I recently finished two regional studies for motion controls: “The South East Asia Market for Motion Controls – 2013” and “The Chinese Market for Motion Controls – 2012”. There are so many interesting similarities and differences between these two adjacent regional markets for motion controls.
Context and Background:
When we talk about the ASEAN, it refers to the Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam and other countries as a single entity. It would rank as the eighth largest economy in the world, with population of over 600 million people, GDP 2 trillion US$, 5.4% GDP growth in 2012. Its counterpart China is with 1.4 billion people, GDP 8.3 trillion US$, 7.8% GDP growth in 2012. It is interesting to note the uneven economic development in both regions: Inside ASEAN countries, Malaysia, Singapore and Thailand have the highest GDP per capita. The rest of South East Asia is still developing its industrial sectors and heavily depending on agriculture and raw materials. Same as ASEAN, Eastern China and Western China also have huge difference. As labour costs continue to rise in Eastern China, some manufacturers are moving their plants to Central and Western China, and the developing countries in ASEAN, such as Indonesia and Vietnam.
Machinery Production and Motion Controls:
China is one of the most important machinery production bases in the world, exporting large amount of machine tools, textile machinery, plastic & rubber machinery, material handling machinery around the world. To the contrary, ASEAN countries are the machinery importers with emerging machinery markets, although there continues to be only a relatively small number of machine builders in the region. Interestingly there was no difference seen the high end machinery markets in both regions as Japanese and European machinery dominates the region. The reasons are equipment imported from Japan and Europe is known for its quality and durability. However, it is also deemed expensive. The machinery imported from China is less expensive and seen as a good cost effective alternative.
As China produces much more machinery than South East Asia, it is easy to understand why the Chinese market for motion controls was overwhelmed. In revenue terms, the Chinese motion controls market accounts for approximately 20% of the global motion market, and over 60% of the Asian market in 2012 (not include Japan), around 20 times bigger than the South East Asia market in 2012.
The motion control market is heavily dependent on machinery production. We can see the growth rate of the Chinese motion controls market is much more volatile than the global market and South East Asia Market. The Chinese market achieved over 25% annual growth in 2010 and 2011, but declined by an estimated 18% in 2012. The volatility in the motion market can be explained by the dependence of this market on volatile machinery industries. On the contrary, the South East Asia market for motion controls maintained steady growth from 2009 until now; it is forecast that he South East Asia market will grow at a compound annual growth rate (CAGR) of 7.5% to 2017.
Vertical Market – Semiconductor, Electronic & Electronic Assembly:
South East Asia is one of the world’s most important semiconductor and electronics production bases for HDDs, Electronic components, ICs. Singapore and Malaysia are the leading countries of specialised semiconductor and E&E equipment. A large portion of motion controls sold into the Semiconductor and Electronic & Electronic Assembly industries in South East Asia.
The electronics industry is also a pillar of Chinese industry with various kinds of electronics & electronics assembly machinery being produced in China. Production of electronics & electronics assembly equipment has increased rapidly due to high demand for consumer electronics such as smart phones and tablets. In China, the semiconductor manufacturing equipment sector is substantially smaller than the electronics & electronics assembly market. Most semiconductor equipment is imported as China lacks the core technology and key components for semiconductor equipment production.
Vertical Market – Foods and Beverages, Packaging:
Both China and South East Asia are in the process of increasing urbanisation. As growing rural populations continue to inhabit cities and towns, consumers in China and in South East Asia are increasingly favouring the convenience of processed and packaged food. The significant urbanization will continue to fuel demand for packaging goods, processed foods and beverages, which will in turn continue to drive the demand for food, beverage & tobacco machinery, and packaging & labelling machinery. The related motion controls products used in these sectors will also grow quickly.
Vertical Market – Machine Tools and Textile Machinery:
The machine tools industry serves a variety of different sectors including key industries like aerospace, ship-building, machine building, and the automotive sector. China is the leading Machine tools production base in the world. Machine tools have been targeted as a top priority in the Chinese government’s plan of developing the equipment manufacturing industry. This bodes well for the motion controls market as the sector was the largest in terms of motion control utilization. On the contrary, The CNC market in South East Asia is relatively small because there are few machine-tool production companies in South East Asia. Most of the CNC machine tools are imported from Japan, Taiwan, China and Germany. Some Japanese machine-tool suppliers have plants in Thailand and Singapore.
Same to the machine tools industry, China is now the world’s largest producer and consumer of textile machinery. Textile machinery machine industry in South East Asia is quite small.
Sales direct to OEMs and sales via a distributor/partner are the most common channels motion suppliers use in reaching the market. Direct sales to OEMs continue to represent the largest sales channel in the Chinese motion controls market as the scale and quantity of OEMs present in China continues to increase. Furthermore, most CNC products are sold direct to machine builders. On the contrary, the most common distribution channel in SEA is via distributors and traders. Local representatives understand the language and the local culture; and they can also offer technical support. Also motion controls suppliers rely on a developing distribution network in South East Asia.
Both China and South East Asia motion controls market are dominated by Japanese suppliers, such as Fanuc, Mitsubishi, Yaskawa, Panasonic, Fuji, Omron and Sanyo Denki.
Japanese suppliers target the medium and low-priced segments of the market, with products that have a reasonable mixture of performance and price. And European and USA suppliers mainly served the high-end market with high-performance motion products and total solutions. European and USA companies are positioned comfortably in the high-end motion market in China and South East Asia and there is no sign that this will change in the near future.
The difference of the two markets is the presence of local motion controls suppliers. So many new Chinese local suppliers continued to enter the motion control market over the past three years. These companies have been successful in taking market share from Japanese players in the low-end market due to low cost and good customer relationship. But we did not yet see very many local motion controls suppliers in South East Asia.