The Industrial Market for
Connectors: The Way Forward
By Arthur Visser, Bishop and
Associates Inc.
Historically, the industrial
market for connectors has had a
share of between 10-13% of the
global connector market between
2000-2010, which makes it the
fourth biggest connector market
behind automotive, computer and
peripherals, and telecom/data
communication applications. As
such, the share of the market
for connectors used in
industrial applications has
remained remarkably stable. In
comparison, the share of the
market for telecom and data
communication connectors has
decreased from over 26% in 2000
to little over 16% in 2010.
Likewise, the share of the
connector market for computer
and peripherals has increased
from almost 15% in 2000 to well
over 20% in 2010. In 2010, these
four market segments combined
made up almost 69%, or more than
two-thirds, of the total global
connector market. Bishop &
Associates’ current forecast
predicts this combined share may
notch up a little, to more than
71% in 2015.
Global Connector Market
Segmentation 2010
The big difference with the
other three market sectors is
that the industrial market for
connectors has always been a
more lucrative market for niche
players in the connector
industry. This is due to a
certain lack of standards, a
large variety of applications,
and a stable growth pattern —
with recent exceptional growth
in particular sectors, like
renewable energy technologies
(wind/solar). While the big OEMs
in the telecom, computer, and
automotive industries dictate
more or less the connector
landscape in their respective
markets, which is often
characterized by large, global
companies, the industrial market
is much more fragmented, and
allows many more and smaller
players to participate,
including local or regional
companies. Although large,
global connector suppliers are
also prominently present in this
market, the nature of the market
allows niche players to develop
specific products for specific
applications, often in relative
small volumes, in contrast with
the huge quantities consumed in
telecom and computer
applications. Many of these
small and medium-sized connector
manufacturers in the industrial
market have developed specific
specializations, and this has
been a successful strategy.
The industrial market for
connectors includes the
following equipment:
Production, process, and
manufacturing machinery
Heavy industry machinery
Energy generation and
distribution equipment
Robotics
Farming, forestry, and
agricultural equipment
Environmental technologies
Building and civil
engineering
Industrial and process
control equipment,
networking, and automation
Other equipment
From our recently published “Top
100 Connector Manufacturers”
report, we learn that the top
ranking connector manufacturers
for the industrial market for
connectors are quite different
from the rankings we see in
other market sectors.
Over the past decade, the world
industrial production has grown
quite strong. Despite the
dramatic collapse in 2008-2009,
we’ve seen exceptional recovery
in 2010. Obviously, this is such
high-level data that it is not
very useful when we want to
study niche markets for niche
applications in the industrial
market for connectors. It
provides a general trend and
each niche has to be researched
individually in order to draw
conclusions about its
attractiveness. Additionally,
this data is not very useful if
we want to know what the future
brings, or even what we can
expect in the next five years.
For this we need to look at the
global economic growth
prospects, including the
above-mentioned growth prospects
for each niche within the large
and diversified industrial
market.
World Industrial Production
Output 2000-2010
At Bishop & Associates, we
divided the industrial market
for connectors into two
categories: connectors for
industrial controls and
connectors for production
equipment. Industrial controls
represent the biggest share of
the industrial market, with just
below 65% of the total. The
other 35% is designated as
connectors for production
equipment. This makes sense, as
in most of the industrial
equipment we find some forms of
electronic control (PCB board),
while the connections used on/in
the equipment itself are smaller
in number.
In analyzing the performance of
the industrial market for
connectors, we also evaluate the
performance of large OEMs active
in the industrial sector. In
this case (see tables below), we
have taken the three-month
period of January 2011 to March
2011, and the six-month period
of October 2010 to March 2011,
compared with the same period
the previous year as a
reference, and we note that:
Large OEMs in the automation
and controls sector
generally perform well,
especially Rockwell
Automation.
Industrial equipment makers
in Japan experienced the
strongest growth.
Industrial equipment makers
around the globe grow with
double digits (except GE).
These figures illustrate the
strong recovery of the
industrial market after the bust
experienced at the end of 2008
and early 2009. The recovery is
also reflected in the revenue
growth registered by connector
manufacturers who are selling
into industrial markets. The
figures show that the recovery
is broad and not restricted to
specific regions. However, few
will argue against the fact
that, even though the recovery
is global, the demand from
Southeast Asia, and in
particular China, has a lot to
do with this.
Net Sales First Quarter 2011 vs.
2010 – Industrial OEMs
Net Sales Six Months 2011 vs.
2010 – Industrial OEMs
As mentioned, one of the (high
level) leading indicators we can
use to evaluate the future
performance of the industrial
market for connectors is the GDP
growth expectation for the world
and for specific regions.
