This from a new release from Pike Research:

"Because commercial buildings consume roughly 23% of all electricity globally, the automation systems that ensure efficient performance are a critical part of energy management.  Until the mid-1990s, modern building automation consisted of little more than individual systems with simple control panels for switches, timers, and alarms.  Today, the market for commercial building automation systems is in the midst of revolutionary change in terms of technology and utility.  In the last several years, the focus has shifted from an individual system view to a more holistic view so that the “building system” can be defined to include virtually any device or data source within the building.  The amount of data created by automation systems can be overwhelming, but real competitive and economic value exists in using the data to monitor performance and uncover trends.  According to a new report from Pike Research, the market for commercial building automation systems will double over the next decade, increasing from $72.5 billion in 2011 to $146.4 billion by 2021."

The complete release is here: http://www.pikeresearch.com/newsroom/global-revenues-for-commercial-building-automation-systems-will-reach-146-billion-by-2021

If you are in the Programmable Logic Controller (PLC) business, the recovery from the downturn happened much earlier than had been generally expected. Most PLC suppliers were pessimistic on their future business after the economic crisis of 2009 and thought their business would not recover to the level of 2008 until 2013. However, in the event, their business was back on track three years earlier than they had expected; in some countries in developing regions, such as China and India, revenues had grown even in 2009. Overall global revenues from PLCs in 2010 were nearly 30% higher than in 2009, reaching an estimated at 8.2 billion US dollars.

“Although the recovery was unexpected, it is not hard to explain,” said Alex Hong, market research analyst in IMS Research’s industrial factory automation group, “The demand for automation products in many ongoing projects stagnated when investment funding dried up in the economic downturn.  However, government economic stimulus in several countries helped to make money more available at different levels of industry.” The customers for PLC manufacturers, mostly builders or users of industrial machinery, had more access to funding to purchase more PLCs and other automation products to continue with their projects. Both the restart of projects discontinued in 2009 and the start of new ones contributed to the high growth of the PLC market in 2010.

Moving forward growth continued in 2011, though at a lower rate than in 2010. Global PLC revenues have remained high in 2011. However, the industrial markets differed by region. In Europe, despite the continuing and worsening Eurozone sovereign debt crisis, the most important market for industrial automation products – Germany - continued to grow at a healthy rate. In the Americas, large projects from some end-users and growing domestic demand enabled the PLC market to grow, though the market in Latin Americas is still underdeveloped. In Asia, the markets in the growing economies of China and India have performed quite well, though that of Japan was hit by the consequences of the earthquake earlier in the year. In general, the growth of the global economy in 2011 underpinned the global growth of the PC market.

However, PLC suppliers and their industrial customers are currently very uncertain whether growth will continue into 2012, considering the risks to the world economy. Many factors, such as Europe’s unresolved sovereign debt crisis, tightening economic policy in China, and the consequences of the earthquake in Japan and the recent floods in Thailand, are affecting the market.  However, IMS Research believes that the PLC market will still grow in 2012, mainly because many large and important PLC markets, such as Germany, France, China and the US, are still performing well at the turn of the year. In addition, emerging markets, such as Brazil, and India, which already account for half the entire PLC market, will be the main driving force for future growth.

The industrial hydraulic equipment market is mature. Alternative electro-mechanical and electro-static solutions, such as electric drives are replacing hydraulics in industrial applications, as they are more efficient, cheaper and available at shorter lead times.

Frost & Sullivan's new report, “European Hydraulic Equipment Markets for Industrial Applications”, finds that the market earned revenues of $1,415.1 million in 2010 and estimates this to reach $2,015.8 million by 2017. However, the impact of recession was severe on the European hydraulic equipment market for industrial applications with revenues dropping by 31.8% in 2009 to reach $1318.8 million, as a result of low investments in major end-user segments. Despite manufacturers investing heavily in improving the reliability and performance of hydraulic equipment, revenues in this market were mainly due to retrofits rather than new installations in 2010.

To a certain extent, the integration of electronics into hydraulic systems has helped the hydraulic equipment market sustain revenues. However, as rapid technological developments in the various fields of alternative motion control continue, it is widely accepted that many hydraulic equipment applications may be replaced by more effective methods in the future.

Hydraulic equipment has a large installed base, which will have to be replaced or repaired within a specific time frame. The major factor sustaining the replacement market has been leakage related issues caused by aging and corrosion in hydraulic cylinders and accessories. Even during the economic slowdown, many end users postponed new installations and invested instead in repairs and replacements.

