Production Systems 2020 - Global challenges and winning strategies for the mechanical engineering industry - Vogel ...
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Production Systems 2020
Global challenges and winning strategies for the mechanical engineering industry
Short version, January 2011
1
Executive Summary (1/2)
> Having been hit severely by the global recession in 2009, the mechanical
engineering industry is expected to fully recover until 2012 on a global level
> For individual industry segments and regions, the recovery's timeframe will be
different (e.g., Germany: 2008 levels will be reached not before 2013)
> Over the next decade, there will be a continued but also structural shift of
machinery demand and production from developed countries to emerging countries,
mainlyy into China
> Increase of demand for high-quality consumer goods in China and development of
industrial production structures drive a strong upgrade process for newly installed
machinery towards "mid-end"
"mid end" quality and performance
> This opens up new export opportunities worldwide for Chinese OEMs, with focus on
easily-accessible
easily accessible markets in South
South-East
East Asia, Middle East, and Africa in the first
step
Source: Roland Berger 2Executive Summary (2/2)
> Key challenge for Chinese OEMs is to master the technological upgrade process
for their products (in terms of know-how generation and financing)
> Western European OEMs will continue dominating their home markets (at least until
2020), but have to improve their cost position for participating in emerging markets'
growth
> Energy efficiency and other "green" concepts are getting more important in
developed
p countries,, but are remainingg a marketingg issue for manyy applications
pp in
the near future
Source: Roland Berger 3Very different impact of recession on major machine building
countries around the globe
Status quo of key countries in machine building1) [EUR bn]
Germany USA Japan
-22.6% -20.3% -42.1%
82 87 69 72
63 68 66
38 40
2008 2009 2010e 2008 2009 2010e 2008 2009 2010e
German machine building industry US experienced the worst recession Japanese machinery industry was hit the
hit hard but now recovering in 6 decades but is picking up hardest by the crisis, slight recovery period
Italy Brazil China
-11.2% -16.4% +6.5%
60 64 75
39 35 36
6 5 5
2008 2009 2010e 2008 2009 2010e 2008 2009 2010e
Italian producers are back on a slow- growth track Although a smaller market, Brazilian production Chinese market barely affected by the economic
growing again +8% per year crisis, currently very dynamic
1) Stationary machinery w/o commercial HVAC; production volumes
Source: IMS; VDMA; Roland Berger 4Mid-term growth in the mechanical engineering industry is expected
at a yearly average of 8% until 2015
Machine building market forecast per segment1) 2010e-2015e [EUR bn]
8.1
698.9
37.8 1 Oil and gas 8.6
32.2 2 Steel and metals 11.4
75.8 3 Machine tools 8.5
41 2
41.2 4 Electronics 6.6
472.9 44.4 5 Food, beverage, and tobacco 8.6
25.1 6 Medical and scientific 7.6
18.9 84.6
50.4 7 Paper and print 7.2
29 9
29.9 37 9
37.9
8 Rubber and plastics 8.9
29.4 33.1
9 Semiconductor 7.8
19.4 10 Textile 10.4
58.6
35.6 11 Woodworking 7.7
26.8 13.5
21.6
13 3
13.3 g
12 Materials handling 8.1
21.7 120.6
9.3 13 Robotics 4.6
81.7 7.0
30.7 14 Packaging 7.4
21.5 5.6
85.1 Others 7.5 CAGR
59 1
59.1
SEGMENT 2010e-2015e
2010e Market size 2015e
1) Stationary machinery w/o commercial HVAC; production volumes
Source: IMS; VDMA; Roland Berger 5Three global mega trends are dominating the future development of
the mechanical engineering industry
Key industry trends
1 Shift to > China is becoming #1 machine building country
Asia worldwide
> Performance and quality requirements are getting closer
to European levels
2 Game > Mid-end performance segment is growing the fastest,
change in becoming a full global battlefield
the mid- > Competition in this segment is highly cost-driven
end
3 Go > Increasing importance of energy efficiency in Europe and
Green Japan
gy savings
> Substantial energy g can be achieved at selected
applications, while just a marketing issue in other fields
Source: Roland Berger 61
Especially China shows impressive ongoing growth in production
volumes and is expected to pass USA in the next few years
Size of local production industry 2009-2015e1) [EUR bn]
Established nations BRIC countries
3,000 CAGR 3,000 CAGR
2009-2015e 2009-2015e
2 500
2,500 2 500
2,500
China +9.0%
2,000 2,000
USA +2.5%
1,500 1,500
Japan +2.2%
1,000 1,000
India +8 7%
+8,7%
Germany +2.9%
500 500 Russia +5,0%
Brazil +5.7%
0 0
2009 2011e 2013e 2015e 2009 2011e 2013e 2015e
1) Including mining, quarrying, manufacturing, construction and utilities; in constant prices and exchange rates 2009
