VDC Research: Industrial Sensing, Networking & Control Market Blog

Predictions for Wireline Industrial Networking Product Markets in 2012

As we head into the final month of the year it is always a fun time to ponder what the future may look next year. As a Boston area sports fan I can always hope the crystal ball calls for a Patriots Super Bowl win, a Boston Celtics NBA Championship, another Stanley Cup for the Boston Bruins and/or another Red Sox World Series Championship.

Another fun thing to blog about is what the future may hold in product technology markets that I have covered during 2011. Recently I blogged my informal predictions on what may likely transpire in the data acquisition solutions markets. Today I am blogging about my predictions for the wireline industrial networking products markets.

 Among the most noteworthy predictions (not going too far out on a limb here) I see for the coming year include the following:

1.  The global market for wireline industrial networking infrastructure products, including industrial-grade interconnect products and networking component products (but excluding standalone network management software), will exceed $3 billion in 2012 and will be comprised of over 26,000,000 units.
2. Global demand for network switches for use in industrial facilities will exceed $1.4 billion in 2012 and shipments of managed network switches will account for almost 77% on a dollar volume basis but will account for less than 42% of unit volume shipments.
3. Harting and Molex will be battling it out for leadership of the global market for interconnect products (cables & cordsets and connectors) but will be fighting other suppliers such as Siemens, Japan Aviation Electronics, Belden and/or Erni depending on which product and/or major geographic region is at stake.
4. Cisco will remain the 800 pound gorilla in global shipments of wireline routers across all major regions with no one else even remotely close in market share.
5. Cisco will hold the overall lead in toal network switch shipments but Belden holds a firm grip on 1st place in EMEA and is also a relatively close 2nd place to Cisco in the Asia-Pacific region where Moxa is closing ranks fast in 3rd place.
6. Should Belden make another acquisition of a network switch supplier in the coming, the race for the lead of the largest product segment will really heat up. Given their track record in making acquisitions it is quite possible Belden wants to overtake Cisco for the lead in the industrial networking switch segment. Conversely Cisco could easily expand on their leadership position through an acquisition of another supplier such as RuggedCom, for example.
7. Spectris PLC may decide to continue building its empire in the networking products after having recently acquired N-TRON and Sixnet to join Red Lion Controls as part of its Industrial Controls business.
8. TE Connectivity (fka Tyco Electronics) may decide to acquire another interconnect product supplier to overtake Belden or Siemens and make the top 3, or perhaps TE Connectivity wants to develop a presence in the networking component segment through the acquisition of a supplier offering one or more of the six networking component products under study.
9. Among the Ethernet-based application layer network protocols suppliers are supporting, the battle between EtherNet/IP and ProfiNet is not nearly as intense since each enjoys the relative dominance within the Americas and EMEA, respectively; however the real battle is for dominance in Asia-Pacific and further encroachment on the other's respective regional strongholds going forth.
10. Networking product shipments to the top five consuming markets of automotive, power generation, food & beverage, water/waste water and oil & gas will combine for almost 54% of the worldwide total in 2012.

Okay, so I decided to go out on a few limbs on predictions 6-8 but that is what makes blogging predictions so much fun. Perhaps next week I will blog about my 2012 predictions for the wireless networking products marketplace.

 

Predictions for Data Acquisition Solution Markets in 2012

With the last of eleven market studies covering the data acquisition (DAQ) solutions markets now being published I decided to take this time to reflect on what I learned over the last several months and to blog some informal predictions on what I may expect to see happen in the DAQ market in 2012 (admittedly I am not going out on many limbs with these).

1. 2012 shipments of external chassis & modules (i.e. DAQ systems), plug-in data acquisition analog I/O boards and standalone (non-bundled) data acquisition software will likely exceed $1.5 billion globally, with DAQ systems accounting for almost 76%.
2. Demand for modular data acquisition systems (one of eight platforms under study) will continue to grow at an above average market growth rate, comprising ~23% of DAQ systems shipments by 2012, as users desire the greater flexibility and ability to mix and match sensor inputs to meet their specific needs without spending on functionality which they do not require.
3. The number of data loggers designed with LCD displays will increase as other suppliers begin to realize that offering video graphic type functionality in a data logger is a sure way to gain market share in that category, just ask Graphtec, Keyence, Hioki E.E. and Dranetz-BMI.
4. Paperless chart recorder suppliers, for units with both >144 mm  and <144 mm panel cutouts, will continue to make inroads into non-process focused markets as an increasing number of these customers realize the benefits of greater real-time visibility into their operations, most of which are increasingly being automated through technology investments.
5. Demand for plug-in analog I/O boards will continue to lag that of most external chassis & module products as an increasing number of users seek out USB PC front ends as they are attractive as peripheral add-ons to computers that are portable and can easily be moved to another platform in a different location. Expectations in usage of USB 3.0 in all new PCs going forward is also expected to help fuel this trend.
6. There will be at least one merger and acquisition within the data acquisition solutions marketplace. The overall market is too large and too fragmented to not experience continued consolidation. Assuming that some predict the future by looking in the rear view mirror of history, some likely targets to consider watching may include Spectris (HBM and Bruel & Kjaer), National Instruments and DynamicSignals LLC. Who knows, maybe ABB or Honeywell will decide to get a little more active in the market and decide to expand their product portfolio beyond paperless chart recorders by acquiring a smaller player.

