Chinese PLC market to double in four years

For the first time in recent economic history, there is a country where manufacturing industries are growing fast, and which has the capacity to invest from rising export revenues.

China has exceeded 20% per year growth in some automation segments. The Chinese market for PLCs is expected to grow at a compounded annual growth rate (CAGR) of 14.1% over the next five years in spite of a decline in prices. The market was about US$370 million in 2003 and is forecasted to nearly double in 2008, according to a recent ARC Advisory Group study. Overall, the study showed the worldwide market for PLCs is surging due to fast-growing regions and expanding applications areas outside of manufacturing. The global market for PLCs is expected to grow at a CAGR of 4.6% over the next five years in spite of declining prices. The market was over US$6 billion in 2003 and is forecasted to reach over US$7.5 billion in 2008.

Getting back to China, the report notes that while a local presence, commitment to service, technologically superior solutions and low pricing are among the key ingredients necessary for success in this overheated marketplace, PLC users in China are extremely selective about the products and suppliers they favour.

The study identifies a number of factors working together are driving the growth of the Chinese PLC market. Power flowing in from the Three Gorges and Yellow River power generation projects will remove constraints for further growth of power hungry manufacturing industries.

ARC says the outsourcing trend by multinational companies that are setting up their production bases in China helps fuel the use of automation, while the upgrading of older, now privatised state owned enterprises (SOEs) will demand more automation to compete in export markets. The surge in engineering education and the adoption of the latest technologies by local Chinese companies aiming to export will support PLC adoption at a broad level, while the booming Chinese machine tool market will continue to demand more PLCs.

ARC says contrary to expectations that a new, growing market which attracts more suppliers should have many winners, monopolisation of PLC market is increasing. Market shares of smaller suppliers decreased even as their revenues increased. Smaller suppliers find it difficult to quickly put trained employees in place, which questions their capability and capacity to address a market which is expanding rapidly across China.