Frost & Sullivan: What’s Hot in the Industrial Automation and Process Control Industry

What’s Hot in the Industrial Automation and Process Control Industry Trends, Opportunities, and Challenges through the Eyes of Key Players in the SectorMay 2012

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Table of ContentsIntroduction 5-7Ø About this Market Insight 6Ø Hot Topic Thought Leader 7What’s Hot in 2012 8-26Ø Key Perspectives on Growth in the Industrial Automation and Process Control Industry in 2012 9Ø Market Highlights for 2012 10Ø Industrial Automation- What Participants see as Hot Topics in 2012 11Ø Industrial Automation – Primary Focus Regions 13Ø Pumps , Valves and Compressors - What Participants see as Hot Topics in 2012 14Ø Pumps , Valves and Compressors– Primary Focus Regions 16Ø Welding, Cutting and Joining Technologies - What Participants see as Hot Topics in 2012 17Ø Welding, Cutting and Joining Technologies– Primary Focus Regions 19Ø Drives and Motors Market - What Participants see as Hot Topics in 2012 20Ø Drives and Motors Market – Primary Focus Regions 22Ø Industrial Automation and Process Control Market Convergence with other Industries 23Ø Global Hotspots Industrial Automation and Process Control Market 25Ø Three BIG predictions 26About Frost & Sullivan 27 - 32 4

Introduction 5

About this Market InsightBased on a survey of several thousand key companies conducted across Europe in December 2011,this Market Insight highlights the hot topics for growth that have been identified in the industrialautomation and process control industry sector for 2012 and beyond.Data and opinions of key stakeholders, combined with analysis and commentary from Frost & Sullivanindustry experts, have been used to present key market highlights, hot growth topics, global and regionalhot spots, areas of market convergence, and bold predictions for 2012.In this study, a summary of the highest growth areas for the industrial automation and process controlindustry is presented for the following key sectors: • Pumps, Valves and Compressors • Welding, Cutting and Joining • Drives and Motors 6

MuthuKumar Viswanathan – Hot Topic Thought Leader Functional Expertise 18 years of general management, consulting and market research expertise, which include leading companies with the development and implementation of growth strategies. Specific expertise includes: - Developing market strategies and implementation plans for geographic expansion - Restructuring loss making businesses - Implement market channel strategies Industry Expertise Experience base covering broad range of sectors, leveraging long-standing working relationships with leading industry participants’ Senior Executives in - Process Manufacturing including industrial automationMuthukumar - Lab and field instrumentation products and servicesViswanathan - Test and Measurement and ElectronicsDirector What I bring to the TeamAutomation & Proven leader developing global teams Strategy planning and implementationProcess Control Knowledge in financial management Career HighlightsFrost & Sullivan Expertise in marketing and general management across several leading firms:London - TT Electronics Plc, Managing Director India - Nagman Instruments and Electronics – Export Manager, a leading company in lab instrumentation products Education Masters in Business Administration, University of Madras 7

What’s Hot in 2012 8

Key Perspectives on Growth in the IndustrialAutomation and Process Control Industry in 2012 Sustainability, in terms of energy and1 resource efficiency, a key ingredient for success of global manufacturing industry Asset management and flexible2 manufacturing to drive factory integration with enterprise Aggressively leverage technology in providing automation solutions enabling3 end-users to gain a competitive edge in a global market4 Smart is the new Green High potential for automation and5 customised service solutions in industrial applications Source: Frost & Sullivan analysis 9

Market Highlights for 2012 Key Market Highlights • Hybrid products with narrow product differentiation, initially conceived to counter high competition, is expected to gain end-user recognition. • Flexible manufacturing to aid regional customisation by aligning product portfolio to suit market demand. • The strongest growth is expected in emerging market, especially in the Middle East, South East Asia, and Eastern Europe. Opportunities connected with modernisation of old infrastructure exists in developed regions like North America and Western Europe. • The need for higher productivity and greater efficiency drives organisations to implement greater interaction between the factory floor and enterprise across all end-users. • Growing focus on implementation of energy efficient solutions in both process and discrete industries promotes sustainable manufacturing.. • Factory of the future driven by megatrends like - cyber-security, mobile and wireless technologies, enterprise ecosystems, cloud computing and sustainability. • Energy efficiency concerns dominate business in electric motors market, with class IE3 energy efficiency, a stricter requirement compared to class IE2 energy efficiency, required in 2015. • Wastewater treatment and handling pumps will dominate traditional water pumps across the globe. • Regulatory measures directing increased spending on safety measures - style and innovation drive welding towards a safer future. 10

