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Good News Ahead for Automation Markets
by Winn Hardin, Contributing Editor - AIA Posted 02/09/2012
Automation markets, including machine vision, robotics, and motion control, can expect another solid year in 2012 thanks to tax incentives, access to cheap money, and shortages of cost-effective, skilled labor.
Despite a global economy that seems permanently trapped in rough seas – caught in a maelstrom of capitulation, optimism, and political dichotomy – economist Alan Beaulieu, AIA Director of Market Analysis Paul Kellett, and a handful of machine vision market makers all say they expect solid growth in 2012 of somewhere between 4% and 5%, similar to what the automation markets saw in 2011.
“2011 was a difficult but very good year,” notes Steve Kinney, Director of Technical Pre-Sales and Support for JAI Inc. (San Jose, California). “Everyone expects that we’ll continue to see difficult business conditions in 2012, but we do expect the economy will grow and that JAI is well positioned to grow its market share as a result. We expect the U.S. market to be strong, while Europe is flattening out. The Asian slowdown was strongly influenced by Japan’s earthquake, but we expect those markets to bounce back as the effects pass.”
Could’ve Been Even Higher
During his speech at the recent AIA Business Conference, Beaulieu brushed aside concerns of another recession in 2012, saying that he didn’t expect a mild global recession to begin until late 2013, maturing in 2014 (although he cautioned that a second recession in 2019 doesn’t look good).
In comments after his presentation, Beaulieu added that he would have predicted even higher growth for 2012 except for the reduction of accelerated capital expenditure tax incentives from the Jobs Act and Tax Relief Act of 2010. Those stimulative acts allowed many U.S. businesses to write off 100% of capital expenditures within the first year, resulting in a flurry of capital expenditure business for automation providers, including machine vision component manufacturers and integrators. Fortunately for companies in the U.S., the legislation still allows up to 50% ”bonus” depreciation in 2012, which should continue to support the growth of automation markets.
Beaulieu also pointed out that government-based short-term stimulative drivers are supported by long-term labor shortages in developed countries. The U.S.’ fertility rate stands at 2.06, while most European countries are below 2.0 and Asian countries are at or near the “no return” rate of 1.3. Beaulieu said that no country has recovered from a fertility rate below 1.3, or approximately where Russia is today.
These short- and long-term drivers, along with other factors, are why AIA’s Kellett says he expects the North American machine vision market to perform well in 2012 and beyond, led by semiconductors and automobiles, food and beverage, and energy production (petroleum and coal). Kellett calls for an average growth rate in the machine vision market of 4.3% in 2012, which represents a return to the long-term machine vision market growth trend since 2002. Both Kellett and Beaulieu say they believe in the long-term profitability of the automation market as developed countries seek to increase productivity in the face of shrinking labor pools.
Analysts expect automotive, semiconductor, and consumer electronics markets will continue to lead growth in the manufacturing sector, but there are other opportunities, too.
“We’ve seen tremendous growth across all four of our segments – namely robot guidance, defect detection, assembly verification, and tracking,” says Nicholas Tebeau, Manager, Vision Solutions Business Unit Industrial Solutions at LEONI Vision Solutions (Lake Orion, Michigan). “We chalk that up to both strong market growth and the LEONI’s relatively new entry into the machine vision automation market from our traditional support of the robotics industry.”
“During the downturn,” Tebeau continues, “automotive companies in particular were pressured to make their business as profitable as possible by cutting waste. During the recession, companies didn’t have money to invest, but now they do. And now that the market has turned slightly, we don’t expect them to stop looking for ways to cut waste and increase productivity.”
When it comes to new markets, Tebeau and Beaulieu had one common focus out of many: namely the food and beverage market. “There’s been a lot of interest from the U.S. government wanting the food industry to use product-level tracking. It wasn’t too long ago that food-packaging companies didn’t think much about machine vision for product tracking. Today, they know about the technology and what it can do, and I think we can take that as an indicator of significant growth opportunities in that market,” said Tebeau.
The Time Is Now
Veteran machine vision integrator David Wyatt, CEO of Automation Doctor Inc. (Mishawaka, Indiana), says that that machine vision should look to the strengths of the next generation to see where growth will come. “I think you’re going to see a lot of young entrepreneurs entering the integration business, just like Tom Brennan at Artemis Vision (Denver, Colorado). After speaking with Tom I was struck by the new tools and methods that young integrators bring to the market place - software mainly. Tom and I, for instance, are two of only 18 advanced AIA Certified Vision Professionals. It is encouraging that the younger generation is looking to AIA certification so early.
Wyatt wasn’t the only person at the AIA Business Conference talking about adopting new tools to boost sales and improve customer service. Beaulieu lists 11 items on his automation company’s strategic ”to-do” list. First, while money is cheap, it is important to lock in low rates for the long term. Borrow now to keep cash available for the slight recession predicted in 2014 and potentially more drastic recession of 2019. In the meantime, spend money hiring talent, training, and buying productivity-enhancing tools while the market stays hot for the next five to six years. Beaulieu suggests now is the time to invest in your company, spend on advertising and market research, and capitalize on what will be a growth market for the next several years. Consider raising prices, buying rather than leasing land, and working on what’s next for your business.
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