Source: Economist Intelligence Unit (EIU) 71
Germany will be loosing its market-leading position to China in most
segments of the machine building industry
Domestic volume1) of machine segments with # 1 position and world market share [%]
Germany [EUR bn] China [EUR bn]
Number of
segments with 5 1 3 7
# 1 position2)
Food, Beverage & 93.8
Tobacco (18%)
7.9
Woodworking 3.2 (24%)
Paper
p & Print 7.7 (20%)
Materials Handling 20.3 (17%)
Food, Beverage &
Tobacco 11.8 (36%)
Rubber &
Woodworking 30.11
30 #1 position
iti will
ill Plastics 16 0
16.0 (45%)
(18%)
Paper & Print 5.3 (26%) be lost to China 23.7
2.5 Textile 5.0 (23%)
Materials Handling 5.4 (22%)
Machine 6.6 (31%) 26.9 (35%)
12.3 (15%) 5.9
Packaging (21%) 59
5.9 (19%) Tools 12.1 (24%)
45
4.5
2010e 2015e 2010e 2015e
1) Production volumes 2) Out of a total of 14 stationary machinery segments
Source: Roland Berger; IMS; VDMA 81
While European operators plan to maintain their technological
levels, Chinese operators are planning to increase them significantly
Development of technological level of production equipment
"How
How will the technological level of newly installed COMMENTS
machines develop until 2020? [% of respondents per region]
Increases significantly 0% > High technological levels reached
EUROPE Increases slightly 28% f growing
> Target is to satisfy
requirements in the mid-end segment
Remains stable 33%
Declines 5%
n/a 33%
Increases significantly 50% > Clear target is to increase performance,
quality and technological level
quality,
CHINA I
Increases slightly
li htl 21%
> However limited willingness to spend
Remains stable 6% significant budgets for that
Declines 3%
n/a
/ 20%
N = 43
Source: Roland Berger expert panel 92
OEMs in both regions are driven by customer groups with
changing but approximating requirements
Challenges for OEMs1)
EUROPE CHINA
> Continue strong innovation, to keep technological > Strongly generate know-how, to deliver required level
advantage towards emerging countries of performance
> Provide suitable products for emerging markets > Improve quality / reliability of products to satisfy
(e g simplified design,
(e.g. design less features) increasing needs of operators
> Shape and realize growth globally, carefully develop > Manage competitiveness while cost of labor are
global footprint strongly rising
> Provide service gglobally,
y, set up
p local service hubs in > Developp sales and service footprint
p in export
p markets
emerging markets
1) Machine building companies
Source: Roland Berger expert panel 102
Established and emerging OEMs will meet in the mid-end, with high
quality but no-frills machines for standard tasks
Technology and performance levels1)
100%
Established High-
Hi h High end > Lots of features for complex tasks with multiple process steps
High-end
OEMs 90% end > 24/7 availability, long lifetime, full precision/safety, max output
> High flexibility, automation, and process stability
80% Mid- > Tailor-made single machines or lines
endd Mid-end > Basic features for standard tasks
70%
"From high-end > 24/7 availability, long lifetime, full precision/safety, high output
to mid-end" 60% > Reduced flexibility, process stability, lower level of automation
Low- > Standard or slightly customized single machines or lines
50%
Emerging end Low-end > Minimal features for simple tasks
OEMs 40% > Availability Standard singleg machines
Low-
L
20% low- Low-low- > Minimal features for simplest tasks at low precision
"From low-end end end > Availability2
Mid-end technological segment will leave all other segments con-
siderably behind, high-end expected to continue growing moderately
Structural shift of world market volume1) [EUR bn]
CAGR COMMENTS
2010e-2015e
> High-end technologies slightly
High- 148 below average
+5%
end 192
> Especially mid-end and low-end
Mid- 180 +10% growing above world market growth
end 296
– Mainly driven by emerging
Low- 85 markets
end +12%
150
– But increasing volumes expected
Low-low- 60 p countries as well
for developed
end
d +0%
61
> Low-low-end drying up in the
long term
Σ 2010e = 473
Σ 2015e = 699
2010e 2015e
1) Stationary machines for discrete manufacturing; w/o commercial HVAC; production volumes
Source: Roland Berger research; Roland Berger expert panel 122
Strong competition between European and Chinese OEMs in most
of the accessible growth regions expected
Global mid-end battlefield
> Expand service offering and footprint to
> Enhance service offering and g
increase share in high-end segment
g
process know-how to defend > Expand into mid-end segment
> Stop Chinese entrance by keeping > Develop local footprint and low-cost
quality and service on a high level market position
base
> Use existing mid-end products
plus product portfolio for Chinese
market to increase penetration
> Adapt service footprint selectively
