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Machine Vision Market Change in North America - Questions and Answers

POSTED 04/08/2008

By Paul Kellett, AIA Director – Machine Vision

Machine vision markets change over time but to what extent and why? In this article, I address this topic with a series of questions and answers.

  1. Aren’t market results more or less a continuation of what happened the previous year? In other words, MV markets don’t really change much year to year, do they?

    MV markets have changed markedly year over year. Actual sales results for previous years show that not only annual sales volumes, but also the rate of growth and direction of growth (negative or positive) have changed.

    Actual, annual sales results clearly show that market growth is not automatic. In some years, MV markets expand, and in other years they contract. Assuming that MV product markets can only go up thus ignores the actual, historical behavior of MV product markets.
  2. What is the extent of change in MV product markets?

    Not surprisingly, the extent of market change varies year to year. In terms of market growth, for example, we find that when the business cycle is neither sharply rising nor declining, MV market growth is more steady and predictable. The growth of MV product markets can be very strong, coincident with, or following an economic recovery; that is, an upturn in the business cycle. Conversely, a sharp decline in the business cycle (a recession) can entail a contraction in MV markets; that is, “negative growth”.
  3. What accounts for market change?

    The drivers of market change are both long-term and short-term. As the previous answers suggest, the economy can greatly affect year-to-year fluctuations in MV sales volumes. But that is only part of the story. In the long-term, technological factors can increase the value provided by MV products (more performance per dollar) and thus stimulate demand for these products. Also, within many sectors of the economy, the need for greater quality control, productivity and cost-effectiveness in manufacturing have increased long-term demand for MV products.

    Markets also change, as customer preferences for various product features shift.

    Finally, new MV applications can expand the size of MV product markets.
  4. Has extensive market change occurred before in the history of machine vision?

    Yes. On the heals of the last recession in the U.S., which occurred in 2001, MV market growth was severely depressed in North America. The only exception was the smart camera market.
  5. Are we experiencing a recession or slowdown in the U.S.?

    The jury is still out. Some economists believe the U.S. is already in a recession, while other economists speak only of a slowdown. U.S. Federal Reserve Chairman Bernanke recently admitted that the U.S. could be in recession. Other economists have indicated that some sectors of the U.S. economy are in recession, while others are not. A major reason for the difficulty in deciding whether a recession has occurred or not is that the U.S. Commerce Department only releases economic data well after the fact.
  6. How will 2008 compare to 2007 in terms of MV market results?

    I expect MV market results in 2008 to be weaker than in 2007 based on economic forecasts. How much weaker will largely depend on whether the industry sectors that MV companies rely upon the most for sales experience a recession or an economic slowdown, which is much less severe. The 2008 AIA market study assumes an economic slowdown, since that was the consensus of economists at the time the study was prepared. Should a recession occur, sales forecasts in the study will probably prove optimistic.
  7. When can we expect a recovery in MV markets?

    Most forecasts of real GDP for the U.S. show stronger growth in 2009. At present, many economists expect weak growth in the first and second quarters of 2008 and a recovery beginning slowly in the third quarter of 2008. Bloomberg.com, for example, reported “The economy may expand 2.1 percent in the third quarter, from 0.55 percent this quarter (2nd quarter) and 0.2 percent in the first three months of the year, according to the median estimate of 85 economists surveyed by Bloomberg.”
  8. Other than provide actual MV sales results and forecasts, what does the market study contain?

    The market study provides important information on market trends, market characteristics, leading suppliers, product price analyses, demand for specific product features (customer preferences), trends in customer preference, geographic market opportunities, comparisons of North American product markets with those of different regional markets and world markets, North American industry sales results and an understanding of the U.S. and Canadian economies.
  9. How can I use AIA’s 2008 MV market study to help my company?

    The AIA 2008 MV market study has been designed with one main purpose in mind: to help MV companies maximize sales in North American product markets and the other markets analyzed in the study. To succeed in a market, MV companies must understand that market. They must know who their competitors are, how the market as a whole is performing and what is selling and what is not. And they must know where market opportunities lie.

    In a fundamental sense, MV companies need market intelligence in order to spend limited sales resources wisely; that is, they need to invest those resources where they will have the greatest likelihood of winning sales (“the biggest bang for the buck”).

    In the absence of market intelligence, MV companies are forced to rely on assumptions that may be dangerously incorrect. In effect, they are operating blind and in so doing, betting their financial health on assumptions.

    Market intelligence thus serves to limit financial risk, especially when it is prepared by an impartial organization long dedicated to the MV industry, an organization that enjoys the widest participation of MV companies in data collection, the Automated Imaging Association.