IMS disputes latest PLC market growth rate forecasts

Citation

(1998), "IMS disputes latest PLC market growth rate forecasts", Assembly Automation, Vol. 18 No. 4. https://doi.org/10.1108/aa.1998.03318dab.006

IMS disputes latest PLC market growth rate forecasts

IMS disputes latest PLC market growth rate forecasts

Keywords Control systems, Fieldbus, Market survey

Over the last few years, revenue growth in the European PLC market has been fairly steady, averaging between 3 per cent and 5 per cent per annum. However, a number of recent market studies have implied that the PLC market will experience growth rates in excess of 7 per cent due to the recent upturn in Europe's major economies. A recent study on the European market for PLCs and industrial PCs, from the specialist market research company Intex Management Services (IMS), suggests this is highly unlikely.

The recent upturn in the French and German economies is indeed likely to stimulate investment in industrial automation leading to growth for PLCs. However, the extent of this growth is likely to be significantly lower than many industry analysts are forecasting. The reason for this is the increasing use of open digital communication networks, which is enabling a number of product-related trends which are expected to have a detrimental effect on market growth.

Open digital communication networks, such as Profibus, Interbus-S and CAN, enable users of automation equipment to extend their existing automation systems without being forced to turn to their original suppliers. Consequently, the PLC market is a significantly more open market than ever before and will become increasingly more open as the use of digital communications becomes more popular. This is expected to increase competition between suppliers and lead to a steady fall in PLC prices over the next few years.

Possibly the best example of this is the increasing use of third party I/O modules by PLC users. In the past, users of PLCs have been forced to buy I/O modules from their original PLC supplier, due to lack of support between different PLC vendors' hardware platforms, and have invariably suffered from price premiums placed on I/O modules. However, open digital communication networks have enabled third party suppliers, such as Phoenix Contact, Weidmuller and Wieland, to offer I/O modules which will link to a wide range of different manufacturers' control systems.

As I/O modules are typically the most profitable part of a company's PLC business, suppliers of PLCs have responded to this trend by lowering the cost of their own I/O modules. In medium to large PLC systems, where the I/O represents a significant proportion of the system price, this trend is driving down the overall cost of a PLC system. Ongoing reductions in the cost of PLC systems will severely affect the value of the PLC market, hence the low growth forecast for this market by IMS.

In the latest IMS report on the PLC market, growth is projected to slow across the period 1998 to 2002 as price erosion continues, with a compound average annual growth rate (CAGR) forecast of 2.5 per cent over the period.

The total European PLC market was estimated by IMS to be worth $1,954.1 million in 1997 and is forecast to expand to reach a value of $2,210.0 million by the year 2002. In 1997, the largest contributor to this market size was from medium PLCs which accounted for around 40 per cent of the total market. The European market for PLCs, by product type, is shown in Figure 1.

Figure 1 European market for PLCs by product type in 1997 (dollar revenues)

For further information contact: Adrian Lloyd, Intex Management Services, 6 Dencora Business Park, Booth Drive, Wellingborough NN8 6GR. Tel: +44 (0) 1933 402255; Fax: +44 (0) 19334022 66; e-mail: ims.europe@virgin.net