> Participate
p in domestic
market growth
> Play an active role in the
industry 's consolidation
process
> Start Expansion into new growth regions
> Expand sales network globally
> Use low-cost footprint in China
> Sell mid-end and higher low-end products
> Eventually expand into US in a
secondd wave after
ft enhancing
h i
technology level and footprint
Source: Roland Berger 133
Three main drivers for the mechanical engineering industry to
increase energy efficiency
Go Green – Motivations for energy efficiency
Cost > Energy-efficient processes can save a significant
savings amount of operational expenses
> This is a global driver depending on the application
industry – Applications with high energy consumptions Improvement of
require
i efficiency
ffi i machine energy
efficiency
Regu- > Regulations define requirements for power efficiency
lations > Especially Europe (mainly due to notification of Kyoto > Increase of
Protocol)) has strict regulations on that, China
C has not efficiency factor
implemented strict standards yet
> This driver is valid for all application industries > Energy
recuperation
"Green" > Some companies use the topic of energy efficiency to > Emission
image market their brand towards their clients, the brand to
the general public
reduction
Source: Roland Berger 143
Many operators consider energy efficiency as important purchasing
criteria but not all are willing to pay a price premium
Importance of energy efficiency of new machinery
"How
How important is energy efficiency in the purchase COMMENTS
decision?" [% of respondents]
Key decision factor 10% > Importance of energy efficiency in
purchase decision depends on typical
EUROPE
Important 55% energy consumption of process
Not important 25% > Feature is often asked for in Europe,
but operators are rarely ready to pay a
N/A
/ 10%
% premium
i ffor it
> Price premium only of energy-
intensive applications
Key decision factor 23%
CHINA
Important 36%
Not important 23%
N/A 18%
N = 43
Source: Roland Berger expert panel 15Tailor-made strategy of European OEMs required, depending on
individual product/market position
Base strategies for European OEMs
Current
position Niche Mass market
> Further develop existing > Drive innovation in core
product/ market position business
✓ ?
> Strengthen
S h export > Build
B ild "defense
"d f liline"" iin the
h
High-End business by slight upper mid-end
footprint adjustments
> Include cost focus into > Switch from technology to
existing (technology- cost focus
> Rebuild entire footprint to
? !
driven) business model
Mid-End > Develop niche globally cope with LCC competitors
> Watch potential entrants > Check for business expan-
from emerging markets sion options into high-end
carefully segment
Low-End (Barely European OEMs in this sector)
✓ = Sustainable Position ? = To be reviewed ! = Need for action
Source: Roland Berger 16Technology-leading high-end OEMs should carefully enhance
business into mid-end to participate in this fast growing segment
Reference strategy for European high-end special machine and line producer
GROWTH PRODUCT/MARKET POSITION
> Continued innovation in products and solutions
STRATEGY > Further development of solutions for entire application process
> Development of highly standardized mid-end products, based on cross-series platform
Maintain concept
1 position in
core markets VALUE-ADDED FOOTPRINT
> Improve cost position by increasing LCC production and sourcing
Extend product
2 range into upper
> Further strengthen sales, service, and application engineering footprint in emerging markets
> Keep R&D, basic engineering, production of advanced assemblies and high-end solutions
mid-end in Europe
3 Slightly expand
footprint into NEW MARKET EXPANSION
emerging > Improved customer access by strong local subsidiary
> Localize parts of components, to have local content and to get access to low-cost supply
markets sources
> Foster organic growth, without acquisitions, JVs or partnerships
Source: Roland Berger 17European high-end OEMs keep biggest part of their footprint in
Western Europe
Typical OEM footprint of European high-end special machine and line producer
FOOTPRINT 2010 FOOTPRINT 2020 COMMENTS
100% 100% 100% 100% 100% 100%
Middle East, 0-10%
> Global sales network already
10%
Far East, Africa
10-15% 10-20%
0-15%
10-20% established, mainly steered
5-10% 10-15% out of Europe
China, India 20-30%
15-25%
Americas
15-25% > Production focused in Europe
10-20% 10-20%
Eastern 0-5% 0-5%
> China & India footprint to be
Europe extended
– Increase in sales/service
80-90% and production capacity
Western 70-80% 70-80%
60-70% – Set-up of first R&D units
60-70% 55-65%
Europe > BUT: Majority of value
value-add
add will
remain in Western Europe
Sales/ R&D/ Pro- Sales/ R&D/ Pro-
Service engin.
engin duction Service engin.
