Thursday 22 October 2020
 
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ANALYSIS

Capex spend on shifting out of China ‘could hit $1trn’

DUBAI, 27 days ago

Capex of $1 trillion could be needed to support the shift of some $1 trillion of "foreign-owned" China exports, said the Bank of America (BofA) in a new report.

 “We believe incremental industrial automation revenue of over $110 billion over five years could accrue from this spending (of which software could be $60 billion+), with an incremental $140 billion+ in related service,” BofA said in the report titled “Digital Machinations IV: The Supply Chain issue”.

A broader shift in global supply chains could be accelerated by a response to the Covid -driven need for flexibility that could drive both urgency and upside to demand for industrial automation.

With the impact of Covid lockdowns driving acceleration in online retail, the growth in smart logistics solutions and warehouses is likely to be sustained and even accelerate in the coming years. E-commerce as an end market for smart warehouses is expected to grow 14% CAGR to 2027 and material handling markets overall are expected to nearly double over the next eight years.

The report explores five key trends investors should be aware of driving industrial automation & software markets in the medium term:
 
1) Supply chain shift; a significant opportunity for incremental industrial automation demand,
2) Smart warehouses; e-commerce growth driving smart logistics requirements,
3) Industrial software evolution; par trillionerships, M&A, organic… multiple strategies all focused on growing industrial software capabilities,
4) Industrial IoT in a post-Covid world? Becoming more about an umbrella concept and platform proliferation,
5) Robots keep marching on, the "headline grabber" of the automation world, but there's growth still in auto, and new end markets & technologies (cobots) offer an extra layer of growth. We also publish an Industrial Automation 101 for a "back to basics" explanation of the market.

Eyes on China recovery

An unprecedented H1 saw significant parts of the world locked down economically and unsurprisingly had a negative effect on industrial production. Software and recurring business showed delivered resilience in the face of 30%+ falls in hardware demand. However, while recovery has been strong in China, Europe & the US are more mixed, the report said.

The question now is the sustainability of recovery, given dissipating momentum in China, it added. – TradeArabia News Service




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