Okay, so maybe I decided to go out on a limb somewhat with the last prediction but that is what makes these things fun. I welcome to learn about any predictions you may have and/or what you think of mine.

Data Acquisition Products Market is Consolidating

Based on soon to be published research VDC determined that the market for data acquisition products has not only grown faster than previous expectations, thanks in large part due to strong demand for modular data acquisition systems, but it continues to experience consolidation.

In 2008, back when the market was just over $920 million, VDC determined that the top 10 suppliers controlled just over 52% of the market for data acquisition solutions (external chassis and boards). New research indicates that the top 10 suppliers now control almost 55% of the $1.4 billion market in 2010.

The composition of the top 10 data accquisition solution (chassis, boards and software) suppliers themselves has also changed dramatically since 2008.

	2010 Shipments
1	National Instruments
2	HBM
3	Yokogawa
4	Agilent Technologies
5	Bruel & Kjaer
6	Campbell Scientific
7	Dewetron
8	Advantech
9	GE
10	VTI Instruments

In 2008 National Instruments was still #1 but most of the other suppliers have either changed position (only Agilent remained at #4), dropped out of the top 10 (Dranetz-BMI and Fluke) or completely exited the market as Sony did over a year ago. 

Companies such as VTI Instruments and Dewetron have made material gains in market share due to strong product offerings, strong technical support and savvier marketing. B & K was not covered in the 2008 research.

The size of the data acquisition market is materially larger than our 2008 research forecast due to expanded coverage which included modular data acquisition systems and standalone (non-bundled) data acquisition software as well as new coverage of VPX and XMC plug-in data acquisition analog I/O boards. Despite the expanded coverage the research indicates the core product markets have rebounded nicely since the global recession of 2009.

The modular systems category comprises the largest share among the external chassis & modules segment and is forecast to experience the strongest growth in demand through 2015. Clearly customers are demanding solutions which offer flexibility and agility in the ability to mix and match sensor inputs while also delivering required performance. Growth rates among VPX and XMC boards are also at well above average board market growth rates due to their enhanced performance, rugged design and growing popularity among military and aerospace applications.

 

Calling All Pressure and Temperature Sensing and Switching Suppliers - iPad2 Raffle

If you are a manufacturer/supplier of Pressure and/or Temperature Sensors, Transducers, Transmitters, and/or Switches we would like to hear from you.

As you probably saw in a previous blog, we have already started our End User/Demand-Side research for this project.

Now, we are kicking off our Supply-Side research in support of our 4 volume report on Pressure and Temperature Sensors, Transducers, Transmitters, and Switches. VDC Research will be committing a team of 3 analysts that will be contacting well over 125 suppliers of these products. It is our aim to have all four volumes of the report available for the important planning period in Q1/2012. Therefore, all 4 volumes are now planned to ship by the end of 2011. In order to do this, we need your help.

To make things interesting, and add some excitement to the project we have decided to let suppliers of the covered products have a chance to win an iPad2 if they participate.

Here’s how it works:

• If you spend 5-10 minutes on our Supplier Strategy survey, you get a single “ticket” in the raffle. Do it before Friday October 14^th, 2011 and that’s doubled to 2 tickets.
  • In addition to the raffle ticket(s), you would also get the aggregated results of that strategy survey in late December.

http://www.surveymonkey.com/s/3HPHN8B

• If you provide us with a short ~30 minute interview to get some insights into your company, its pressure and temperature products, and your view of the market that’s worth 5 tickets.

• Not enough time for an interview? That’s OK, you can take our streamlined “just the basics” on-line survey and that’s worth 3 tickets.

http://www.surveymonkey.com/s/7CHHC87 

• If you take the streamlined survey or grant us an interview, you will also receive a participant’s edition of the executive brief from the reports in early January when the reports are complete.

Note: In all cases, your/your company’s participation will be kept confidential. All insights and analysis that are published as a result of supplier participation will be identified as VDC estimates/opinion.

If for some reason you are not the correct person to work with for this these types of products and/or this type of inquiry, we would appreciate it if you could please forward these links and information to the correct parties. You would figure that if they win the iPad2, they would at least owe you a nice lunch/dinner.

