The global market for industrial automation equipment, previously in line to enjoy a modicum of growth this year after a recent period of struggle, is now projected to contract in the double digits because of the havoc caused by the novel coronavirus.
This comes as the coronavirus disease, COVID-19, continues to spread throughout the world after first appearing in central China in December last year. The effect of the pandemic on the global economy has been devastating. With many governments worldwide ordering lockdowns and mandating their citizens to stay home to contain the spread of the virus, business and commerce have been brought to a standstill, causing massive and near-universal disruption to industrial supply chains and end-markets.
A more than 11% year-on-year plunge in revenue is expected this year, compared to the close to 2% growth in the previous year, Omdia projection shows. The chart below shows the forecast in revenue growth for the IAE market from 2019 to 2023. Revenue this year for the IAE market worldwide is expected to reach more than $195 billion in 2020.
These and other findings are available in the Industrial Automation Market Tracker – Q1 2020
. The report examines in detail the impact of COVID-19 on industrial automation equipment manufacturing worldwide since the first coronavirus outbreak.
Despite lackluster growth in the IAE market the previous year due to economic uncertainties stemming from the US-China trade war and internecine anti-EU sentiment within Europe, initial projections for 2020 had been positive. However, forecasts have since been substantially revised downward as the novel coronavirus made its way around the world.
Over the short term, sluggish global demand and disruption throughout the supply chain will dampen production and suppress investment. Furthermore, growth in machinery production will be substantially lower, and is projected to decrease 14.2% this year as manufacturers prioritize cost control. Sectors such as machine tools, semiconductor machinery, rubber and plastic machinery, food and beverage machinery, and packaging machinery will be affected, resulting in turn in a fall in demand for automation products for new equipment.
The automation market suffered a new blow after oil prices tumbled—first, in a price war, and then because of oversupply—in yet another negative development for the world economy.
As the industrial supply chain is globally integrated, the shutdown of factories in a country will lead to complications downstream, affecting transportation and logistics, leading to delays in distribution and then sales. The result could be a rise in the prices of automation products in the short term, but the pandemic is likely to cause all sorts of undesirable effects and repercussions on supply chains worldwide.
Among Asia Pacific countries, China is expected to restart its economy soon after the country claimed it had successfully contained the spread of the virus. Its PMI rose from a record low of 40.3 in February to 50.1 in March as production and economic activity began to pick up. However, even if China’s recovery continued throughout the year, the country will find itself in a world with dramatically attenuated demand as other countries deploy their resources toward managing the pandemic. The situation is less optimistic in Japan, which is experiencing a drastic decline in demand for Japanese-made products from China and elsewhere. Moreover, its attempt to boost the country’s economy by hosting the Olympics in Tokyo has been put on hold, with the sports event postponed to next year.
At present, the US has the largest number of COVID-19 cases as well as the highest death toll, with neighboring Mexico forced to shut down its major automotive and aerospace plants. In addition, the ongoing price war in the oil industry is contributing to low investment confidence in the Americas, further dampening the market for automation products.
In Europe, countries are imposing more stringent restrictions to stop the virus from proliferating, and impact from the restrictions will be felt keenly by the manufacturing sector. And because the European market was already weak prior to the COVID-19 outbreak, it is expected to suffer more than other regional markets during the recovery process.
The Industrial Automation Equipment Market Tracker – Q1 2020 is offered under Omdia’s industrial research pillar. An in-depth quarterly publication, the report covers 5 global regions, 52 equipment types, and 28 industry sectors. Contact us for more details or if you wish to subscribe.