Currently, the world economy
seems to be going through a soft
spot and expectations are that
rapid growth, recently recorded,
will subside and give way to a
far more moderate growth
scenario in the years ahead.
World GDP Forecast 2006-2015
If we follow these GDP
forecasts, we note that a more
moderate growth scenario is
expected for each of the four
large industrial regions in the
world, including China. However,
in absolute terms, the GDP
growth expectations for China
remain much higher than for
Europe, North America, and Japan
(see graph).
GDP Forecast by Region 2006-2015
Source: Economist
If these GDP forecasts are
anything to go by, it spells a
rather flat outlook for the
industrial production as a whole
for the period between
2011-2015. However, if we
combine this with growth
expectations by emerging
technologies markets such as
industrial environmental
technology (comprising of energy
efficiency and green
technologies), robotics, traffic
controls systems and electronic
traffic management systems,
security applications, and water
and waste treatment equipment,
combined with further growth in
industrial Ethernet networks and
control applications, the
outlook for the industrial
market for connectors until 2015
is more positive.
The Hannover Industry Exhibition
held every year in April in
Hannover, Germany, is the
world’s largest industry
exhibition and a good gauge of
the industry’s health. At the
same time, it’s an interesting
and important platform to spot
and evaluate trends in the
industry. The April 2011
exhibition ended with the best
results in 10 years. The already
high expectations of the
exhibitors were surpassed and
international participation
levels were very high. The main
theme of the exhibition, Smart
Efficiency, was well received
and debated, while energy and
automation topics remained at
the heart of the show.
Industrial environmental
technology was a key subject,
and the newly launched
Metropolitan Solutions show,
part of the exhibition, will
most likely be expanded in 2012.
Urbanization is a very important
and dynamic process in our
world. Especially when emerging
economies such as India, Brazil,
China, are rapidly modernizing
their economies and investing in
the transition from traditional
(agricultural) societies to
industrialized, urbanized
economies. Additionally, the
result of increased urbanization
in the developed world means
problems with traffic control,
waste treatment, and energy
distribution are high on the
agenda across the globe.
Metropolitan Solutions
encompasses seven different
pressing areas for which the
industry is already developing
new technologies to solve its
challenges. It will be
interesting to follow the trends
in these areas, especially for
suppliers (such as connector
manufacturers) to the OEMs
active in this field, as these
markets are most likely to
provide new sales opportunities
and stimulate new innovations.
These areas are (Source:
Hannover Messe):
Energy Infrastructure
Intelligent urban grids
Decentralized energy
concepts
Energy storage and
distribution in cities
Energy generation on the
basis of solid waste,
wastewater, etc.
Water/Sewage, Waste Management
Drinking water production
methods
Supply of drinking water and
process water
Water infrastructure and
risk management
Renaturation of water
infrastructures, etc.
Mobility and Logistics
Charging infrastructures for
electro-mobility
applications
Intermodal mobility concepts
Goods distribution
structures close to the
consumer
Traffic management, etc.
Building Infrastructures
Energy-efficient building
technologies/concepts
Green building technologies
Modern buildings as “energy
producers”
Networking and integration
of previously separate
building systems, etc.
Security/Safety
Security and safety
solutions for public
utilities,
mobility/transport, building
management, etc.
Components and systems for
monitoring and surveillance
installations
Electronic security and
safety systems
Waste Management
Municipal waste disposal
Street cleaning
Municipal cleaning services,
etc.
In light of these developments,
we estimate that the industrial
market for connectors, measured
in dollars, will outgrow the
expected GDP growth, and grow at
a compound average growth rate
of 5.8% between 2010-2015 (see
graph). As a rule of thumb, the
connector industry has,
historically, been growing at a
pace of roughly twice the GDP
growth, so this growth rate may
even be at the conservative side
if the world economy manages to
find its footing and continue to
grow beyond the current
expectations.
Industrial Market for Connectors
2006-2010 and Forecast for 2015
Arthur Visser
Managing Director—Europe, Bishop & Associates Inc.
Arthur Visser has been
active as a professional in the industrial market for 25 years.
He started his career at Océ Corporate headquarters in Venlo,
the Netherlands, and has since worked in management positions
for OMRON Corporation, a leader in industrial automation
equipment, and later as managing director for HARTING
Belgium/Luxembourg, a leader in industrial ‘heavy duty’
connectors. Arthur has a Bachelor of Science degree in Airplane
Engineering, degrees in marketing and finance, and a master’s
degree in e-media enterprising. His native tongue is Dutch, but
he also speaks English, French, German, and Russian. Using his
successful career and solid education as a stepping -stone,
Arthur started his own company in 2003 and is based in Brussels.
Arthur represents Bishop & Associates in Europe and is as such a
liaison for the European Connector industry.