 

Foxconn Initiative Shows a Growing Trend of Factory Automation in China

An article in today's Financial Times described the initiative of Foxconn in China to eventually replace and/or augment their workforce of 1 million workers with increased automation. Foxconn which is a leading contract manufacturer known for their work with Apple products including the iPad currently only uses approximately 10,000 robots. They plan to increase this number to 1 million by 2013. I had several thoughts on what this means.

The Financial Times article cited Alvin Kwock from JPMorgan where he noted ' that the cost of capital for purchasing and operating a robot has now met the cost of the workers it replaces.' In my opinion, the fact that this is happening in China is a particularly big deal. Why do I say this? In a highly automated factory, the main operating costs are for the facility, energy and raw materials. After that, you have the costs for a much smaller number of higher skilled workers. The tipping point comes at the point where China either has enough of these skilled workers to meet the increased demands or the labor costs for them increase to the point where there is not a significant Chinese advantage. At the same time, the governments in EMEA and the Americas are looking to increase job creation. Empty / underutilized factories, available workforces that have re-set expectations, and possible government incentives could drive a shift in the marketplace. The benefits that many N. American and European companies saw from outsourcing over the last 10 years are now drying up to the point that the problems from the logistics and quality are not being offset.

We saw some of this in the preliminary results from our recent level measurement survey. In the survey, we asked 'Do you see the regional percentages for your organizations demand for products changing in 2011 or 2012? Please indicate where you see your regional percentage for your company’s demand for Process Level and/or ITG Products and systems decreasing and increasing in 2011 or 2012.'

Quite simply, it looks like the trend moving the market demand from Americas and EMEA to APAC is slowing and even likely to be reversing.

My other thought is that's a lot of robots and it should make a pretty good impact on the industrial automation market regardless of where they are made.

Wireless Networking Products Markets Experiencing Robust Growth

Based on soon to be published comprehensive market intelligence, VDC estimates the worldwide wireless networking products market opportunity in 2010 was $370 million and is growing at a robust pace of over 28% CAGR through 2015.

VDC based its rather explosive forecasts on feedback obtained from 230 respondents using wireless networking products as well as over 200 channel respondents selling wireless networking products.

 

Although VDC does not anticipate the real emergence of wireless infrastructure networks being used up the entire control hierarchy in most applications, particularly those deemed most critical, it does believe that material changes in market will take shape within next five years particularly as more users seek to connect their I/O and device level components into the network via wireless communications.

There are several primary drivers behind this rather explosive growth outlook:

1. Strong growth in the adoption of wireless infrastructure networking in industrial facilities is driven by a variety of factors. Improved efficiency, cost reductions, ability for install where wired solutions impractical or impossible and increased productivity.
2. Wireless networking reduces the majority of the cabling required, thus the associated costs, which is can be more expensive to install in certain locations.
3. Wireless networking allows easier add-ons, changes and removal of functions and is perceived by many users as being more scalable. This is most valuable where changes or expansions are frequent and expensive.
4. Increasing adoption of mesh networking and the self-healing capabilities provided therein
5. Increasing trust in wireless networking and technological enhancements made to overcome previous concerns over reliability, latency and security
6. Perceived ease of implementation and lower implementation costs as well as perceived lower maintenance and installation costs
7. To obtain greater mobility in industrial facilities which provide benefits of real-time response to machine problems, real-time optimization of machine performance, reduce personnel required and increase productivity, and reducing downtime of both equipment and time to repair

Healthy Outlook for Industrial Wireline Networking Products Markets

Based on soon to be published comprehensive market intelligence, VDC Research estimates the worldwide industrial wireline networking products market opportunity in 2010 was over $2.132 billion and is growing at a healthy pace of over 20% CAGR through 2015.

VDC based its robust forecasts largely on feedback obtained from 160 respondents using wireline networking products as well as over 145 channel respondents selling wireline networking products.

 
There are several primary drivers behind this vigorous growth outlook:

1. Networking enables companies to realize real-time visibility into operational issues for better decision making, control and management. By having access to real-time data, managers are better prepared to make decisions that will improve performance, and improve quality and production.
2. Networking provides the ability to monitor and control operations and machinery remotely. It provides the ability to incorporate device diagnostics and alarm reporting for operations, equipment, and devices. By using networking, troubleshooting and corrective actions can be accomplished remotely.
3. Networking reduces the majority of the point-to-point hard wiring, which is both expensive to install, difficult to troubleshoot, and hard to modify. Networking allows easier add-ons, changes and removal of functions.
4. Many users who seek plant floor automation often find wireline networking infrastructure products to be more reliable than wireless. Most industrial automation applications require monitoring and/or control equipment to work 100% of the time and users more commonly feel wireline products best guarantee this.
5. The growing acceptance of application layer network protocols used with Ethernet networks as the de-facto standard for wireline industrial networking infrastructure is helping driving this strong growth.  Improvements in industrial Ethernet-based network protocols around reliability, latency and improved real-time deterministic performance are all factors contributing to the growing adoption of Ethernet-based network protocols even in real control applications.

