How has the COVID-19 pandemic changed how I look at the future of industrial automation? If anything, I’m even more passionate and optimistic about this market. As a tech angel investor, it’s been fascinating to watch the industrial automation market’s meteoric growth, despite being hard-hit by the pandemic. While the market size initially took a slight hit after the pandemic struck, experts predict immense growth in the industry between 2021-2026, driven in part by the rise in demand for advanced technologies such as robotics, AI, the Industrial Internet of Things (IIoT), and more.
It’s easy to see why manufacturing companies are aggressively integrating these technologies into their processes in 2021 and beyond: industrial automation eliminates human intervention, increases safety in hazardous workplaces, enhances productivity and efficiency, and reduces errors and waste.
Sources Predict Industrial Automation Market Size To Hit Close To 300 Billion By 2026
According to recent market analysis, the global industrial automation market size is projected to reach $296.7 billion by 2026 with a compound annual growth rate (CAGR) of 8.4% between now and then. This high-level growth is mostly a result of the heightened adoption of advanced technologies and rising demand for manufacturing robots. These new technologies are strengthening the global market’s rapid growth even through the challenges of COVID-19.
Experts Say Market Will Hit 214 Billion By 2021
More immediately, the global automation industry is expected to generate around $214 billion in 2021, up from its $151.8 billion value in 2020. Considerable growth is predicted to come from the segments of artificial intelligence, drones, and 3D printing, in particular, which are all expected to double in revenue from 2019 to the end of this year.
Today, the focus of automation has shifted from increasing productivity and reducing cost to increasing quality and flexibility within the manufacturing process, and the above advancements will impact these values in 2021.
Industrial Automation Market COVID-19 Impact
Manufacturing was by far one of the worst-hit industries due to COVID, if not the worst. When COVID hit and global lockdowns happened, the combination of plant closures and the halting of the global supply chain led to a downturn in both production and consumer demand. We saw this take effect in the industrial automation market value, dropping slightly from $168.81 billion in 2019 to $151.8 billion in 2020.
Read more: The Future Trends in Supply Chain Management
Another place we can see a slight decline thanks to COVID-19 is through the Purchasing Manager Index (PMI), a survey-based index that offers insight into activity in the manufacturing industry. For instance, China’s PMI dropped from 52% to 35.7% in February 2020.
Despite this slight discrepancy, the market value is predicted to grow astronomically in 2021 as we ease our way out of the pandemic.
Key market players are already taking the initiative to mitigate the business impact of COVID-19 by filling the new gaps in the market. For example, Rockwell Automation is helping the healthcare sector manufacture critical medical equipment with its Independent Cart Technology (ICT). Siemens has similarly produced technology to aid in medical manufacturing with the availability of the company’s Additive Manufacturing Network incorporated with its 3D printers.
How Adoption of Advanced Technology Is Fortifying The Global Industrial Automation Market’s Rapid Growth
An increased need for enhanced productivity and rapidly changing market dynamics are pushing companies to adopt modern tech like the Industrial Internet of Things (IIoT) and robotics to optimize the productivity and safety of their operations.
Additionally, modern technology adoption has driven companies to implement manufacturing practices that are sustainable long-term and safer for both workers and products.
According to the U.S. Department of Labor, injury rates have been drastically declining over recent years due to the adoption of industrial automation processes across industries. That’s because industrial automation utilizes control systems such as robots and computer software to perform tasks that historically required manual intervention, reducing the level of operator involvement and oversight required and thus keeping employees safer.
Here’s a closer look at how advanced technology, such as robotics and IIoT, is reinforcing the market’s rapid growth:
Advanced Robotics Technology On The Rise, High Demand
According to experts, industrial robots are predicted to be the biggest contributor to the industrial automation market between 2020-2025. What we’re seeing is manufacturers primarily using robots to streamline production and distribution, thus reducing their manufacturing costs while improving quality, safety, and production capacity.
