Companies Should Complete Systems to Automate Growth, Says Frost & Sullivan

SINGAPORE, July 6 /PRNewswire/ -- 2009 saw many projects put on hold or slowed down due to the economic slowdown across many countries in the region. Singapore, Thailand and Malaysia were the hardest hit, registering -9.5%, -7.1% and -6.2% GDP in the first quarter of 2009 respectively. Although the economy improved in the later part of the year, the ASEAN GDP was still at -0.3% in 2009.

(Logo:  http://photos.prnewswire.com/prnh/20081117/FSLOGO)

(Logo:  http://www.newscom.com/cgi-bin/prnh/20081117/FSLOGO)

Still, automation companies in the region managed to see the year through, with the effects of government stimulus packages, low interest rates, low commodity prices, and tamed inflation. There was better political stability in the region as well, the exception being Thailand.

According to Frost & Sullivan's Asia Pacific Industrial Technologies Vice President Satish Lele, most companies have prepared themselves for the rebound. A strong first quarter performance in 2010 was seen for the region even as forecasts show the ASEAN GDP to grow 3.7% in 2010.

"As the economy recovers, automation companies need to watch the market closely to track opportunities as end users begin cautious investment. With the easing of the stimulus packages, the private sector is now expected to drive the growth. However the trends for a sustained growth continue to be weak, mainly because of the effect of Europe and North America on Asian markets," he says.

In terms of industry specifics, Frost & Sullivan have identified Distributed Control Systems (DCS) and Programmable Logic Controllers (PLC) as the major components of Automation systems, and together they form three-fourths of the automation revenues.

The DCS market was estimated at USD270 million in 2009 and is expected to grow at a CAGR of 10.2% until 2013. "Although the high start-up cost of DCS and the lack of ease of integration between manufacturers is a challenge, the increased focus on efficiency and wider range of functionality are encouraging manufacturers to invest in these systems," Satish says.

He adds, "The growth of the oil & gas industry continues to drive sales for DCS. This sector constitutes more than half of the investments of DCS. Malaysia dominates the oil & gas sector although ANZ is showing surprisingly huge growth in this area with new projects in the pipeline. Vietnam is potentially the fastest growing market with large expectations for new projects."

On the other hand, the PLC market was estimated at USD306 million in 2009 and is expected to have a Compound Annual Growth Rate (CAGR) of 5.8% over the next 5 years. The PLC market is largely dominated by Australia and New Zealand, contributing 47% of the total revenues for the PLC market.

Satish continues, "The lack of a large OEM sector in Asia Pacific combined with the slow economic recovery and price sensitivity in the market will be the major restraint for the PLC market. Still, PLC's low maintenance cost, ease of operation with high reliability and more functionality combined with the increasing need for efficient factory automation will continue to drive the market forward."

"The power sector will also continue to attract investment in the current year with existing and planned projects," he says. "Other key industries with the potential for growth are the Food & Beverage and Water & Wastewater sectors."

Regarding the need from end users, Satish says, "Automation companies should continue to focus on providing complete solutions to end-users. They need to adopt the concept of Main Automation Contractor (MAC), a term that is becoming increasingly common in the procurement of process control systems or automation systems, to meet the increasing demand for services and solution-based offerings from end-user companies."

"End users are also concerned about the after-sales service and local representation. Automation companies should strive to have a wider distribution network to be nearer to their customers to achieve better growth," Satish continues.

About Frost & Sullivan

Frost & Sullivan, the Growth Partnership Company, enables clients to accelerate growth and achieve best-in-class positions in growth, innovation and leadership. The company's Growth Partnership Service provides the CEO and the CEO's Growth Team with disciplined research and best-practice models to drive the generation, evaluation and implementation of powerful growth strategies.   Frost & Sullivan leverages over 45 years of experience in partnering with Global 1000 companies, emerging businesses and the investment community from 40 offices on six continents. To join our Growth Partnership, please visit http://www.frost.com.

SOURCE Frost & Sullivan