“The use of hydraulic systems in mechanized processes is being threatened by the increased use of electrically-operated drives and motors that offer accurate performance and re-programmable digital control and settings, except in high pressure applications,” states a company spokesperson. “Electrically-operated equipment is able to meet customer demands for greater levels of accuracy and efficiency from automation apparatus.”

Harmonic standards are regulated differently by country, and this often affects which industry sectors will require harmonic mitigation. “Asia Pacific is the largest regional market for harmonic filters, representing 41.4% of sales in 2010, due to the region’s poor power quality in relation to Europe and to a lesser extent the United States,” according to new IMS Research. The company believes that industrial standards to regulate harmonics for heavy industry in China are leading to increased demand for harmonic solutions there.

IEEE 519 is a US harmonic standard that regulates harmonic distortion at the point of common coupling. As a result, industries most affected by this requirement are ones nearest in proximity to the consumer power grid, such as water & wastewater and commercial HVAC. Similar IEC standards in Europe regulate voltage distortion at the major input to the plant, forcing all heavy industry to regulate harmonics. However, due to higher power quality in Europe, harmonic concerns tend to be less of an issue than in other major regions. Asian countries use a combination of IEC standards and IEEE 519.

As a result, growth for low harmonic solutions is highly dependent on regulation and enforcement of harmonic mitigation standards, which can be enforced by the country’s government, the state or province government, or by the individual utility company. While the global market is predicted to have a strong performance in 2011, growing approximately 14.0%, many of the countries in the Asia Pacific region will outpace overall market growth as a result of more stringent standards and enforcement.

Bosch Rexroth has released a statement of business performance that boast some impressive recent growth numbers, and is glowingly optimistic about the future. Rather than rewrite it, we thought you might want to read the original, especially if you have and interest in the firm or the larger market trends that it is seeing.

Bosch Rexroth returned to a growth course in 2010 and will make considerable gains again this year. The supplier for machinery construction, mobile machines, and renewable energies increased sales by 22% to €5.1B. “Bosch Rexroth understood the market changes as an opportunity and translated them into strong growth,” explained Dr. Karl Tragl, President of Bosch Rexroth AG, at the annual press conference in Frankfurt. 2011 is set to be yet another year of growth – the number of incoming orders doubled last year to approximately €6B. “That puts pre-crisis peak values back onto the horizon faster than assumed just one year ago,” highlighted Dr. Tragl. This year, the company will continue to expand its international activities and again anticipates double-digit growth.

Bosch Rexroth was able to gain global market shares during the first half of 2010 in markets still suffering from the effects of the crisis. The company achieved the strongest growth in Asia, where it increased sales by 38% to €1.4B. Within Asia, China, by far, became the largest single market outside of Germany. Business volumes in North and South America increased by 36% to €829M. For the first time ever, Brazil was among the company’s top ten countries with the strongest sales. “Just like it did in India, our longtime local presence is paying off in Brazil. We are experiencing above-average growth in these markets,” said Dr. Tragl. Overall business increased by 9% to €1.6B in Europe (without Germany). Sales in Germany developed significantly stronger, where 2010 sales were 18% above the previous year’s value at €1.3B.

Berend Bracht, president and CEO of Bosch Rexroth Americas concurs: “We’re extremely pleased with our progress in Brazil, and also with the better-than-expected recovery in our business sectors in North America in 2010. Our strategy of combining global and local capabilities for the best possible customer result should also position us well for continued success in 2011.”

Significant research and development investments

In 2010 Bosch Rexroth invested over €260M in research and development. Last year’s R&D share was 5.3%, a figure well above the industry average. German developers work together in close collaboration with their colleagues in Asia and America within the framework of the global network. The company hopes to take better advantage of the high-growth regions of Asia and South America with the continual expansion of its international development and production network. For example, products and solutions will be adapted to the specific requirements of each region based on platforms developed in Germany.

Core workforce retained throughout crisis

“We combine our traditional strengths in Germany with our global potential,” highlighted Dr. Tragl, who expressly thanked all associates for their dedication and commitment during the last fiscal year. The President pointed out the fact that the company’s worldwide success helped to secure jobs, including those in Germany. Despite the difficult crisis, Bosch Rexroth was able to retain its core workforce at its 67 global production sites. At the turn of the year, the company employed 34,900 individuals, around 18,200 of whom are located in Germany. While the number of associates in Germany remained stable, the company added to its workforce, especially in Asia. Bosch Rexroth increased capacities by 13% in that region, where 5,100 associates now work for the company.