With advanced robotics on the rise, key industry players are already cultivating their own cutting-edge applications for robotics. For example, Swedish-Swiss multinational corporation ABB Ltd. is investing approx 5% in research and development (R&D) to expand its product portfolio with a concentration on machine-centric robotics, artificial intelligence, collaborative robotics, and digital factory automation.
Evolution Of IIoT (Industrial Internet Of Things)
One example of advanced tech propelling industrial automation market growth is the Industrial Internet of Things (IIoT). IIoT comprises a set of instruments, sensors, and devices that are interconnected through industrial computer applications, allowing for data exchange and analysis to ultimately improve efficiency and productivity.
While the current conception of IIoT emerged in 2002 following the inception of cloud technology, IIoT has evolved enormously since then and continues to evolve now. Today, with the collaboration of other advanced technologies such as AI and 5G, opportunities for IIoT on the horizon are limitless.
IIOT is a key driving factor for servitized business models such as Manufacturing as a Service (MaaS), helping manufacturers expand their value props by offering new, digital, platform-based solutions as a service rather than selling a one-off product.
For manufacturing companies that want to create new servitized business models, provide new services/products, and improve operational excellence (OPEX) throughout their value chain, IIoT delivers.
Increased Demand For AI-Based Industrial Robots
Another type of technology driving market growth is robotics. Currently, we’re seeing an increase in demand for robotics in varied applications (pick and place, part transfer, packaging) stimulating market growth.
For instance, robotics can be used to self-optimize production lines in the discrete automation industry, using real-time data to adjust processes automatically and meet the desired values or output.
We see just how robotics will accelerate further growth in the collaboration of French company Schneider Electric and Swiss-based Staubli. In 2018, these two companies collaborated to integrate Staubli’s robotics into Schneider’s EcoStruxure smart machines. Siemens AG and Alibaba Cloud’s partnership to develop more advanced IIoT solutions in China is another great example.
Industrial Automation Market Value
|Market Size||126.3 billion||168.81 billion||151.8 billion||214 billion|
In this chart, you can see just how the industrial automation market value has grown over the past four years, with a CAGR of 8.6% from 2019 to 2025.
The industrial automation market supports risk mitigation, responsiveness, agility, and a faster timeline to market for the manufacturing industry. It increases manufacturing production capacity, which encourages companies to further invest in new technologies, thus increasing competition among key players and creating a tech-oriented workforce.
All of this enables more automation, which further drives demand and feeds market growth. Additionally, government policies that support the adoption of industrial automation benefit tech providers, their customers, and the market as a whole.
Top 2021 Trends in Industrial Automation
I’ve briefly covered some of the current industrial automation trends such as IIoT and robotics, but those are just the tip of the iceberg. Through insights from leading market research firms, we can explore the top 2021 trends in industrial automation:
Digital Twins and Augmented Reality Technology
We’ll see a growing implementation of advanced technologies such as digital twins and augmented reality for simulation in the product design process to optimize manufacturing.
Digital twin technology offers a virtual version of an object or system, which allows companies to simulate real-world scenarios and collect data regarding outcomes. In 2019, Gartner Research found that 75% of organizations using IoT were already using digital twins or planned to soon. Now, they predict that 91% of these IoT platforms will utilize digital twins by 2026.
Further, manufacturers will use virtual and augmented reality (AR) to upskill their workforce and integrate these technologies with their current tools to reduce error rates.
Expansion of Industrial IoT
IIoT will continue to expand greatly through the convergence of high-speed internet, artificial intelligence, cloud computing, and data analytics, streamlining the manufacturing process and automating where human intervention was historically required. Further, IIoT will provide factory leads with real-time data from production lines to mitigate risk and manage their manufacturing infrastructure. Together, these components will strengthen IIoT as a market driver in the coming years.
With technology evolving so rapidly, companies will look to partnerships and collaborations to build upon proven tech, capitalizing on the potential of the fourth industrial revolution, or Industry 4.0 by implementing smarter processes.