engin duction
Source: Roland Berger expert panel 18European Mid-end OEMs have to aggressively expand their
business into emerging markets
Reference strategy for European mid-end standard machine producer
GROWTH PRODUCT/MARKET POSITION
> Localize and partly simplify established products, to have comparable cost level
STRATEGY > Keep machine quality level, consulting, and solution capabilities
Adapt product > Establish "global" product construction kit
1 range tot opera-
tors' needs in VALUE-ADDED FOOTPRINT
emerging markets > Transfer production and engineering capacities into LDCs
> Keep only core know
know-how
how in R&D, manufacturing, and selected sub
sub-assemblies
assemblies in Germany
Grow aggres-
aggres
2 sively in
> Expand sales & service network globally
emerging markets
3 Selectively
expand into high-
NEW MARKET EXPANSION
> Support operators in establishing professional production process (based on high-quality
equipment)
end niches > Provide basic services
> Product/assemble products for the domestic market locally
> Leverage German brand and value proposition
Source: Roland Berger 19European mid-end OEMs do already have a global footprint –
Further transfer of R&D into emerging markets
Typical OEM footprint of European mid-end standard machine producer
FOOTPRINT 2010 FOOTPRINT 2020 COMMENTS
100% 100% 100% 100% 100% 100%
0-5%
> Especially sales and services
Middle East, 5-20%
10-30% 5-30% plus production are already
10-40%
10 40%
F E
Far East, Africa
Af i 0-20% 20-40% global today
China, India 5-10% 10-30%
30-50% > Further transfer of R&D into
10-25%
emerging regions in the next 10
Americas 10-20% 0-20%
0-10% years
Eastern
E t 3-5%
10 20%
10-20%
Europe > Second wave of production
70-85%
5% 10-25% off-shoring
0-10%
to India, Malaysia, Vietnam etc.
Western 50-60%
40-60%
40 60%
50-60% in next 10 yyears
Europe 30-50%
20-30%
Sales/ R&D/ Pro- Sales/ R&D/ Pro-
S i
Service engin.
i d ti
duction S i
Service engin.
i d ti
duction
Source: Roland Berger expert panel 20Chinese OEMs tackle the large potential in their home market –
Mainly by improving their technological offerings
Growth strategy of Chinese OEMs
"How
How do you intend to grow over the next decade?
decade?" COMMENTS
[% of respondents]
Top-5 growth China 100% > Technology, functionality, and quality
regions1)) upgrade of product range into lower
Latin America 33%
mid-end
Eastern Europe / Russia 22% > Development of sales and service
India 11% networks abroad, preferably by
South-East Asia 11% partnerships
t hi or acquisitions
i iti
> Focus on easily accessible export
Key Technology Innovation 91% markets in the first step, skip Western
enablers1) Europe
p for the time beingg ((as entryy
S l &S
Sales Service
i N Network
t k 73% barriers are too high)
M&A / JV / Partnership 27% > Production fully remaining in mainland
Product Range 9% China
M f t i F
Manufacturing Footprint
t i t 9%
1) Multiple nominations possible
N = 13
Source: Roland Berger expert panel 21Chinese OEMs have to adopt their further strategy according to their
current product and market position
Base strategies for Chinese OEMs
Current
position Niche Mass market
High-End (Barely Chinese OEMs in this sector)
> Continue technological
upgrade process
✓
> Enhance domestic market
Mid-End (Barely Chinese OEMs in this sector) position and develop
service capabilities
> Push export business in
easily-accessible markets
> Further developp existingg > Participate
p in domestic
niche position market growth
✓ ?
> Watch out for growth > Carefully start technolo-
Low-End opportunities in other gical upgrade process of
niches and entry options product portfolio
into the mid
mid-end
end
✓ = Sustainable Position ? = To be reviewed ! = Need for action
Source: Roland Berger 22Current footprint of Chinese mid-end OEMs is very local except
sales and services – Expansion of R&D planned in some cases
Typical OEM footprint of Chinese mid-end climber
FOOTPRINT 2010 FOOTPRINT 2020 COMMENTS
100% 100% 100% 100% 100% 100%
RoW 0-10% 0-10%
> Large OEMs with global sales
0-15%
5-20% network, but still no real global
reach
> Service capabilities abroad to
be further enhanced
60- 80-
80- > R&D done in China for upper
China 100% 100% 50 80%
50-80% 100%
l
low-endd segmentt andd
90- 90-
100% 100% selectively in MDCs for mid-
end segment
> Manufacturing focused on
Americas
Chi only
China l ffew parts
t produced
d d
Eastern Europe 0-
5-20% abroad
20% 0-20%
Western Europe 0-10% 0-10% 0-10% > Strengthen international sales
Sales/ R&D/ Pro- Sales/ R&D/ Pro- network by 2020 as key target
Service engin.
engin duction Service engin.
engin duction
Source: Roland Berger expert panel 23You can also read
