Favorable Performance of Most North American MV Product Markets in 2006 Expected to Continue through 2011 but with Slight Dip in 2007. . . .by Paul Kellett, AIA Director - Market Analysis

How well are machine vision product markets performing in North America?  To answer this and other key questions of importance to the industry, AIA conducted an extensive study based on market surveys from leading companies in all major MV product markets in North America. In surveys for the optics, lighting, camera, imaging board, smart camera and application-specific MV system (ASMV) markets, companies identified their MV sales volumes in revenue and units sold and broke down their aggregate sales by specific product features.  

What the study found was that 2006 was generally a good year for the industry in North America.  For the most part, machine vision companies continued to benefit from macro and micro-economic trends. Real GDP was slightly better than in 2005 for both the U.S. and Canada, while technological advancements continued to fuel longer-term growth.  The largest beneficiaries were suppliers of smart cameras and cameras, which as a group saw double-digit sales growth.  Optics, software and ASMV system suppliers likewise benefited but to a lesser extent with single-digit growth on the whole.

However, sales were not positive in all MV product markets.  Imaging board sales exhibited negative revenue growth, reflecting a dramatic decline in average unit price due to steep discounting intended to preemptively lock in sales in response to competitive challenges.  Lighting revenue also experienced negative growth in 2006, but this represented a continuation of a pattern of negative growth seen in preceding years. The major causes of this pattern remained increased competition and the rise of the LED.

For 2007 we anticipate continued growth in machine vision sales but at somewhat lower levels due to an anticipated drop in real GDP for the U.S. 

For 2008 through 2011, we believe machine vision sales will continue to exhibit solid growth.  As a key automation technology, machine vision will become increasingly indispensable to manufacturers seeking to maximize quality, productivity and efficiency. Machine vision will moreover extend its reach into new, non-manufacturing markets.  Driving this success will be three key, underlying trends: expanding core capabilities, decreasing MV product prices, and product miniaturization and integration.  All in all, machine vision sales in North America will trend strongly upwards over the long-term, while also unavoidably reflecting the impacts of the business cycle.

Micro-Economic Trends
In the twenty-five years or so since its inception, machine vision has evolved far beyond its humble roots as an experimental technology.  Today, as a means of improving product quality, increasing productivity and decreasing costs, machine vision is indispensable in a wide range of manufacturing processes and is now moving well beyond the confines of the factory. 

As identified in the AIA study, there are three major, long-term, micro-economic trends:

      Expanding core capabilities
      Declining product prices
      Miniaturization and integration

'Expanding core capabilities' refers to the fact that today’s MV products can do more than their earlier counterparts.  This derives from computer, camera and connection-related developments that have spilled over into the machine vision industry. Computer-related developments that have boosted MV capability include faster processors and bus speeds.  Camera-related developments include a trend toward increasing resolutions and the introduction of faster sensor frame rates.  Finally, connection-related developments have involved slower interfaces (such as basic analog) giving way to faster, digital interfaces (such as Camera Link® and GigE Vision™), which are necessary to handle the higher bandwidth signals generated by faster sensor frame rates and greater resolution.

Another salient, major trend in machine vision has been the gradual decline in average unit prices.  Driving this decline is increased competition among suppliers, substitution between technological alternatives and also less expensive sub-components resulting from economies of scale, as production is ramped up to optimal levels.

While MV products are generally becoming more capable and less expensive, they are also in some cases becoming more integrated and are assuming smaller form factors.  The best known example of this is the smart camera, which integrates the functions of a complete MV system in a single physical unit.  In terms of integration, a smart camera is nearly the polar opposite of a PC-based MV system, which utilizes modular components.  Only a MV system on a chip, as NASA has proposed, is more integrated and smaller.  As the example of the smart camera illustrates, miniaturization and integration have gone hand in hand; the miniaturization of sub-components has enabled their integration in smaller form factors. 

As a consequence of the three major trends identified, it is clear that machine vision products have not only grown in capability but have also have become less expensive on average.   In effect, purchasers of machine vision products have been receiving better performance for less money, making machine vision a wiser purchase.  This, in turn, has made machine vision increasingly indispensable for manufacturers who seek to optimize the efficiency of their operations and quality of their products.  For all these reasons, we can only expect machine vision sales to grow.

Macro-Economic Factors
In our study we also took into consideration macro-economic factors, particularly inflation and the rate of annual change in inflation-adjusted (real) gross domestic product (GDP) as a measure of the business cycle.  We did so because both the business cycle and interest rates affect the ability of companies to purchase MV products.  Importantly, for 2007 we assumed a rate of change in real GDP of 2.7% for the U.S. based on seven independent forecasts.  For subsequent years, we extended forecasts of the International Monetary Fund (IMF) out to 2011.  We then developed weighted averages for North America based on the relative sizes of the U.S. and Canadian economies.  Importantly, as Figure 1 shows, GDP dips slightly in 2007 from 2006 and then rebounds in 2008.  While a recession sometime in the 2008 – 2011 time frame is possible, economists have not yet offered predictions indicating a downturn.

Figure 1: Weighted North American Real GDP Forecast
(Annual Percent Year-Over-Year Change)

MV Product Market Growth Rates
While fluctuations in real GDP clearly affect growth in MV revenue, the relationship is complex and varies by MV product market.  This variability is illustrated by Figure 2, which lists revenue growth rates by product market by year.

Figure 2: Revenue Growth Rates by MV Product Market

*CAGR – Compound Annual Growth Rate

As previously mentioned, smart cameras and cameras are the highest growth markets, while the lighting market has experienced revenue contraction.  (By contrast, lighting unit sales have grown at double-digit rates. Because of steep price reductions, lighting revenue has not kept pace with units.)

All in all, machine vision sales in North America are healthy and are expected to remain so for quite some time.  Going forward, machine vision will continue to play a leading role in spurring productivity, increasing product quality and lowering costs in manufacturing and a growing number of new industries.

To learn more about AIA’s new MV market study, Machine Vision Markets – 2006 Results and Forecasts to 2011, please visit Kellett’s Corner or visit AIA’s online bookstore.  Providing invaluable market intelligence for MV companies seeking to boost sales, the study is highly detailed and comprehensive and yet easy to understand and use.  It consists of 16 chapters (two of which are new), 294 pages and over 185 data tables, color plots and diagrams. In addition to estimating market size and growth, the study focuses on market trends, market characteristics, sales by product features and new market opportunities outside of manufacturing.  The study is designed primarily for MV companies seeking to maximize their sales success.