1. Industrial AutomationWhat Participants see as Hot Topics in 2012Industrial Automation Markets: Identification of Hot Topics (Europe), 2012 Rank Market Topic % of Respondents Nominating as Hottest Topic 1 Industrial Competitiveness and Its Impact on "Future of Factory” 40% 2 Strategic Analysis of Automation and Control Solutions in Oil & Gas Industry 40% 3 Impact of Cloud Computing in Industrial Automation Market 30% 4 Programmable Automation Controller (PAC) Market 26% 5 Automation Opportunities from Smart Grid Initiatives 23% 6 Packaging Machinery Market 21% 7 Interfaces and I/O Devices Market 21% 8 Human Machine Interface Software Market 19% 9 Opportunity Analysis for Automation Vendors in Smart Grid Ma 19% 10 Facility Management Market in Building Automation 17% 11 Mining & Metal Processing Machines Market 15% 12 Substation Automation Market 13% 13 Analysis of the Safety Instrumented Systems Market 11% 14 Analysis of the PLM System Integrators Market 6% 15 The Fashion PLM Market 6% 16 Analysis of the Collaborative PLM Market 2% 17 ACS Market for the Nuclear Industry 2% Source: Frost & Sullivan analysis 11

1. Industrial AutomationWhat Participants see as Hot Topics in 2012 (Contd ...) Market Themes for 2012 Industrial Automation Markets: Top 5 Market Topics (Europe), 2012 • The factory of the future will require paradigm shifts in product formulations, process planning and manufacturing methods. This will call for increased competitiveness from vendors, contractors and end-users alike. • Oil & gas industry , a major end-user of automation products, is a dynamic market that adopts and deploys the latest technological products from the IPC market. • Cloud computing is a megatrend that offers interesting prospects to the world of industrial automation. • The PC-based PLC market or the PAC market is a major segment of the programmable logic controller market. It provides an economic, Source: Frost & Sullivan analysis cost-efficient alternative to high-end PLCs and has received an excellent response from the end-user community. 12

1. Industrial AutomationPrimary Focus Regions Geographic Focus for 2012 Industrial Automation Markets:Primary Regions of Focus for EU Players (World), 2012 • Exciting and growing opportunities in developed countries in Western Europe for automation solutions is expected to boost the European revenues. • Emerging economies in the Asia Pacific region especially China and India requires targeted solutions on specific segments in these regions. • Middle East & Africa provide exciting and growing opportunities in the automation field which are expected to boost the global revenues. Source: Frost & Sullivan analysis 13

2. Pumps, Valves and Compressor TechnologiesWhat Participants see as Hot Topics in 2012Pumps, Valves and Compressors Markets: Identification of Hot Topics (Europe), 2012 Rank Market Topic % of Respondents Nominating as Hottest Topic 1 Pumps Market in HVAC Industry 47% Strategic Analysis of Pumps Market in Water and 2 42% Waste Water 3 Centrifugal Compressors Market 37% End-user Analysis of Pumps Market (Voice of the 4 32% Customer) 5 Industrial Valves and Actuators Market 26% Pumps Market in Commercial and Industrial 6 26% Buildings 7 Pumps Market in Power Generation Industry 26% 8 Process Mixing Equipment Market 21% 9 PD Pumps Market in Food & Beverage Market 21% 10 Artificial Lift Pumps Market 16% 11 Valves Market in Oil & Gas Industry 16% Pumps Market in Chemical and Petrochemical 12 16% Industry 13 Heat Exchangers Market 11% 14 Machine Tools & Cutting Tools Market 5% Source: Frost & Sullivan analysis 14

2. Pumps, Valves and Compressor TechnologiesWhat Participants see as Hot Topics in 2012 (Contd ...) Market Themes for 2012 Pumps, Valves and Compressors Market: Top 5 Market Topics (Europe), 2012 • The trend of ‘Green Building’ affects pumps market in HVAC industry to build strategies that lead to lower energy consumption and higher performance. • Greater focus on water purification techniques and wastewater treatment generates greater demand for pumps used in specialised applications. • Their inherent oil-free nature and high energy efficiency puts Centrifugal compressors in good stead for clean air applications. • End User perspective and insights on the key success factors for higher market penetration rates, and mindshare of the customer. Source: Frost & Sullivan analysis • The introduction of digital and wireless technology have opened new possibilities for valve manufacturers and end users. 15

2. Pumps, Valves and Compressor TechnologiesPrimary Focus Regions Geographic Focus for 2012Pumps, Valves and Compressors Market: Primary Regions of Focus for EU Players (World), 2012 • Eurozone sovereign debt crisis and a mature market in Western Europe necessitates the emergence of a robust growth strategy for Central and Eastern Europe. • Growing economies in Latin America providing skilled manpower, lower cost raw materials and manufacturing are attracting manufacturers to set up base. • Strategies to help improve penetration levels in western Europe as well as new revenue generation by demonstrating service capability and new services such as condition monitoring, advanced diagnostics, and smart pumping. • Focus on providing pumps for core industries such as oil and gas in Middle East and mining in Africa. • Supernormal growth expected from the two fastest growing economies of China and India augurs well for Pump manufacturers looking to tap market Source: Frost & Sullivan analysis potential. 16

