Asia Driving DCS Growth

The distributed control system (DCS) market experienced the strongest growth in a decade between 2004 and 2005, increasing at a rate of close to 9%. This strong growth is expected to continue through 2010, with the global market increasing at an average annual rate of almost 7%, according to the new ARC Advisory Group study, “Distributed Control System (DCS) Worldwide Outlook”.

It’s really a perfect storm when it comes to DCS market growth,” says Larry O’Brien, Research Director for ARC Advisory Group and principal author of the report. “Growth continues to be driven by buoyant capital spending and large infrastructural projects in Asia, Eastern Europe, the Middle East, and Latin America. These large grassroots undertakings are complemented by significant investment in the modernization of outdated control systems in the developed markets of North America, Western Europe, and Japan.”

“At the same time, we are seeing a shift in spending toward the oil and gas, refining, petrochemical, power generation, and other traditional heavy process industries at a level that we have not seen in many years. Higher energy prices and continued demand for energy and power are all contributing to greater spending on automation.”

China Leading The Pack

With investment in manufacturing in developing Asian nations far outpacing the already high GDP growth that is occurring, Asia still leads DCS growth for all worldwide regions and this will not change for at least the next five years, barring any unforeseen political events or overheating of the Chinese economy.

Investment in Asia is also quite high for large infrastructural projects such as power generation, steel mills, paper mills, cement plants, and water treatment plants. Investment in other traditional heavy process industries, such as oil & gas production, transportation, and refining, is also high. From a regional perspective, China leads growth in all of Asia, with India also contributing a great deal and at an accelerating rate. In China, however, the growth is unparalleled, and the very latest and most advanced technologies and products are commonly specified for projects.

Both China and India are increasing their focus on manufacturing for export, in addition to developing infrastructure, investing in basic industries, and in training personnel to operate automation plants. China could well become the single largest geographic market for automation in less than 20 years leading with new grassroots projects for automation, new systems installed, and the addition of manufacturing and energy capacity.

The pattern of economic growth in India has been less consistent than that of China, particularly in the manufacturing sector. India’s economic survey for 2005-06 estimates that GDP will grow at the rate of 8.1%. Manufacturing growth in India has accelerated quickly, growing by 7.1% between 2003 and 2004 and is forecast to increase by 9.4% between 2005 and 2006.

Migration Is the Big Opportunity, But the Window Is Shrinking

Control system migration continues to be an important issue for manufacturers faced with the aging of their process automation systems, combined with the compelling value proposition of information technology available from today’s automation suppliers. ARC advocates that end users must take the same approach to control system migration that they would to overall control system selection, all in the context of a six-sigma style continuous improvement process. The window for much of the opportunity that exists for control system migration among DCS suppliers, however, is shrinking and will be considerably diminished over the next couple of years. Many end users are in the process of deciding who their new control system supplier will be for the next 10 or 20 years, and the suppliers that get their foot in the door today will succeed in the long term.

However, says ARC, the value of advanced automation provided by DCSs continues to elude some end users, particularly in industries such as food & beverage and in developing regions such as China and India. Both China and India have a long way to go when it comes to adopting food industry best practices that parallel those of developed economies such as the US, Europe, and Japan. Both China and India’s food & beverage markets contain many small, and in many cases family owned, enterprises that do not view advanced forms of automation as a competitive advantage. The growing market for export, as well as increased government crackdown on food safety and traceability, should result in significantly increased adoption of automation over the next several years.