Jun 24, 2003
Dedham, Massachusetts; June 24, 2003: The worldwide market for DCS systems including hardware, software, and services is expected to grow from $9.1 billion in 2002 and is forecasted to be over $10.3 billion in 2007, according to a new ARC Advisory Group study titled “DCS Worldwide Market Outlook and Forecast: 2002-2007”. ARC has scaled down its projections for growth in the DCS market since its previous study. ARC Research Director and study author Larry O'Brien stated, “Our analysis shows that the market declined between 2001 and 2002 by over 2 percent. Persistent and global economic weakness with limited capital spending in the process industries will result in the market growing less than one percent between 2002 and 2003. Growth through 2007 will improve so that the average annual rate for the study forecast period is 2.5 percent.”
Demand Side Lethargy Will Delay Recovery
Demand side indicators for manufacturing remain weak in both North America and Europe. Overall, US industrial production fell by 0.5 percent and US manufacturing output also decreased by 0.2% in March of 2003. Capacity utilization is a key indicator for spending trends in automation. In the US, capacity utilization remains well below the 80 percent that is usually required for manufacturers to move into expansion mode. Capacity utilization for total US industry actually decreased by half a percentage point to 74.8 percent in the first quarter of 2003, compared to the same period in 2002.
In Europe, economists are cutting their growth figures for the European Union from 1.8 percent down to 1 percent in the 12 nation Euro-Zone. Europe’s manufacturing capacity utilization remains essentially flat. Industrial production in Europe was on the increase after flat results in the fourth quarter of 2002.
The situation in key vertical industry segments remains largely unchanged. Traditional process intense industries such as refining, petrochemical, power, steel, and pulp & paper continue to suffer. The pharmaceutical industry remains the highest growth industry in the process and hybrid segment, driven largely by 21 CFR Part 11 compliance issues. Food & beverage, upstream oil & gas, and water & waste are also growth segments.
Migration Becomes Burgeoning Issue
At some point, users must choose to upgrade their existing control system or migrate to a new one. Sometimes, upgrades are not possible because the system has been phased out altogether or the installed system is based on an outdated architecture. ARC believes in migrating to a new system when the old one keeps users from taking advantage of a new business opportunity or presents the imminent threat of unscheduled downtime.
Control system replacement is hard to justify. Usually, lower TCO and better ease-of-use do not justify replacement. At best, you get a 25 percent cut in annual TCO, which is less than 2 percent of replacement cost. While the downtime threat of the existing system can be a major factor in the decision to migrate, the migration process itself can also cause interruption in process operations and is a major pain point for users wishing to migrate. The market for process control systems has changed. Most DCSs used to be sold for new installations in heavy process industries like refining, petrochemicals, power, and pulp & paper. Today, reduced capital spending, a depressed economy, and more focus on getting more out of existing assets means that most systems sold are for replacement applications.
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