Expanded leadership for mobile and industrial applications

Mobile applications activities experienced particularly positive developments during the last fiscal year. As the global market leader for mobile applications equipment, Bosch Rexroth offers innovative system solutions. They support manufacturers of mobile machines to adhere to internationally tightened exhaust emissions regulations. The objective is to gradually decrease emissions in North America, Europe and Japan by 90% in accordance with the TIER 4 final standards for types of mobile machines, including excavators, bulldozers, harvesters, tractors, and forestry vehicles. In order to realize these values, manufacturers in addition to the after-treatment of exhaust gases also will probably have to use smaller motors and reduced motor speeds. Moreover, Bosch Rexroth developers are linking diesel motors with hydraulic controls, reducing fuel consumption by up to 20 percent without affecting performance.
“Our introduction of these TIER-4-capable technologies at the March 2011 CONEXPO-CON/AGG trade show was a tremendous success,” says Bracht. “It showed us that many of our customers in the Americas are looking for partners who can help them address these 2014 standards now, especially with the ongoing growth in mobile hydraulics applications worldwide.”

In plant engineering and factory automation, early-cycle industries, such as plastics machines, made a particularly positive recovery. More and more, both users and machine manufacturers are coming to expect one-source mechatronics solutions. As a supplier for all drive and control technologies, Bosch Rexroth benefits from an innovative advantage with cross-technological drive and control solutions. Those solutions reduce engineering expenditure from design to commissioning and increase machine energy efficiency.

Bosch Rexroth is also expanding its solution spectrum in the fields of primary production and recycling. The company is currently delivering components for building the first fully-hydraulic plant for producing ethanol from sugarcane in Bolivia. The manufacturing process requires significant effort. Hydraulics meets such requirements and is a field where high-performance drives from Swedish subsidiary Hägglunds are a perfect compliment to the hydraulic power units and cylinders from Bosch Rexroth. “This example demonstrates how the acquisition has provided us with additional market opportunities in primary production, recycling, and heavy loads handling,” says Tragl.  

“The Bolivia project really is a great example of the types of opportunities Hägglunds gives us in markets we weren’t very active in before,” says Bracht.

Positive outlook for renewable energies

For wind energy, the number of new plant installations in Europe and the USA experienced a sharp decline. By contrast, the market continued to expand in China, where half of the world’s wind turbines were put into operation in 2010. In addition, the company works in close collaboration with ocean energy plant manufacturers. “It will still take several years until we achieve series production readiness with our partners, but ocean energy holds just as much potential as wind energy,” highlighted Dr. Tragl.

ABB is reporting that growth is accelerating on industrial demand. Here are the details of their quarterly announcement.

• Q4 growth accelerates: Orders up 18%, revenues 6% higher
• Energy efficiency, industrial productivity and grid reliability drive demand
• Q4 operational EBIT margin of 12.3% within target range on growth and cost savings
• $1.8 billion in cash from operations close to previous year’s record Q4
• Proposed dividend increase to CHF 0.60 per share shows confidence in the business
• Additional cost savings of more than $1 billion targeted for 2011

Midpoint in the last decade, while sitting in a strategy meeting with one of the world’s top drives companies, pondering potential growth acquisitions, I said “why not Baldor?”

A Senior VP jumped on it. “We’ve thought about that for years, but motors and drives companies aren’t in the same profit peer group. They make money on razor thin margins and volume. We make money on engineering value add. We can’t put them together” So I shut up.

The real story behind ABB’s $4.2B acquisition of Baldor last week isn’t that one or the other is securing sales channel or global footprint. The real story is what it means to the evolution of the market. And, remember, this isn’t the first drives company to try to put power, control and motion together. Remember Rockwell and Reliance? Why might this deal succeed, when the last was, well, forgettable? If you consider this SVP’s position, just a few years old, you begin to see how quickly this market is changing, and where it may go.

First, note that Baldor is among an exclusive few companies that sees that process and flexibility, not location, is what creates sustainable profitability. While everyone ran offshore, Baldor quietly built a US-based motor manufacturing machine that consistently delivers outstanding return to investors. This isn’t to say that every Baldor foray has been a good one. They’ve been dabbling in drives and control for years. But the fact that they’ve been able to dabble means that motors, are indeed, in a high value peer group and can return profits that can be re-invested, if you are creative, and willing to do what others won’t.

On the other hand, ABB’s interest in Baldor indicates something quite different.