Engineeringtalk Editorial
Team on 21 November 2005
Distributed control systems continue
growth
Healthy growth in the distributed control systems market between 2003 and 2004 is expected to continue through at least the 2006-2007 timeframe, according to a new study.
The distributed control systems (DCS) market, primarily buoyed by growth in developing countries such as China and India and a slowdown in hardware price declines, has experienced healthy growth between 2003 and 2004 This growth is expected to continue through at least the 2006-2007 timeframe, resulting in overall market growth of 6% between 2004 and 2009, according to a new ARC Advisory Group study: "DCS worldwide outlook market analysis and forecast through 2009"
Growth in China and India is compounded by the fact that significant restructuring efforts will need to be made in the North American oil and gas and refining infrastructure in the wake of an unprecedented hurricane season, as well as a return to stronger, albeit moderate growth, in the previously depressed Japanese DCS market.
"After years of decline in the hardware business, increased demand and overall market growth have resulted in a resurgence in hardware growth".
"Hardware revenues for suppliers are expected to grow at the average annual rate of just over 4% through 2009, which is a big departure from the declines witnessed in the hardware business in recent years".
"Most DCS suppliers have retained key business elements of manufacturing and/or design of control hardware", according to ARC Research Director Larry O'Brien, the study's principal author.
Contributing to overall DCS market growth is increased manufacturing capacity utilisation in North America and Japan, while developing economies in China and India continue to add significant amounts of capacity.
Capacity utilisation in the USA, for example, is coming closer and closer to breaking the 80% mark, which, as a rule of thumb, should signal a capacity expansion mode, resulting in increased investment in automation.
In the USA, productivity (measured as output per hour of all persons) increased by more than 4% for manufacturing in the second quarter compared with the same period last year.
Europe, meanwhile, is experiencing a downturn in capacity utilisation, which for manufacturing is normally much higher than utilisation rates in North America.
The reason for this is unclear, but may be affected by increased manufacturing growth in Eastern Europe.
The EU 25 New Orders Index for manufacturing has also fallen in recent months.
Japan is experiencing a recovery in capacity utilisation, with rates over 2% higher than average levels for the year 2000, marking five consecutive quarters of increase.
The near term prospects for Japan continue to look favourable in light of this increased utilisation as well as continued supplier reports concerning increased investment for Japanese manufacturers.
The oil and gas industry will experience the most growth in the DCS market through 2009, driven by the increased investment in oil exploration and production in Asia, Eastern Europe, the Former Soviet Union, and Latin America.
Investment in new production, compounded with the investment required in North America to reconstruct the damaged offshore industry, is also a major contributor to growth in this sector.
Growth in refining has increased for many of the same reasons.
Large, new facilities continue to be built in Asia and other developing regions, while many refineries in North America remain closed due to hurricane damage and will require substantial investment to get them back online.
The need for added refinery capacity in North America is also apparent, and hopefully recent events will result in expanded refining capacity.
This is the longest period for high margins in the refining industry for over 20 years.
Added capacity in North America makes sense but oil companies are reluctant to commit capital because of regulatory burdens and expected environmental resistance.
Canada, meanwhile, is experiencing a surge in growth for its oil sands industry that will last well into the next decade.
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