In response to the spread of the Wuhan coronavirus the preliminary forecast of China’s industrial automation equipment (IAE) market growth by Omdia has been revised down by 1.1 percentage point to 2% in 2020, followed by an upward revision of 0.7 percentage point to 2.7% in 2021. In a more severe scenario, with confinements and plant closures extending throughout February 2020 and lower than expected production volume throughout mid-2020, China’s growth could subside to below 1.5% this year. Two major developments in January could impact the forecast by Omdia: the outbreak of the 2019-novel coronavirus in Wuhan and the US-China trade agreement.
The Omdia view:
Moving supply chain away from China
Firms and institutions have suspended operations in several sectors, including transportation, manufacturing, and retail trade because of the coronavirus outbreak, as analyzed in “Insight on machinery production market impact” by Omdia. Industrial production has gradually resumed in the second week since the holiday break (17–19 February 2020) ended. However, the work resumption ratio remains far below the normal level, less than 50% on average. The impact of supply chain disruptions from China have impacted companies around the world that are heavily involved in the automotive and electronics supply chain.
Those companies, which are sourcing from China, have started to divert the production volume away from China to mitigate the risk of supply chain disruption. Some are setting up new production hubs in other emerging countries, as the coronavirus outbreak has no end in sight. Additionally, the uncertainty surrounding the US-China trade will also speed up the process of companies moving the supply chain away from China.
Adoption of transformative technology
This outbreak seems to have made many end users in China to realize the importance of remote intelligence, automation, and smart manufacturing in reducing the reliance on the workforce at the production level. Therefore, Omdia is expecting a rapid growth in the Chinese industrial automation equipment market over the next five years, following a surge in demand for artificial intelligence, industrial internet of things (IIoT), industrial internet, and other transformative technology used in the manufacturing process. China accounted for 19% of the global IAE market in 2019, and Omdia estimates that by 2024 China will account for 21% of the global IAE market.
Analysts at Omdia are constantly analyzing the dynamics of the virus transmission, therefore, assessing the impact on China's major industries is an ongoing effort. Omdia will continue to assess the situation and provide further analysis on the impact of the outbreak and the effects on the overall industrial automation equipment market. For more detailed coverage on this market, please inquire for Industrial Automation Equipment Tracker by Omdia, which provides in-depth quarterly Market Tracker that provides comprehensive evaluation of the global IAE market includes a detailed overview of the major equipment markets within this sector for Europe, Middle East, and Africa (EMEA), the Americas, China, Japan, and rest of Asia.