In the five years prior to the economic downturn in 2009, revenue from low-voltage motor drive sales grew by an average of over 12 percent annually. Since that time, the market has only grown by approximately 2 percent CAGR over the past six years, according to market research firm IHS. Excluding the double-digit revenue contraction that occurred in 2009, the market has still only averaged half the annual growth experienced pre-recession. Overall expansion has not recovered to previous growth rates and is not forecast to return to the magnitude achieved prior to the downturn, IHS says.
According to Kevin Schiller, analyst for Industrial Automation at IHS, while residual regional economic weakness has undoubtedly impacted demand in select markets, recent years’ modest sales estimates from aggregated supplier reports is symptomatic of “new normal” growth from a maturing product market.
“Market maturity seems long overdue for a product whose introduction roughly coincides with the first Apple Macintosh computer,” Schiller said. “While the variable frequency drive is by no means a recent innovation, several improvements to product components and design have evolved drives over the past 30 years into a product far removed from its ancestors. These components and designs are now becoming standardized among a growing competitive landscape, creating a commoditized product and driving down prices.”
Following these product innovations, inorganic factors prolonged the momentum in expanding drive markets, increasing drive-motor attachment rates by overcoming two significant adoption barriers: awareness/understanding and upfront cost. While there has not been an abrupt decline in these catalysts, their waning influence in a maturing market has diminished the long-term growth outlook.
“As the attachment rate of drives to motors moves closer to its apex, the growth in demand will understandably decelerate,” Schiller said. “In addition, the higher drive attachment rate will also reduce future retrofit opportunities, which have recently provided lucrative demand in sizeable drive markets such as HVAC and food, beverage, and tobacco sectors.”
The deceleration in demand for drives is more significant in process markets that have high drive-motor attachment rates, such as Japan, Western Europe, and North America. These markets are only forecast to increase in revenue by approximately 4 percent CAGR from 2014 to 2019. Incentives for retrofits will continue to buoy markets above other industrial automation equipment in short-term forecasts, but a growing movement toward evaluating energy efficiency at a system level is predicted to further commoditize the low-voltage drives markets in these regions. As these regions also have sizeable discrete markets, machine building sectors that export to other regions are forecast to provide the largest opportunities.
Markets with lower drive-motor attachment rates such as Asia Pacific (outside of China) and Latin America are forecast to have the best opportunity for long-term growth, in domestic process sectors as well as a destination for discrete machinery exports. Drive revenue in these markets are forecast to grow by over 7 percent CAGR from 2014 to 2019.