3. Welding , Cutting and Joining TechnologiesWhat Participants see as Hot Topics in 2012Welding, Cutting and Joining Markets: Identification of Hot Topics (Europe), 2012 Rank Market Topic % of Respondents Nominating as Hottest Topic 1 Cutting Equipment Market 60% 2 Automation Solutions in the Welding Market 60% 3 Analysis of Safety and Hazardous Procedures 40% 4 World Laser Market 40% 5 Welding Opportunities 40% 6 Analysis of Welding Market for Automotive and 40% Transportation 7 Welding Consumables Market 20% 8 Emerging Technologies in the Metal Joining 20% Market 9 End-user Analysis of Welding Equipment and 10% Consumables Market Source: Frost & Sullivan analysis 17

3. Welding , Cutting and Joining TechnologiesWhat Participants see as Hot Topics in 2012 (Contd ...) Market Themes for 2012 Welding , Cutting and Joining Technologies Markets: Top 5 Market Topics (Europe), 2012 • End users increasingly being involved in decision making on effective way to join materials for structural integrity and reducing costs. • Increasing safety measures and need for standard platform is currently one of the key reasons for automating manufacturing process including welding activities. • Automation also helps welders focus less on repetitive tasks, more on quality. • Fibre laser cutting and plasma cutting forging ahead with increased demand from the structural fabrication industry. • Lasers - New applications expected to ensure a diversification of customer base and fibre lasers slowly replacing traditional Source: Frost & Sullivan analysis lasers anticipated to reinforce growth trends. 18

3. Welding , Cutting and Joining TechnologiesPrimary Focus Regions Geographic Focus for 2012 : Welding , Cutting and Joining Technologies Markets: • Advancing market maturity and a weak economy inPrimary Regions of Focus for EU Players (World), 2012 North America and Western Europe – necessity to observe historical trends ,embrace the future with aggressive growth plans. • Need to have targeted strategies for emerging regions like the BRIC’s and the Middle East. These economies are pumping high investments into the construction , automotive and the energy industries. • Newer market opportunities in the Asia Pacific region especially China and India requires targeted solutions on specific segments in these regions. • Exciting and growing opportunities in the field of welding equipment and consumables in Brazil , Turkey and Russia expected to boost the global Source: Frost & Sullivan analysis revenues. 19

4. Drives & MotorsWhat Participants see as Hot Topics in 2012Drives & Motors: Identification of Hot Topics (Europe), 2012Rank Market Topic % of Respondents Nominating as Hottest Topic1 Electric Drives & Motors Market In Wind & Solar Power 71% Industry2 Motors Market in Pumps, Fans & Compressors Applications 48%3 Electric Drives & Motors Market in Oil & Gas Industry 48%4 Impact of Electric & Hybrid Automobiles on Motors Market 32%5 End-user Analysis of Motors & Services Market (VoC) 32%6 Automotive Electric Motors Market 26%7 Soft Starter Market 16%8 Explosion Proof Motors Market 13%9 Belt & Chain Drives Market 13%10 Strategic Analysis of Bearings Market 13%11 FHP & IHP Motors Market 6% Source: Frost & Sullivan analysis 20

4. Drives & MotorsWhat Participants see as Hot Topics in 2012 (Contd ...) Market Themes for 2012 Drives & Motors Markets: Top 5 Market Topics (Europe), 2012 • Focus on renewable energy due to shortage in fossil fuel and rising energy demand in developing economies resulting from high industrial growth necessitates research focus on the drives market in the wind and solar industries. • Most of the motors applications in different industries are in pumps , fans and compressors. Analysis of the market will provide a new dimension for the vendors. • Oil & gas industries demand for drives and motors is unique with significance on explosion proof regulation conformance. • Burgeoning growth of electric and hybrid vehicles in the automotive market is expected to augur well for the motors industry. Source: Frost & Sullivan analysis • Shift of focus to the service segment necessitates analysis of motors service market. 21

4. Drives & MotorsPrimary Focus Regions Geographic Focus for 2012 Drives & Motors Markets:Primary Regions of Focus for EU Players (World), 2012 • Europe is heading into a difficult economic climate, the research focus is expected to be on the Western Europe region. • Eastern Europe provides a higher scope for the vendors in the drives and motors market as it has pockets of emerging economies. • North America is a mature market and the research focus on this region is likely to provide a content for the vendors to strategise their resources for consolidation. • Middle East and Africa are likely to spur demand in this market owing to improved FDI in these regions, but the political uncertainties in many countries is likely to impact business in this region. Source: Frost & Sullivan analysis. 22