Industrial Automation Insights Segmented By Vertical and Market
The industrial automation market can be divided into verticals such as manufacturing, automotive, food and beverage, and more. When we categorize the market this way, we can see that the manufacturing vertical dominated the market in 2018 and is expected to maintain its position well into 2025.
The food and beverage vertical is close behind, with automation helping reduce waste, improve reliability, and optimize costs in the face of challenges such as regulatory compliance, process improvement, product quality, and supply chain management. Behind food and beverage is healthcare, then automotive, chemical, and oil/gas, in order of percentage of market share.
Other verticals with much smaller market shares include mining and metal, aerospace and defense, energy and utilities, transportation, and others.
Top Contenders Leading The Industrial Automation Market
While my personal interest lies with tech startups, analyzing key market player strategies is helpful to understanding the competitive outlook of the global industrial automation market. The market is highly competitive, with numerous well-established tech companies striving to maintain their positions in the market by investing in collaborations, partnerships, and expansions like those touched on throughout this article.
Some of the major players in the industrial automation market are (in no particular order):
- ABB Ltd.
- GE Company
- Honeywell International Inc.
- Mitsubishi Electric Corp.
- Rockwell Automation, Inc.
- Schneider Electric
- Emerson Electric Co.
- Kawasaki Electric Corp.
- Yokogawa Electric Corp.
- Omron Corp.
- Chaos Prime
- 3D Systems
Behind these key players, other prominent companies include Fuji Electric, Fanuc, Bosch Rexroth, Kuka AG, Endress+Hauser, Keyence Corp., and Hitachi.
Industrial Automation Market Size By Region
The industrial automation market can be segmented by region into the following categories: North America, Europe, Asia-Pacific (APAC), and the rest of the world (ROW). Among all of these regions, APAC accounts for over 30% of the total market share and is projected to continue to account for the largest market share, primarily because of its high adoption rates of automation technologies and groundbreaking innovations. APAC is expected to see the highest CAGR from 2019 to 2025 at 11%.
APAC’s key players include Mitsubishi Electric, Fanuc, Omron, Yaskawa, Yokogawa, and Fuji, all based in Japan. China is not far behind, however, with corporations and research institutes working hand in hand to improve the country’s manufacturing processes with automation technologies. The country’s government industrial policies favor this kind of industrial intellectualization, which experts predict will further increase the demand for industrial automation.
Another area where APAC is leading the way is in automotive manufacturing, with companies such as Honda and Toyota integrating robotics, wireless tech, sensors, and machine vision systems to create smart factories, propelling the growth of the market in Japan.
Close behind is the North American regional market, driven in part by factory automation systems leveraged by numerous discrete and process manufacturing enterprises as well as the rise in R&D in IIoT.
The Future Of Global Industrial Automation Growth
Whether we realize it or not, automation is shaping our everyday lives. Without it, your local grocer or drugstore would struggle to fill its shelves. The products you rely on day in and day out would be produced and distributed at much slower rates, making small luxuries we take for granted, like two-day delivery, out of reach.
Automation expedites processes and reduces human intervention, minimizing error. Because of advancements in software engineering and robotics, automation is being implemented by researchers, industrial workers, and even bureaucrats. Technologies and products that were previously unavailable to the masses are now more accessible as automation technology gets better, cheaper, and more prevalent around the world. Self-driving cars are the perfect.
As the industrial automation sectors continue to develop, the technology will trickle down, becoming more available to startups and smaller companies to gain a competitive edge in the market. This passes profound benefits onto consumers, which drives demand for these innovations and fuels more industry growth.
I’m consistently impressed by the agility of the industrial automation market in the post-COVID world, and I only expect further growth in the years to come. MacDonald Ventures is in the business of funding disruptive companies that have the potential to shape the future of our world, and I have no doubt that industrial automation will be critical to that progress. If you have an idea for the automation industry and want to learn more about what angel investors look for in entrepreneurs , learn more about MacDonald Ventures and get in touch.