Despite global economic uncertainty, the market for process manufacturing and automation remains strong.
Nowhere is this more evident than the global DCS market, which grew by almost 13 per cent between 2006 and 2007. ARC research director Larry O'Brien, the principal author of ARC's 'Distributed Control Systems Worldwide Outlook' report, states: "ARC expects there to be continued growth in the global DCS market through 2012, with the overall CAGR of just under 10 per cent. This may seem like an overzealous growth projection to some, but the process automation market remains poised for long-term growth on several fronts that we believe will be sustainable for the next several years."
Both end users and engineering and procurement firms (EPCs) are increasingly looking to automation suppliers to provide them with automation project execution capabilities. There is more to this equation, however, than simply project backlogs. Many factors are contributing to growth in project and engineering services for automation suppliers. As a result, suppliers are beginning to fill the role of a main automation contractor (MAC), overseeing all aspects of automation projects and providing a single point of responsibility for automation projects, from design to startup.
The ability of the customer to influence project costs diminishes as the project nears its latter phases, but these latter phases are also where the bulk of project costs start to accrue. The ability to have a single point of responsibility in an automation supplier that acts as a primary automation contractor is essential to controlling project costs, especially when it comes to preparing expert proposals that portray a realistic and honest view of project costs so they can be managed effectively.
According to ARC, a couple of years ago only two automation suppliers had a sound competitive migration strategy. Now ARC says that just about everyone has one, albeit to varying degrees. Offerings include extensive migration service capabilities and tools for automated graphic conversion, control strategy and database conversion, and so on. This makes it much easier for suppliers to infiltrate their competitors' control system installations. Suppliers are targeting not just existing DCS installations, but many PLC installations as well. In ARC's view, 2008 will be a pivotal year for competitive system migration, and suppliers will become more aggressive about targeting their competitors' installations. At the same time, many end users are reformulating their automation strategy for the next decade and are re-evaluating their installed base suppliers.
Migration, evolution or modernisation - whichever term you use to describe making the transition to a modern DCS - is fraught with challenges for end users, from the increasingly difficult task of justifying the automation purchase, selecting a supplier and implementing the system, to providing a roadmap for the future. Most of the end users ARC deals with list migration as one of the key issues they are facing today. ARC estimates that there are $65billion worth of installed process automation systems in the world today that are nearing the end of their useful lifecycle, which in many cases can exceed 25 years. Many - as much as $12billion worth - are some of the original DCSs first installed in the late 1970s. Some date back to the pneumatic or analogue age.
ARC says that the large amount of grassroots project activity in Asia remains the leading driver for growth in the global DCS market. China, in particular, continues to be the primary global growth driver for automation. GDP growth in China reached 11.4 per cent in 2007 compared to 2006. Value added for primary industries increased by 3.7 per cent while value added by secondary industry increased by 13.4 per cent and tertiary industry by 11.4 per cent. Total value added of the industrial sector in-creased by 13.5 per cent over 2006. There continues to be significant growth in nearly all industry sectors, from process to discrete manufacturing.
ARC sees particular promise in the long-term growth prospects for the pharmaceutical and batch process related industries. The Chinese pharmaceutical industry is growing at 30 per cent per year, and the need for more advanced forms of automation to achieve regulatory compliance and enable China's pharmaceutical companies to become true global players is huge. The basic process and discrete industries also continue to perform well. In the oil and gas industry, there continues to be a considerable focus on offshore production to meet China's ever-increasing demand.