Monday, August 12, 2013

Industrial Automation and Controls Business – Why ChiNdia (China+India) Matters

Today China and India are among the fastest growing economies in the world that also present tremendous market opportunities to those willing to join the fray for newer growth opportunities. They are no longer just cost-effective manufacturing and services centers, but the world’s two biggest markets with rapidly expanding domestic market and infrastructure needs.


For the industrial automation sector Chindia market is even more important. According to ARC Advisory Group’s 2013 research report titled, Human Machine Interface Software and Services Global Market Research Study, “both Chinese and Indian economies will continue to be a growth engine for HMI software and services as they pursue expansion and improvement of internal infrastructure and manufacturing operations to meet increasing domestic demands, as well as to increase energy efficiency and the quality of their processes.” When it comes to HMI software and services Asia remains the world’s third largest market. ARC’s 2013 market research study predicts that the Asia will be the fastest growing region at almost 10 percent compound annual growth rate (CAGR) from 2012 to 2017.

The economy of India is the tenth-largest in the world by nominal GDP and the third-largest by purchasing power parity (PPP). The World Bank sees 6.7% GDP growth for India by FY2014–15. With a young and rapidly growing population, India is faced with a multitude of challenges including city infrastructure, transportation, water & waste water management, power generation and clean drinking water. China on the other hand is the world’s second largest economy as well as the largest exporter of manufactured goods. China has made huge investments made in infrastructure and results are there for all to see; however, it also faces challenges related to rapid urbanization, such as city infrastructure development and management, waste water management, and power.


Opportunities in the Guise of Problems

Water & wastewater, power generation, oil & gas, mining & metals, electronics manufacturing and automobile are the key industries with great potential in both China and India. According to ARC Advisory Group study (ARC’s 2011 report, Human Machine Interface Software and Services Worldwide Outlook), “the water & wastewater industry represents one of the greatest opportunities for the automation business as a whole, and the HMI software and services market in particular, through the next 20 years. The infrastructure needed to supply clean water and help protect water sources from human, industrial, and agricultural contaminants is sorely burdened on many different fronts.”

Rapid population and industrial growth in both China and India have posed few infrastructure-related challenges. The cities produce a huge amount of sewage, wastewater and industrial effluents, most of which is dumped almost untreated in rivers and other water bodies. This has badly affected the health of the major rivers in China and India. Ganges, Yamuna, Jian and Yangtze are among the world’s most polluted rivers. Underground water table is also decreasing at an alarming rate in most urban areas. There is an increasing demand for establishing proper means to protect water sources. The government of China aims to invest 1.8 trillion yuan (US$280 billion) in water conservation projects by 2015. City infrastructure is yet another challenge which is an opportunity in disguise. Most Indian cities are not well equipped to manage the demands of growing population. The Indian Government is planning to spend close to US$1 trillion on a variety of new infrastructure projects between 2012 and 2017, including roads, airports, power and urban regeneration. There is a tremendous opportunity for companies involved in providing infrastructure solutions related to transportation, energy, manufacturing, and traffic management.

India’s is fast emerging as a "Global Manufacturing and Supply Hub" in several areas. India is Asia's third-largest automobile market. Experts believe that unlike China, India's manufacturing will be selective and largely concentrated on high-end military, aerospace and industrial raw materials. The Indian automation industry currently has a turnover of over $930 million and is expected to grow at an annual rate of 20-25 percent. Industrial automation in India is still in its nascent stage; however, it has tremendous growth potential in near future.

India and China are emerging as the two biggest markets for Industrial Automation & Controls business. If a company wants to remain relevant, sustain its growth and increase revenue, it must focus on Chindia market. One must also have a sound understanding of socio-politico-economic scenarios of these countries. In India you need to have patience while in China you need to be cautious, if you want your business to succeed.

Suman Singh, is a Product Marketing Specialist at Invensys where he supports marketing activities for Wonderware's HMI and SCADA software products, including InTouch, System Platform and Alarm Adviser. Based in Bangalore - the IT hub of India - Suman has over 6 years experience in product and content marketing. He is most interested in technology, social media, and sustainable development