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Client Focused R&D to Offer Greatest Potential for Protecting Future Revenues in German Electric Drives Market

Client Focused R&D to Offer Greatest Potential for Protecting Future Revenues in German Electric Drives Market

LONDON, December 7 /PRNewswire/ -- Increasing demand from end users for technological integration is compelling German drives manufacturers to adapt product offerings and increase investment in research and development (R&D) to complement the already complex and automated manufacturing environment.

"The growing popularity of factory automation systems means that drives need to integrate within the wider manufacturing network environment" explains Frost & Sullivan (http://automation.frost.com) Research Analyst Martina Blazkova. "Some manufacturers are already positioning themselves to take advantage of this trend and combat the increasing price competition from Far Eastern manufacturers at the less-intelligent end of the market."

With end users showing a clear preference for space and cost savings and easily installed products, there has been a significant rise in demand for a variety of new, compact and multi-functional products. At the high end of the market, other technological developments are being directed towards supporting the decentralisation of "intelligence" of the manufacturing IT network, including, for example, supporting the adoption of Ethernet-based technologies in the communication process, and meeting more demanding safety and security regulations.

Increasingly, manufacturers are being expected to support extensive product ranges, covering all segments of the drives market. Despite the growing divergence in the functional capabilities of drives and their ability to adapt to specific manufacturing sectors, end users are looking to limit their supply chains, and are showing movement towards companies able to support an extensive range of products. In time, this is likely to create R&D issues for manufacturers as they look to balance the potentially conflicting demands of features such as miniaturisation, improved remote control facilities and the capacity for greater independence and network communication.

Advanced features are boosting overall revenues in the German drives market. In 2004, the total electric drives market was valued at $778.1 million and is expected to grow at a compound annual growth rate (CAGR) of 1.8 per cent to reach $884.1 million by 2011.

Although R&D is taking on greater priority, drive manufacturers cannot afford to sacrifice quality in a bid to increase the range of sophisticated technical features. This is largely because China and South Korea are entering the market with low-cost and increasingly high-quality options, forcing current market participants to bring in a variety of value-added features.

"The challenge to overcome the threat posed by new entrants will be to prevent these companies from gaining a foothold in the market and changing the market's existing perception," says Ms. Blazkova. "Therefore existing suppliers should emphasise their tradition and reputation within the market - while new entrants may offer purchase cost advantages, existing suppliers may be able to offer better implementation, training and consultancy services".

These developments and innovations are forced by customers' requirements such as shorter time-to-market, increased productivity, reduction of life cycle costs as well as high product quality and reliability.

The ongoing product developments are expected to support the future demand of electric drives with manufacturers already offering more precise, smaller-sized compact complex solutions, particularly in the alternate current (AC) servo drives market.

In fact, the AC servo market is proving to be the main engine of total market revenue growth, supported by the on-going, if slow, restructuring of key German industrial sectors, such as food & beverage towards smaller and more flexible industrial units.

However, the largest market remains the AC standard electric drives, which is expected to continue on an upward trend due to the number of end users opting to shift from direct current (DC) to AC applications.

Further, DC standard drives have been losing market to new AC products, where developments in terms of accuracy, reliability and attractive pricing mean that end-users can exploit the advantages of the wide availability of cheap AC power without sacrificing performance objectives.

The eastern enlargement of European Union is also having a positive impact on the German drives market, with the easing of restrictions proving to be advantageous for export-oriented and internationally active German companies across all industry sectors.

Looking ahead, since drives are a relatively difficult product to differentiate from a technical point of view, the generic strategy of market niching by particular product type or industry sector will provide some benefits.

"This increasing sophistication in manufacturing systems will result in higher average prices, while the shift from AC to DC systems should produce increasing unit shipments for the overall market," observes Ms. Blazkova.

However, even in some of the fastest growing areas, end users will have significant power to restrict manufacturer's pricing options. In such a scenario, both the manufacturer's brand and the product's reputation are likely to become critical factors in protecting sales margins.

"End-user's familiarity with companies and modes of operation are gaining importance, reiterates Ms. Blazkova. "Drives manufacturers must focus on smaller industrial units that are traditionally less price sensitive, purchase in lower volumes and are more interested in establishing strong relationships."

If you are interested in a virtual brochure, which provides manufacturers, end users and other industry participants an overview of the latest analysis of the German Electric Drives Sourcebook, then send an e-mail to Magdalena Oberland, Corporate Communications, at [email protected] with the following information: your full name, company name, title, telephone number, fax number, e-mail address and source of information. Upon receipt of the above information, an overview will be sent to you through e-mail.

As part of the Electric Drives series Frost & Sullivan has also published the UK Electric Drives Sourcebook, French Electric Drives Sourcebook, Italian Electric Drives Sourcebook, UK Electric Drives End-User Analysis, German Electric Drives End-User Analysis, French Electric Drives End-User Analysis and Italian Electric Drives End-User Analysis.

Background

Frost & Sullivan, a global growth consulting company, has been partnering with clients to support the development of innovative strategies for more than 40 years. The company's industry expertise integrates growth consulting, growth partnership services and corporate management training to identify and develop opportunities. Frost & Sullivan serves an extensive clientele that includes Global 1000 companies, emerging companies, and the investment community, by providing comprehensive industry coverage that reflects a unique global perspective and combines ongoing analysis of markets, technologies, econometrics, and demographics.

Media Contacts: Europe: Magdalena Oberland Corporate Communications P: +44-(0)-20-7915-7876 E: [email protected] Americas: Tori Foster Corporate Communications P: +1-210-477-8448 E: [email protected] Asia Pacific Donna Jeremiah Corporate Communications P: +603-6304-5832 E: [email protected] India: Surbhi Dedhia Corporate Communications P: +91-22-2832-4705 Ext: 131 E: [email protected] Australia: Sharmin Jassal Corporate Communications P: + 61-2-8247-8900 E: [email protected]

Key Words in this Press Release : electric drives, Germany, Ethernet, alternate current, AC, AC drives, AC servo drives, direct current, DC, DC drives, research, information, market, trends, technology, service, forecast, market share

List of Key Industry Participants: Siemens, ABB Automation Products, SEW-EURODRIVE, Bosch Rexroth, KEB, Yaskawa, Lenze, Schneider Electric, Berger Lahr, Mitsubishi, Baumueller, Danfoss, Omron, ,VACON, Lust Antriebstechnik.

Frost & Sullivan

Media Contacts: Europe: Magdalena Oberland, Corporate Communications, P: +44-(0)-20-7915-7876, E: [email protected]. Americas: Tori Foster, Corporate Communications, P: +1-210-477-8448, E: [email protected]. Asia Pacific: Donna Jeremiah, Corporate Communications, P: +603-6304-5832, E: [email protected]. India: Surbhi Dedhia, Corporate Communications, P: +91-22-2832-4705 Ext: 131, E: [email protected]. Australia: Sharmin Jassa, Corporate Communications, P: + 61-2-8247-8900, E: [email protected]

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