Economics force rethink in French drives market

Edited by the Engineeringtalk editorial team Jan 25, 2006

Increasing competition in the French electric drives market forces manufacturers to reduce profit margins to sustain their market share, leaving door open for client-focused RandD to bring dividends.

Economic uncertainties and increasing competition in the French electric drives market are compelling manufacturers to reduce profit margins to sustain their market share.

As a result, manufacturers that invest in client-focused RandD to develop application-specific drive systems are likely to succeed in increasing their market presence.

Encouraged by the potential of the French electric drives market, competitors are emerging from China and South Korea providing low-cost options to end users.

"Chinese companies, due to their low production and labour costs, are building their plants and processes to high standards, thus enabling them to offer their products at lower prices," said Richard Tamworth, Research Manager at Frost and Sullivan.

"This trend has emerged despite the lack of belief by western manufacturers in the ability of developing economies to do so".

Thus, in the middle of intensifying competition, manufacturers would do well to safeguard their existing end-user base, as this would provide them with a competitive edge over new entrants.

Further, as the electric drives market is technologically mature, manufacturers should seek differentiation by offering value-added services such as consultancy, training and technical support.

Offering high-quality servicing during the lifecycle of the product, especially pres-sales, is also likely to be crucial to success.

Additionally, poor domestic demand, the ongoing process of industrial restructuring and globalisation have resulted in several OEMs moving to Asian and Eastern European countries to benefit from lower production costs.

This shift in base has significantly affected market growth.

To offset it, manufacturers will have to emphasise product differentiation as well as develop client-focused RandD.

Growing preferences by end users for more comprehensive and flexible products with additional features, such as built-in programmable macro functions or automatic motor tuning, have underpinned the decentralisation of manufacturing processes.

The consequent advantages include a reduction in the cost of inputs and materials as well as faster integration, which are likely to benefit manufacturers.

"These trends combined with evolving customer requirements, which demand complex, integrated applications, are driving manufacturers to produce more intelligent, application-specific drives," said Tamworth.

"The development of the anticipated new generation of electric drives will allow easy programming, remote operation and independent functioning, and lead to market growth".

Hence, awareness of technological trends such as the decentralisation of manufacturing processes and the integration of Ethernet in the communication process will also become vital in meeting changing customer requirements.

Moreover, in keeping with the growing importance of factory automation systems such as supervisory control and data acquisition (Scada) and distributed control systems (DCS), developing drives that communicate as part of a wider manufacturing network will become crucial.

"As sections of the market become more demanding in terms of technological integration, the electric drives market must adapt its offerings according to the increasingly complex, automated manufacturing environment," said Tamworth.

"While end users are seeking integrated packages due to the savings in costs and space as well as the ease of installation, investing in these packages is also likely to benefit manufacturers by increasing their profit margins".

Supported by these trends, market revenues are likely to grow from $309.8 million in 2005 to $347.4 million by 2011.

Also, the growing demand in certain industry sectors combined with continued manufacturing and product developments (particularly related to AC servo technology) will contribute to market growth.

AC servo drives are forecast to be the fastest-growing market segment as the demand for high-precision applications increases.

However, AC standard products (particularly low power-rated units) will continue to dominate the market, supported by continuing technological developments.

In view of the current market trends, the French electric drives market is likely to be dominated by a concentration of larger participants, while niche market participants will occupy specific sectors.