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"Automation trends and market structure" - part 2 of the three-part serial

How the market structure of the suppliers of automation technology changed during the transition from electromechanics to microelectronics

This article combines the transition from electromechanics to microelectronics with the changes in the market structure of the suppliers of automation technology.


August 23rd, 2010 -
The first article „The trends of the automation“ identified the two main trends in the automation technology i.e. 1. substituting the electromechanics by microelectronics in the 1980 and 1990 years and 2. establishing an ever higher degree of integration of microelectronics resp. automation technology since the beginning of 2000.

The third article of this series will highlight the future market structure of the suppliers.

The change of the market structure of the suppliers during the first main trend in the automation technology

Part 2 of the article series

The substitution of the electromechanics by microelectronics changed the market structure of the suppliers in two regards:

  1. new medium-sized suppliers came up and had been developing fast

  2. the top dogs of the electromechanics such as Siemens or Kloeckner-Moeller came into conflict between old and new technology, which worked both restraining and supporting.

Microelectronics favour new, medium-sized suppliers

Which factors favoured the emergence of numerous new and medium-sized suppliers?

  • The know-how in microelectronics and its focus on new products. The many new companies could deal with this factor much easier than the enterprises that had become large with electromechanics.
  • The fast and user-friendly enhancements of the products. This success factor too favoured focused operating medium-sized suppliers. Large, cost-efficient operating production plants did not work as competitive advantage of the large suppliers because of the fast technological progress during this period.
  • The capital requirement for the market entry was initially relatively low.
  • The growth of the sales markets. From 1980 to the year 2000 the industrial production rose in the European Union, the USA and Japan nearly continuously. So e.g. in Germany the production index increased from 71.0 (1980) to 93.9 (2000, 2005=100 according to statistics of the OECD 2010).


Numerous new companies benefitted from these success factors. Among them AMK, Bachmann, Beckhoff, Bernecker & Rainer, Danfoss, Eckelmann, ELAU, epis Automation, ESR Pollmeier, KEB, Lauer, Lenze, LTi, Sigmatek, TR electronics and many other more.

Large suppliers are both favoured and restrained by Microelectronics

Large suppliers of the electromechanics such as Siemens or Kloeckner-Moeller of course took up the trend to microelectronics. The two success factors for large suppliers in this time were

  • the benefit for machine-builders to get both technologies, microelectronics such as PLC and electromechanics such as contactor-based control technology, from a single source. This made the conversion from the old to the new technology easier - a process that required a certain time both with the machine-builders and their customers.
  • the need of the machine-builders and their customers to be able to use s solid floor in form of a standard amid the fast developing microelectronics. Siemens could benefit from this need with its Simatic S5 and Step5.


The restraining factors for large suppliers in this time were

  • the rapid development of microelectronics and its enhancement to ever more user-friendly products. At this point the large suppliers had more difficulties than their new medium-sized and focused competitors.
  • the balancing act offering electromechanics and microelectronics at the same time. That led to speed losses and obstructed the focusing on microelectronics.

 

The third part of this article serial will highlight how the market structure of the suppliers of automation technology changed during the second main trend in automation - a ever higher degree of integration - and will gives an outlook to the future development.


The three-part serial "Automation trends and market structure":

 

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