Industrial and Medical Electronics

Major trends

After having recovered in 2010 from the 2009 recession, the global industrial sector market has not been immediately affected by the financial crisis in 2011. But the global weakness of the economy in the developed countries and a slower growth in the developing ones stopped this favourable orientation, and the world industrial electronic equipment production growth rate decreased from 8.4% in 2011 to 2.6% in 2012 and 3.5% in 2013.

The U.S. industrial electronics industry, strongly positioned on all segments of the industrial market and at the forefront of innovation, was more successful in 2012 than the European one, but the global evolution on both sides of the Atlantic was not very different from 2010 to 2013. The situation in Japan has not been very different from what we observed in Europe and North America. Outside Japan, the Asian economic prosperity has also raised the need for local governments to set up or develop infrastructures that were poor or even non-existent. This is also happening in other parts of the developing world. Innovation and cost savings are now the key growth drivers for industrial companies in this sector. Introducing more and more electronics and intelligence into their products is mandatory to survive.
As a result, the global industrial and medical electronics production will start a new growth cycle, which is forecast to reach 6.5% in average over the period 2012-2017.

In 2012, Europe still accounted for 28% of the world industrial electronics production (including medical electronics), North America 24%, and Japan 18%. All together, these three regions represented 70% of the world production, and 66% of world market. But these positions are rapidly evolving and China, which passed Japan in 2010, will account for 22% of the world production by 2017, almost on par with North America. At that time, Europe will still retain its leading place, but its share will have shrunk to 28% in terms of market and 26% in terms of production. Demand today is outweighed by major energy concerns. This modifies the expected technological roadmap and the renewal demand routines. A growing part of the market will turn towards smart energy saving systems.

Industrial electronic equipment production breakdown by product in 2017

Segmentation
Industrial and medical electronics can be divided into five segments:

1. Transportation: electronics equipment for railways, marine and off-road vehicles applications, (excluding automotive electronics, aerospace, and defense systems).

   - Rolling stock and Rail Control are the two segments of the Railway industry using electronics. The world railway systems market is still in a positive cycle phase, despite the slow-down in China. A growing part of this market will take place in emerging countries in Latin America, Central Europe (CIS countries) and Africa and Middle East.

   - Off-road vehicles include three major segments: agricultural machinery, construction machinery and industrial trucks. Electronic applications include engine, vehicle and tool control, as well as sophisticated functions for farming process control.

   - Marine: the demand for new merchant ships decreased in 2011 by 31% and again in 2012 by 33%. 2013 looked a lot better. China and South Korea are now approximately on par, sharing together 70% to 75% of the world market, followed by Japan, which is progressively declining.

   Transportation, World and European production by product segment, 2012-2017, million euros

   	World CAGR 2012-17	Europe CAGR 2012-17
   Total	5.4%	3.2%
   Railway equipment	3.1%	2.5%
   Marine, off-road	6.8%	4.1%

   CAGR: Compound Annual Growth Rate
   Source: DECISION (Extract from the World Electronic Industries 2012 – 2017 Forecast report)

2. Power electronics: includes UPS (Uninterruptible Power Supply), labs and industrial power supplies, solar inverters, and power distribution networks as a first segment, solar panels and electronic lighting as two other ones.

   The market and production of power supplies, power conversion and power grid equipment are related to telecommunication infrastructures, data infrastructures (data centers), electrical or electronic OEM equipment conversion, and the increasing need for high quality and secured electric power in general. The world solar inverter market is forecast to double between 2012 and 2017 in terms of yearly new installed gigawatts. Power distribution networks are today oriented toward energy efficiency required by all their end-user markets. The main manufacturers are offering complete solutions including controls and services in addition to their classical product.

   In 2012, 31 gigawatts of new solar panels were installed worldwide, a growth of only 2.3% over 2011. For the first time, the European market, the most developed, declined by 23%. This evolution is explained by a progressive decrease of the public feed-in tariffs set in place in the different countries which made investor decisions more difficult.The basic component of a solar panel is still a group of solar cells, most of the time made of crystalline silicon (c-Si), and manufactured from wafers. In 2012, wafers were manufactured at 80% in China.
   The revolution in lighting technology is LED lighting. Today LEDs have only just started penetrating the general lighting market (10% market share in 2012). China has decided to start banning the sale of incandescent lamps from 2013, which will open the biggest world lighting market to the LED technology. And LED prices are now progressively decreasing and this trend will accelerate.

