Drives and Controls Magazine

Global drives market goes into decline

01 May, 2009

The global market for low-voltage AC and DC drives will shrink by 5.6% this year, according to a revised forecast issued by the market analyst, IMS Research. Previously, the company had been predicting that the market would expand by 3.6% during 2009 to reach a value of $10.14bn but, based on the latest information from drives suppliers, it is now forecasting that global revenues will fall from $9.79bn last year to $9.44bn in 2009.

IMS expects the market to start recovering in 2010, when it will return to growth with a 6% expansion to reach a value of $9.8bn. But it won’t exceed the $10bn mark until 2011, when IMS expects it to grow by a further 8.1%. In 2012, the market will expand yet again, by 9.5%, to reach a value of $11.6bn. Under IMS’ original forecasts, the global market for LV drives would have been worth at least $1bn more ($12.73bn) by 2012.

There are no signs that the global drives market will return, in the short term, to the boom it experienced in 2007, when it grew by more than 20% – or even in 2008, when it expanded by 10.6%.

IMS says that it considered several factors in reaching its revised forecast. One was that the machinery market performed worse than expected during the first quarter of 2009. In addition, during the last quarter of 2008, GDP declined by 1% in the US, 1.5% in the EU and 3.3% in Japan.

A slightly rosier picture emerges from China, where IMS predicts that the LV drives market will grow by 5% during 2009, helped by a government stimulus package that is targeting end-users.

Another reason for the market contraction, according to IMS, is the continuing problems with capital lending. Tight lending conditions are affecting previously strong growth sectors such as renewable energy. Several component suppliers and wind turbine manufacturers exhibiting at the recent Hannover Industrial Automation Show reported that while demand for wind projects is still abundant, many of the projects have encountered significant delays because of restricted lending by banks. This, in turn, has caused problems securing funding for costly, large-scale wind and solar farm projects.
IMS notes that many drives suppliers have reported a slight increase in orders in the second quarter of 2009, and says that its forecasts for 2010-2012 remain positive. IMS analyst Jenalea Howell says that government legislation and stimulus packages will provide opportunities for LV drives suppliers. She expects the market to emerge from the recession slightly smaller than before, and to resume positive growth in 2010.