CNC market's bright spots smooth machine tool market's dips
Dedham, MA—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 the new ARC Advisory Group study, “CNC Worldwide Outlook.”
Dedham, MA— Following a sharp downturn in the machine tool market, the worldwide computer numerical control (CNC) market has experienced a bruising 9% drop during the past two years, according to a new study 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 the new ARC study, “CNC Worldwide Outlook.”
“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.
Consequently, the five-year worldwide outlook for the CNC market continues to sustain its relatively low single-digit growth rate during this period. The expectation is that the market has put the downward cycle behind it and will continue to face a sustainable demand in CNC-based machine tools from the world's industrialized and developing regions. Specifically, Japan and Asia are expected to experience above average growth in their regions. Japan in particular, with its strong infrastructure of machine tool manufacturers, is in a desirable position to satisfy the demand coming from manufacturing buildups in China and Southeast Asia.
Overall, growth in the Asian market, which is expected to be more than 8% annually during the forecast period, is primarily derived from China, Korea and Taiwan. Most importantly, Taiwanese and Korean machine builders should not be ignored because their market entry strategy mirrors Japan's entry more than 20 years ago. The exception now is that Korea and Taiwan depend on Japanese CNC providers, Fanuc and Mitsubishi, to instrument their machines. While the Koreans have strengthened their automotive production capacity, they have also strengthened the machine tool infrastructure to support this industry.
The story in China is quite different. Many foreign machine tool builders are establishing subsidiaries in this region. These subsidiaries are not just distribution centers, but full-fledged assembly and manufacturing operations capable of producing machine tools for the local Chinese market. This is one of the factors shifting the point of sale for many of the CNC systems in the near term. In effect, CNC sales that would have originated in regions such as North America, Japan or Europe are now being sold directly in China.
For more information, visit www.arcweb.com/res/cnc .
Control Engineering Daily News Desk
Jim Montague, news editor