Industrial Automation and Process Control MarketConvergence with other IndustriesKey Industries Tracked in Addition to Company’s Core Markets (Europe), 2012 Core Market Cross-interest 1 Cross-interest 2 Cross-interest 3 n A&D Security 50% ICT 29% Electronics 24% 42 A&T Electronics 24% ICT 19% EPS 12% 86 CMF A&T 40% EBT 36% EPS 30% 53 Electronics M&I 53% EPS 47% IPC 47% 15 EPS EBT 32% IPC 21% A&T 15% 73 EBT EPS 58% ICT 15% M&I 15% 26 HC CMF 18% ICT 14% M&I 8% 90 IPC EPS 74% A&T 41% EBT 26% 27 ICT A&T 30% EPS 24% HC 21% 66 M&I EPS 25% EBT 25% IPC 25% 8 PPE A&D 17% CMF 17% EPS 17% 12 Security ICT 39% A&D 33% EBT 33% 18A&D = Aerospace & Defence HC = HealthcareA&T = Automotive & Transportation IPC = Industry & Process ControlCMF = Chemicals, Materials & Food ICT = Information & Communication TechnologyEPS = Energy & Power Supplies M&I = Measurement & InstrumentationEBT = Environment & Building Technologies PPE = Personal Protective Equipment Source: Frost & Sullivan analysis 23

Industrial Automation and Process Control MarketsConvergence with other Industries (Contd ...) Key Areas of Technology Convergence • Smart Grid Automation ensures implementation of sustainable environment in utility industry. • Expected explosive growth in demand for electric vehicles in the next few years provides scope for growth in charging station automation. • High potential to implement modern technologies, including low footprint construction techniques, smart water solutions, energy-efficiency improvements and a broad range of opportunities for niche markets of desalination and water reuse. • The economic impacts on climate change are crucial for water and wastewater industry. Drought conditions create good opportunities to develop storm water management and water reuse and to implement progressive strategies for catchment and retention. All of these techniques would require pumps and pumping systems. • The growth of renewable energy is set to increase considerably in the next two decades on account of the growing emphasis on sustainable business practices providing scope for automation vendors in new power grid integration projects. • Automotive industry is currently focusing on weight reduction methods and light weight performance parts for cars, including carbon fibre and fibreglass bonnets, boots and wings- this is driving new technologies like aluminum welding , plastic welding , laser welding and other technologies that will create a lower deposit of metals thereby reducing weight. 24

Global Hot Spots in the Industrial Automation and Process Control IndustryIndustrial Automation and Process Control Markets: Global Hot Spots (World), 2012Industrial markets in Americas which were the The subsequent transition of the Manufacturing-ledmost impacted due to sharp reduction in manufacturing base to low-cost Eastern recovery expected toconsumer spending. also witnessing European countries has opened new revive the industrialpostponements of production activities and prospects for market sustainability. Many automation market inshutting down of plants is expected to see heavy and light industry plants exist, which, Russiaincreased activities once modernised, will constitute good bases for various industrial developments thereby Russia North America indicating a huge market for industrial and The automation industry saw its automated products strongest sustained growth in China during the global recession. The Europe Ongoing economic growth drivers for Chinese industrial reform as well as automation now include the energy increased foreign China sector along with oil and gas. investment in Middle The Middle East India East supports growth of industrial markets APAC Industrial Automation in Asia is one such industry Africa that is poised for potential Latin America Right mix of process development. In these industry in India regions process Rapid Urbanisation and provides excellent applications such asSeveral opportunities exist in countries Governments’ Initiatives growth opportunities welding are going to firstlike Brazil which are providing towards Infrastructural for the entire witness increasingopportunities for growth post Development ensure spectrum of automation, then moverecession. The industrial automation continued growth for industrial automation toward more sophisticatedindustry in Latin America consist of industrial automation and and process control applicationsdynamic developing markets that are process control products products and systemsexpected to generate large revenues in and servicesthe future Source: Frost & Sullivan 25

Three Big Predictions for 2012 BRIC and other emerging economies across the globe are likely to sustain 1 high growth in industrial automation markets Four major spheres of influence that determine business models in future 2 factories are Integrated Enterprise Ecosystem, Sustainability , Life Cycle Assessment and Eco-efficiency Analysis Megatrends such as cloud computing, wireless communication, cyber 3 security are the next growth drivers for industrial markets Source: Frost & Sullivan analysis 26

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Frost & Sullivan: What’s Hot in the Industrial Automation and Process Control Industry

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