The motor controls industry has long been one of the fastest growing automation markets and despite a value of nearly $24.3 billion in 2012, strong growth is forecast to continue for this space. Variable speed drives accounted for 47% of all motor controls sales in 2012 and are primarily energy efficient products, offering manufacturers compelling cost savings and decreasing payback times as energy costs continuing to rise.
A key market shift occurred in 2012 as Asia supplanted Europe as the largest consumer of motor drives due to the size of the Chinese market, which accounted for 27% of global motor controls sales. Not only is a large user base in China catching the attention of motor control suppliers, so are the lasting impacts of the of China’s wider economic transition.
Global dependence on Chinese demand
China is clearly shaping the global market for motor controls as evolving customer demands in China are leading to new product line development from international suppliers and sizable shifts in import and export demands. Distributer overcapacity led to a decline in the second half of 2012 for the AC drives and servo drives markets. Chinese demand for imports and foreign investment also declined significantly, negatively impacting major markets around the globe. The drives market recorded record levels in 2Q 2013 due to a combination of inventory correction and increased domestic demand. An increase in foreign demand is expected to follow and provide growth opportunities for Europe and the US in early 2014. The markets in Africa, Greenland, and Latin America will also be impacted by China’s economic health, as China looks to invest in these regions to secure access to the markets and energy resources necessary for the country’s continued economic development.
Demand for sophisticated motor control
To compete in a domestic market with lower demand, suppliers in China are looking to differentiate their offering by increasing the functionality of products as the market moves toward more sophisticated machine control overall. This increase in sophistication is causing a significant shift in the type of products purchased by domestic motor control users, which in the past focused almost exclusively on the price and quick availability. To compete in this new environment, international suppliers are releasing lower cost versions of traditional products, with the aim of taking share from domestic Chinese motor control suppliers. Not surprisingly these solutions targeted at the Chinese market have also proved successful with some customers in Western Europe and Latin America.
Energy demand requires imports
The new Chinese government faces a significant challenge to develop an energy strategy that will meet the country’s very high demand, which will require multiple methods of energy production to sustain. Large pipeline projects are underway to transport LNG to mainland China and develop oilfields in Russia and Kazakhstan, which will increase sales of large drives, including 690V and medium voltage drives, over the next five years. Also providing demand for the drives markets is an attempt to tap into new unconventional gas opportunities. China has just started using hydraulic fracturing (fracking) and already there are plans to use fracking in Changqing, China’s third largest oil field, to increase production by 2015.