According to a new ARC Advisory Group five-year market outlook study, 2010 showed a comeback in the large-scale distributed control systems (DCS) market compared to 2009, when the effects of the worldwide financial crisis and recession had been most apparent.
While 2010 showed a comeback in revenue numbers, ARC does not expect the revenue to surpass the 2008 peak until 2012. Most global DCS suppliers (ABB, Siemens, Honeywell, Yokogawa, Emerson, etc.) reported very strong order rates right through the end of calendar year 2010 and this will translate into strong revenue for 2011. “The DCS market has a lag between orders and revenue that approaches nine months on average, due to the heavy concentration of project business. This lag will carry strong order rates from 2010 into strong revenue for 2011,” according to Barry Young, Principal Analyst at ARC and author of ARC’s “Distributed Control Systems Worldwide Outlook” study. “Beyond 2011, the DCS market should return to its normal slow but steady growth rate with a combined annual growth rate (CAGR) of approximately 3 to 4 percent over the five-year period of 2010–2015, barring any double-dip worldwide recession, of course,” said Young.
New projects in the heavy process industries, where DCSs are used to monitor, manage, and control plant operations, drove sales orders in mid to late 2009. This translated into increased revenue for suppliers in 2010. The industry verticals of chemical, petrochemical, and oil & gas showed particularly strong growth. Since, traditionally, these verticals are among the largest in the DCS marketplace, the overall DCS marketplace showed an upswing. The water & wastewater sector also continued to show significant above-average growth, even though this sector is not very large.
The resurgence in power generation projects, particularly in the nuclear and gas-fired combined cycle sectors, also increased demand for DCSs. In the developed regions, power generation plants currently emphasize improving efficiency, reducing emissions, and improving ramp rates. In emerging countries, China and in particular, the power industry is working to reduce its dependence on coal-fired power generation with more nuclear, wind, and solar generation. The resurgence in power generation projects — including many large greenfield projects — will not only drive demand for DCSs, but also for associated software applications. These include collaborative production management, advanced process control, optimization, and operator training simulators.
The DCS business has primarily been a services business for the past few years, with combined project and after-sales or operational services accounting for over half of total revenues. The main automation contractor (MAC) concept continues to grow stronger and build in scope. ARC sees owner-operators demanding strong local content on MAC projects, ensuring a strong support presence once the project has been commissioned and started up. Also, the MAC scope is increasing, now often including the electrical content of the project, which further reduces both project engineering cost and overall risk for the owner-operator.