   Power electronics, world and European production by product segment, 2012-2017, in million euros

   	World CAGR 2012-17	Europe CAGR 2012-17
   Total	8.7%	6.4%
   Power supplies, UPS, power distribution	6.0%	4.3%
   Solar panels	11.0%	8.9%
   Electronic lighting (lamp & control)	9.5%	12.4%

   Source: DECISION (Extract from the World Electronic Industries 2012 – 2017 Forecast report)

3. Automation: control equipment for factory and utility automation on one hand, and building and home automation for the second one.

   Growth in the Automation field is closely related to capital good markets, and economic activity. This segment is still dominated by three European manufacturers (Siemens, ABB, Schneider Electric), four American (Rockwell Automation, Emerson, Honeywell, General Electric), and one Japanese (Mitsubishi Electric). New Chinese actors are progressively coming, such as the Chint group.

   The automation market is classically segmented between factory and utility automation, and building and home automation. Among the main devices included in the various industrial automation systems are: PLC (Programmable Logic Controller) and PAC (Programmable Automotion Controller) used in batch industries, DCS (Distributed Control System) used in process industries, AC Drives, Numerical Control systems, industrial robots, and industrial networks. M2M communication technology deployment will impact the factory automation world.

   The main driver of the Building Automation market today is energy efficiency. The Home Automation market covers four application segments: comfort, energy efficiency, health, and security.

   Automation, World and European production growth 2012-2017, in million euros

   	World CAGR 2012-17	Europe CAGR 2012-17
   Factory/utility automation, Building/home automation	6.3%	4.9%

   Source: DECISION (Extract from the World Electronic Industries 2012 – 2017 Forecast report)

4. Medical electronics: imaging systems, implants, other diagnosis and therapy equipment.

   The medical imaging industry includes different technologies: radiography (X-Ray), scanners, magnetic resonance imaging (MRI), ultrasound, nuclear medicine, etc. The market is very concentrated: the first three players, General Electric, Siemens, and Philips corner 70% of the total market. The fourth, Toshiba, is present mainly in Japan.
   The most famous implants including electronics are making the Cardiac Rhythm Management industry (CRM). The most important devices are the pacemaker and the defibrillator. Derived from the CRM implantable devices technology, Neuromodulation is a fast growing market.

   Among the other diagnosis and therapy equiment are: respiratory equipment, dental devices, functional screening systems (ECG, EEG, Holters), functional substitutes (dialysis equipment, hearing aid, etc.) patient monitoring equipment, surgery equipment, medical lasers, etc.

   In the medical world, new technologies are arriving on the market with Telemedicine acts allowing for distant diagnosis and follow-up treatment at home, and e-Health systems deployment providing well-being and security for depending and elderly people. Nanotechnologies will also bring new perspectives for illness diagnosis, surgery, and drug delivery.

   Medical Electronics, World and European production growth, 2012-2017, in million euros

   	World CAGR 2012-17	Europe CAGR 2012-17
   Imaging systems, therapy equipment, implants, etc.	6.3%	4.4%

   Source: DECISION (Extract from the World Electronic Industries 2012 – 2017 Forecast report)

5. Instrumentation, measuring and test equipment: Automatic Test Equipment (ATE), general instrumentation, telecommunications instrumentation, metering.

   The semiconductor industry accounts for over 80% of ATE demand, which is, as a result, highly cyclical. The ATE market is extremely concentrated, in fact a duopoly between Teradyne and Advantest (since Advantest acquired Verigy in 2011). The rest of the electronic test and measurement market includes: general test instruments (oscilloscopes, analysers, etc.), specific dedicated instruments used for instance in geophysics or by the nuclear industry, electronic weighing systems. The General Instruments market includes devices such as oscilloscopes, analysers, multimeters, etc. and some specific instruments used for instance in geophysics or by the nuclear industry.

   Electronic Weighing systems are used by labs and industrial facilities and communications and network test equipment are needed to test all communication networks and terminals.
   Metering has become today’s smart metering, and is a growing market dedicated to utilities and homes. Combined with Advanced Metering Infrastructures (AMI) systems, smart meters are offering either just Automated Metering Reading (AMR) capabilities, or two-way communications and monitoring capabilities.

   Instrumentation, Measuring, and Test equipment World and European production growth

   	World CAGR 2012-17	Europe CAGR 2012-17
   Instrumentation, Measuring and Test equipment	5.3%	4.1%

   Source: DECISION (Extract from the World Electronic Industries 2012 – 2017 Forecast report)