My Crystal Ball for Demand of Wireless Infrastructure Products Looks Quite Rosy

I have always prided myself for not being one of "those" analysts that would publish "hype" forecasts of a product or technology market - think Internet boom in late 1990s/early 2000s. I vowed to myself that I would "always tell it like it is" no matter what the cost be it may.

But as the topic of a new Wireless Sensor Network related study began to percolate within our business development planning I felt compelled to dig into the study archives and see if I did in fact "walk the talk" when it comes to objective forecasting. 

In 2001-2002 I was the lead Analyst working on VDC's first North American Market for Wireless Monitoring and Control in Discrete and Process Manufacturing Applications report (circa 3/2002). Based on strong user feedback we forecast an eye popping growth rate of 47% CAGR through 2006, albeit from a base of just under $109 million in 2001, across the seven product categories under study.

Our 2005 Report Edition indicated that I apparently succumbed to some of the hype in developing our forecast back in 2002 (or we overstated base year 2001 shipments) as our base year data in 2004 was just over $154 million, representing a CAGR of only 12% from 2001.  Despite the user respondents optimistic outlook back in 2002 it is clear that wireless connectivity was not ready for prime time. Concerns such as reliability, security and a less than expected rapid price decline due to lower volumes were real world issues that impeded more widespread adoption. 

It seems that the Analyst team working on our 2005 Edition was helped by the maturation of the market and user base which was becoming more comfortable with wireless technology; or perhaps those Analysts simply had a better crystal ball. Their forecast in 2005 of a 40% CAGR through 2007 to $419 million proved closer to reality as our 2008 Wireless Monitoring & Control Products report indicated wireless shipments to North America reached $348 million in 2007, representing a much close 31.1% CAGR.

You are probably asking about what has any of this diatribe on wireless monitoring and control research have to do with our recently published 2010 Industrial Networking Infrastructure Products research covering user requirements and channel analysis. My forecasts for the soon to be published Track 2: Competitive Analysis, Volume 1: Global Wireless Industrial Networking Product report will be even more robust than those published in 2008.

But my forecast will once again be based on extensive end user and channel feedback that is provided for in the recently published Track 1: User Requirements and Channel Analysis, Volume 1: Wireless Industrial Networking Products report. Feedback which expressed the positive impact of "pent up" demand as the economy comes out of the 2nd worse recession in American history coupled with overall greater adoption and confidence in wireless networks to handle a growing number of industrial automation applications.

Technology and standards development are playing a major role in improving that confidence level and certainly in driving greater adoption in all applications, real control notwithstanding. I think my crystal ball now will not be impacted by "hype" as it was years ago; I think the market is ripe for real wireless infrastructure network adoption.

The following exhibit is a small sample of some of the reasons users indicated were driving greater demand for and adoption of wireless infrastructure products for use in industrial applications. It should be noted that the share of respondents citing reasons for greater wireless adoption increased across the board from our 2008 data and, in most cases, the share of respondents citing reasons for wireline adoption remained flat or declined. 
  
For example the percentage share of respondents citing wireless provides solutions where wireline impossible or impractical was 44% in 2008, an increase of 18%. The percentage share of respondents indicating wireless is easier/quicker to install was only 30% in 2008, an increase of 33%. In 2008 52% of respondents felt wireline was more reliable and 43% cited the greater familiarity as being a factor in decision-making.

Of course I am shamelessly thinking about how we can tap into the current buzz on "smart grid" and work that anlge into the research scope for this latest wireless sensor network update, thereby perhaps violating my own personal principle of not falling prey to the hype. But when push comes to shove I am more of a pragmatist than an idealist.

I welcome the opportunity to discuss your thoughts, perspectives, opinions or specific need as it may relate to comprehensive and actionable market intelligence on wireless infrastructure products, wireless monitoring and control products (especially those involving smart grid applications) or anything else related to wireless sensing, networking, data acquisition or simply industrial automation. 

Webcast: Position Sensor Market ‘Positioned’ for Recovery

Today we hosted a webcast where we presented our most recent findings from our position sensor market study.

While we would like to be flawless in our presentations, that doesn't always happen. 

One chart that was presented during the live broadcast had some incorrect information.  Unfortunately, we can't edit the recording, so we are taking this opportunity to correct our mistake.  Please note that we estimate that the top 3 Rotary (non-modular) position sensor manufacturers are:

• Johannes Heidenhain GMBH;
• Schneider Electric SA; and,
• SICK AG

The slides posted below do have the correct information.  We do apologize for this error and any confusion it may cause.  Should you have any detailed questions about the data from the webcast, or the study itself, please do not hesitate to contact someone on our team.

Position Sensor Market 'Positioned' For Recovery

View more presentations from VDC Research Group.