ARC Sees PLC Market in China to Double by 2008

Business Wire, June 29, 2004

DEDHAM, Mass. -- For the first time in recent economic history, there is a country where manufacturing industries are growing fast, which is of a substantial size, and which has the capacity to invest from rising export revenues. China, with this environment, has exceeded 20 percent per year growth in some automation segments. The China market for PLCs is expected to grow at a Compounded Annual Growth Rate (CAGR) of 14.1 percent over the next five years in spite of a decline in prices. The market was about $370 million in 2003 and is forecasted to nearly double in 2008, according to a new ARC Advisory Group study.

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 favor. "Suppliers' success clearly depends on the location of their facilities, the industries they focus on, the product mix they offer, and the technical and cultural competency of the sales and support channels they establish," according to Senior Analyst Himanshu Shah hshah@arcweb.com, co-author of ARC's "Programmable Logic Controller Outlook for China" (www.arcweb.com/research/auto/plc-chi.asp).

Multiple Drivers Guarantee Market Growth

A number of factors working together are driving the growth of the China 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. The outsourcing trend by multi-national companies who are setting up their production bases in China helps fuel the use of automation, while the upgrading of older, now privatized 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 broader level, while the booming Chinese machine tool market will continue to demand more PLCs.

Small Suppliers Face Hurdles

Contrary to expectations that a new, growing market which attracts more suppliers should have many winners, monopolization of the 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.

Challenges on the Road Ahead

This market study identifies various factors inhibiting market growth. For example, there is a chance that the Chinese RMB will appreciate under the existing pressures from the United States and Japan. This, together with inflation, could slow the pace of growth, but most predictions are that the Chinese economy will continue to grow to become the world's largest by 2050 or sooner.

ARC's PLC Outlook for China provides strategic information including market size and its potential, leading suppliers, key factors that contribute to the market growth, market dynamics, and strategic issues which suppliers will face.

Additional information on this study can be found at: www.arcweb.com/res/plc-chi

Note to Editors: This document can be used with attribution to ARC Advisory Group. For a graphic containing "The PLC Market in China in Millions of Dollars", please contact Kim Coffman at press@arcweb.com .

About ARC: Founded in 1986, ARC Advisory Group has grown to become the Thought Leader in Manufacturing and Supply Chain solutions. No matter how complex your business issues, our analysts have the expert industry knowledge and first-hand experience to help you find the best answer. We focus on simple yet critical goals: improving your return on assets, operational performance, total cost of ownership, project time-to-benefit, and shareholder value. Further information can be obtained from ARC, Three Allied Drive, Dedham, MA 02026, 781-471-1000, Fax 781-471-1100, E-mail info@arcweb.com, Web www.ARCweb.com.