Dedham, MA— Following a sharp downturn in the machine tool market, the worldwide computer numerical control (CNC) market experienced a bruising 9% drop during the past two years, according to a new study, "CNC Worldwide Outlook," by ARC Advisory Group. The report adds that the decline in machinery purchases was a somewhat self-inflicted result of developing all-in-one machines that do everything well at high speed. Also, declining demand for machinery is expected to continue, fueled by international outsourcing of manufacturing. Another result has been strong growth for CNCs in Japan.

The worldwide CNC market is expected to grow at a 3% compound annual growth rate (CAGR) over the next five years from $3.3 billion in 2002 to $3.9 billion in 2007, according to ARC's study.

"CNC system suppliers, who leverage the right strategies, can grow despite the slowdown in the machine tool market," says Sal Spada, ARC's research director.

ARC's study found that fears of obsolescence and technological change are driving market growth. End-users are focusing on retrofits and upgrades of existing machines to avoid obsolescence. For example, the merging of CNCs with robotics to create manufacturing cells is used to compete with the low-wage outsourcing trend. The machine tool business and its use of CNCs declined in 2002. However, refurbishments provided a boost and growth in the total CNC market. Overall, the report adds that the forecast is promising because the demand for CNC retrofits and upgrades will grow as the population of installed machines increases.