The overall automation market in 2022 performed poorly, and the overall automation market in the first half of 2023 continued the downward trend in the fourth quarter of 2022, and industry demand continued to be sluggish. The following will take you to review the automation market performance in the first half of 2023, analyze the development trend in the second half of the year and forecast the overall automation market growth rate in 2024 and 2025.
01
The continued downturn in the automation market
The overall market size of automation in the first half of 2023 was 151.9 billion yuan, down 2.4% year-on-year; In the first quarter, the market size of automation was 79.5 billion yuan, down 1.9% year-on-year; The size of the automation market in the second quarter was 72.4 billion yuan, down 3.1% year-on-year. It is expected that in 2023, the overall market is still in the recovery stage, and some demand realization is mainly met by the channel side, which actually brings limited performance growth momentum to the manufacturer side. In addition, most industries do not see obvious growth points at present, and the overall market demand continues to decline, and the whole year will show a lower state than 2022.
The overall market size of China’s automation in each quarter of 2020-2023Q2
From the demand side, OEM market demand continued the weak state of the first quarter, and most industry demand is in a shrinking state; At the project-based market end, the demand for some industries such as power and chemical industry has increased, but the pulling effect on the overall market is limited. From the product side, the product line based on the demand of the OEM industry has declined significantly, such as servo, small PLC, etc.; Product lines with project-based needs performed relatively well, such as large PLCS.
Looking ahead to the second half of 2023, MIR Rui Industrial believes that the automation market is facing downward pressure and the recovery surface is limited. It is mainly manifested in the following aspects:
Three-year cycle decline: Over the past decade or so, the cyclical movement of the automation market has been relatively obvious, and 2023 May be the trough of this cycle, and the market may experience a cyclical decline. That means market demand could weaken and companies could face falling sales and pressure on profits.
Bullwhip effect: Market depression may lead to excessive contraction of agents’ confidence. When the market is sluggish, agents may be worried about the market prospects and reduce the procurement and promotion of automation products, further affecting the growth of the market. This psychological effect may lead to a further decline in market demand.
Weak downstream demand: Some of the more cyclical sectors, such as real estate and manufacturing, may face falling investment and weak demand. Factors such as less than expected investment in the infrastructure industry, the outflow of manufacturing from China, and sluggish internal circulation consumption are likely to have a negative impact on the automation market. In particular, the decline in automotive production and sales and the slowdown in the growth of the lithium battery industry may lead to a reduction in the demand for automation equipment and solutions.
Weak external demand: The slowdown in export growth in 2022 has a greater impact on the automation market. If overseas demand contracts further and China’s export growth slows sharply, this will exacerbate the impact on the automation market. The reduction in the size of overseas markets will lead to a reduction in market demand, especially for enterprises specializing in export business.
02
The OEM market has experienced negative growth for five consecutive quarters
In the first half of 2023, the OEM automation market size was 57.5 billion yuan, down 8.4% year-on-year; In the first quarter, the OEM automation market was 30.5 billion yuan, down 6.6% year on year; The OEM automation market size in the second quarter was 27 billion yuan, down 10.7% year-on-year.
China’s automation OEM market size by quarter from 2020 to 2023Q2
From the product point of view, the overall market demand of OEM in the first half of 2023 has declined significantly, and a small number of industries with a low base are growing positively.
Fewer major industries achieved positive growth: Although some industries such as elevators, printing machinery and pharmaceutical machinery achieved positive growth, this was mainly due to a low base in the same period last year. Actual market demand has not fully recovered to pre-pandemic levels. As a result, although certain sectors are performing better, they have a limited role in driving the overall market.
Most industries are in a state of decline: According to the general feedback of manufacturers, the performance of most OEM industries is poor, sales and orders are not ideal. This may be due to the economic downturn, falling demand and increased competition in the market. This decline could have an impact on the overall growth of the market.
Limited demand growth in the new energy industry: Although the demand for the new energy industry has increased, due to its current relatively small volume, it cannot drive the growth of the overall market. Despite the vast market prospects in the new energy sector, its influence has not yet reached a level sufficient to drive the entire OEM market.
2022Q2/2023Q2 Year-on-year growth of automation products in various OEM industries
Project market growth is positive
The market size of project-based automation in the first half of 2023 was 94.4 billion yuan, up 1.7% year-on-year; In the first quarter, the project automation market scale was 49 billion yuan, an increase of 1.3%; The market size of project-based automation in the second quarter was 45.4 billion yuan, an increase of 2.1% year-on-year.
China’s automation project-type market size in each quarter of 2020-2023Q2
● The project-based automation market rose slightly in both the first and second quarters. From the perspective of project-based industry automation products, in the second quarter, power, automotive, mining, chemical and municipal and public facilities have risen to varying degrees, becoming the main driving force for the project-based market in the first half of the year, while petrochemical has declined sharply for two consecutive quarters.
2023Q1/2023Q2 The year-on-year growth of automation products in various project-based industries
Demand for automation products is sluggish
The market underperformed expectations
In the first half of 2023, affected by the macroeconomic downturn, sluggish market demand, weakening exports, and cyclical decline in the industry, the overall market size of automation products showed a downward trend.
MIR Rui Industry believes that in 2023, China’s HMI market will still face downward pressure, the recovery surface is limited, and the whole year may decline by 8.7%; The PLC market performance in 2023 is pessimistic, the recovery in the first half of 2024 is limited, and the PLC market is expected to start to pick up in the second half of 2024; The overall market demand for general servo is still showing a downward state, and part of the demand is mainly met by the channel side, which actually brings limited performance growth momentum to the manufacturer side. It is expected that the overall market growth rate of low-voltage frequency conversion will decline by 5.8%, and the market size will be 21.7 billion yuan.
HMI Overall Market Size and Growth Analysis (2018-2025E)
PLC Overall Market Size and Growth Analysis (2018-2025E)
China General Servo Overall Market size and Growth Analysis (2020-2027)
Low-voltage frequency Conversion Overall Market Size and Growth Analysis (2018-2025E)
Uncertainties in the external environment have increased
1) Manufacturing is picking up, but development is under pressure and uncertainty is increasing
The manufacturing PMI index rebounded slightly in June in the second quarter, mainly caused by the low base last month, with a low rebound nature, meaning that the operating conditions of the manufacturing industry have improved, but the overall level is still at a low level. The manufacturing PMI index continues to be in the contraction range below 50%, and has been for three months, mainly due to the lack of demand, manufacturing activity as a whole is still weak, there is no clear sign of recovery.
In the context of the global economic slowdown, external demand is also weakening, leading to fewer export opportunities for the manufacturing industry. According to the company survey, 61.1 percent of companies reported insufficient market demand in June, up 2.3 percentage points from the previous month, setting a new record. This is another important challenge for manufacturing.
2) GDP growth of 6.3% in the second quarter was slightly below market expectations
The actual release of GDP growth in the second quarter is lower than expected, which means that the market is not operating as expected, which means that economic growth is facing certain pressure. The lower growth rate may have a certain impact on the automation development market. In June, the year-on-year growth of industrial added value above designated size was 4.4%, hovering at a low level, and weak downstream demand and low industrial product prices further indicated that industrial activity remained weak overall.
Looking ahead to the second half of 2023, China’s economic development will be mainly stable and gradually promote economic recovery, which means that the automation market may take some time to achieve full recovery and growth.