The Manufacturing Technology team from IHS Markit recently returned after visiting SPS IPC Drives 2016 in Nurnberg, Germany. With over 63,000 professional attendees, the show is one of the most important year-end gatherings for the automation industry and a great place to collect insight on what to expect for the coming year.
Overall, sentiment was not overly optimistic from the companies that I and colleagues met with. Most vendors agreed that 2016 was a poor year for automation sales. While some smaller automation vendors seem to have experienced slight revenue growth in 2016, many large vendors reported a market and business contraction in 2016 (particularly those heavily tied to process sectors), in some cases by as much as 20%.
Concerns about the impact of the oil and gas sector downturn are still top of mind for automation vendors. While many are hopeful that the bottom for oil prices and the market has been reached, particularly given the recent OPEC announcement on reducing global production, there seems little optimism for a strong automation market bounce back in 2017. Many vendors expect flat or negative growth for 2017 as capital expenditure is expected to remain restricted due to low commodity prices.
Despite these struggles, some vendors (particularly those more aligned with discrete industry sectors) have a more positive outlook for growth in 2017; one example is discrete-machine safety components. Vendors also reported balancing investments in the oil and gas industry by focusing on and investing more in industries less affected by the downturn. This includes consumer related sectors like food and beverage, and infrastructure projects including water and wastewater and construction.
Industrie 4.0: From buzz to solutions
When compared to SPS IPC Drives 2015 or Hannover 2016, there was a noticeable scale back of Industrie 4.0 promotion and associated buzzwords at the show. It seems the focus has shifted from the overarching theories and hype surrounding Industrie 4.0 to industry applications and what it means for the customer. This year we saw more promotion of specific market-oriented solutions like “predictive maintenance”, “quality management”, and “visualization” as a means to providing better machine performance and visibility for the end user.
Certainly this change is a move that will help with messaging and educating the market as to the benefits. According to a recent IHS Markit survey, over 40% of end-user respondents aren’t currently using or planning to use analytics solutions, citing a lack of perceived benefit as the main reason.
Whilst marketing may be changing, one of the big questions facing automation vendors is: where do we fit into the equation, and what is the business model that ensures we’re fairly compensated?
In spite of this uncertainty, many of the automation companies we spoke with at SPS have been quick to market but slow to implement real Industrie 4.0 solutions themselves. Some are now starting to change their business to support the integration of new technologies, many of which they’re already offering in their portfolio.
Other topics gaining “mindshare” at the show included deterministic Ethernet networking with TSN, and further consideration as to how the cloud could impact manufacturing in the future. This also includes virtualization of the PLC, and a change to the traditional automation pyramid architecture.
Political implications remain uncertain
Regarding Brexit, most people don’t expect it to have much of an impact on the automation markets. The general feeling is that the UK will suffer more than anywhere else due to higher taxes imposed on exports, but it isn’t a large enough market to significantly affect the global picture.
As for the US election, overall people are still uncertain and are waiting to see how things play out with different policies. Sentiment was more positive than negative regarding potential impacts to the oil and gas, metals and mining, and infrastructure sectors in the US as the new administration may remove some of the red tape and barriers to investment. For instance, I was given an example of a pipeline project that wasn’t likely to go ahead before the election due to the environmental impact, but now it’s back on the table.
The Manufacturing Technology analyst team will continue to monitor quarterly progress throughout 2017 and will again be traveling to visit the Hannover Show in April.