© 2016 IHS. ALL RIGHTS RESERVED.

© 2016 IHS. ALL RIGHTS RESERVED.

CWIEME BERLIN 2016

MOTOR MARKET UPDATE

PRESENTED BY:

PRESTON REINE, SENIOR ANALYST

IHS MANUFACTURING TECHNOLOGY

www.coilwindingexpo.com/BERLIN

© 2016 IHS

IHS Manufacturing Technology Presentation

Agenda

• Economic update

• Motor market statistics

• Key trends and challenges for

suppliers

• Conclusion

© 2016 IHS. ALL RIGHTS RESERVED.

DISCOVERING

MANUFACTURING TECHNOLOGY

3

INDUSTRIAL AREAS

Capital Equipment &

Machinery

Discrete & Process

Automation

Electric Motor Systems

Comprised of three dedicated research areas and

over 30 analysts covering electrical, electronic,

electromechanical, and mechanical automation

equipment types; as well as finished machinery and

equipment markets. By leveraging the breadth of

IHS and its experts, IHS’s insight into

manufacturing technology is unparalleled in key

vertical markets, including automotive, power

generation, oil & gas, maritime, amongst others.

25+8

Industrial analysts

across

locations worldwide

Strategic

Plannersto

Procurement

Personnel

30+dedicated analysts

years of industry

coverage

Team of

ANALYTICS

EXPERTISE

INFORMATION

© 2016 IHS 4

Global economic outlook

© 2016 IHS 5

Short term factors affecting the world economy

Systematic factors

• Withdrawal of policy stimulus

• Over capacity after investment booms

• Sluggish export markets

• Increased risk aversion

Structural factors

• Slower labor force growth

• Slower pace of globalization

• Falling commodity prices

• Lack of market reforms

© 2016 IHS 6

World GDP growth will stay flat, despite 2015

projections, with 3.1% growth in 2017.

-2%

-1%

0%

1%

2%

3%

4%

5%

Real GDP

Real GDPSource: IHS © 2016 IHS

Real GDP

© 2016 IHS 7

Emerging economies still struggling

-10%

-5%

0%

5%

10%

15%

India China Brazil RussiaSource: IHS © 2016 IHS

Real

GD

P G

row

th

Real GDP Growth - BRIC Countries

• India committed to rural development rather than business incentives

• Key overcapacity concerns loom large in China; lower commodity prices will continue through

2017

• Political issues in Russia and the Middle East are reverberating through the Eurozone.

Manufacturing PMI fell to its 7-month low in March 2016, and export orders declined for the 31st

consecutive month.

• Venezuela, Argentina and Brazil are in substantial recessions. The worsening political crisis will

extend the ongoing downturn in Brazil

© 2016 IHS 8

China’s investment-driven industrial expansion is

winding down

Challenges:

• Collapsing Commodity Demand

• Overcapacity

• Stock Market Correction

Opportunities:

• More investment in robotics

• Automation penetration rate

• Factory capacity consolidation

-5%

0%

5%

10%

15%

20%

25%

30%

35%

Real GDP Industrial Production Machinery ProductionSource: IHS © 2016 IHS

China Economic Figures

© 2016 IHS 9

Industrial automation equipment market update

© 2016 IHS

IAE 2015 and 2016 forecast comparison

10

$199.3B2015 Equipment Revenue

33.0%

Automation Equipment34.2%

Motors & Motor Controls 32.8%

Power Transmission Equipment

$41.0 billion

Motors & Generators

$19.4 billionProcess Control

$17.2 billionSwitchgear

$30.1 billionLinear Products

$31.4 billionDiscrete Controllers

$24.4 billionMotor Controls

$35.6 billionRotary Products

2016 Regional Sales Growth 2016 Market Drivers

44.0%IAE Sales into

Discrete Manufacturing

Machinery Production

0.1% Growth

41.0%IAE Sales into

Process Manufacturing

Capital Expenditure

-0.1% Decline

Global GDP

2.7% Growth

M

A

P

Americas

2.2%

EMEA

1.2%

Rest of Asia

4.3% Japan

-2.1%China

3.1%

© 2016 IHS 1111

Industrial automation equipment market regional growth

$ 45.3 billion $ 60.8 billion $ 73.6 billion

Americas EMEA Asia Pacific

$ 51.5 billion $ 67.7 billion $ 84.6 billion

3.3% 2.7% 3.5%

2015

2018

World Market Revenue for IAE was $179.7 billion in 2015

EMEA

$60.8

Americas

$45.3

China

$35.3(CAGR 15-18)

2.9%

Japan

$15.9(CAGR 15-18)

2.2%

Rest of

Asia

$22.3(CAGR 15-18)

3.0%

CA

GR

15

-18

© 2016 IHS

Key industry sector weight and performance in 2016

12

3.7%

4.9%

3.6%

6.0%

3.4%

4.4%

6.2%

6.8%

8.4%

7.6%

37.9%

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

% of 2015 IAE 2015 Growth 2016 Growth

Industrial Automation Equipment Market by Industry

© 2016 IHS

Pro

po

rtio

no

f T

ota

l IA

E M

ark

et

(%)

Se

cto

r Gro

wth

© 2016 IHS

-50%

-25%

0%

25%

50%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

USGermanyChinaJapan

Percentage growth rates of machinery production in US $

Machinery production growth profiles

13

-50%

-25%

0%

25%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Europe (€)Europe ($)

Percentage growth rates of European machinery production. Comparison of $ against €

-50%

-25%

0%

25%

50%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

AmericasEuropeAsia Pacific

Percentage growth rates of machinery production in US $

Total Machinery Production Percentage Growth Rates

% Growth of machinery production measured in US $

2013 2014 2015 2016 2017 2018 2019 2020

CAGR

13 - 20

US 9.4% 0.5% -1.8% 1.4% -0.7% 1.6% 3.7% 3.4% 1.6%

Germany -4.7% 4.1% 1.6% -19.2% -0.9% 1.3% 2.5% 2.4% -1.7%

China 5.7% 7.5% 6.4% 0.2% -0.3% 1.4% 2.8% 3.0% 2.0%

Japan 1.4% -13.1% 1.2% -5.5% -1.1% 1.4% 2.1% 2.8% 1.4%

Source: IHS; Industry Publications © IHS 2016

Total Machinery Production Percentage Growth Rates

% Growth of machinery production measured in US $

2013 2014 2015 2016 2017 2018 2019 2020

CAGR

13 - 20

Americas 1.4% -2.4% -0.7% 0.4% 1.6% 3.3% 3.2% 3.5% 1.2%

Europe 1.4% 1.8% -18.2% 0.9% 2.6% 3.1% 3.0% 2.9% -0.9%Asia

Pacific 11.0% -5.1% 5.3% 0.5% -1.9% 1.9% 3.0% 6.4% 1.4%

Source: IHS; Industry Publications © IHS 2016

Total Machinery Production Percentage Growth Rates

% Growth of machinery production measured $ and €

2013 2014 2015 2016 2017 2018 2019 2020

CAGR

13 - 20

Europe (€) -1.8% 1.9% -2.2% 0.9% 2.6% 3.1% 3.0% 2.9% 1.4%

Europe ($) 1.4% 1.8% -18.2% 0.9% 2.6% 3.1% 3.0% 2.9% -0.9%

Source: IHS; Industry Publications © IHS 2016

© 2016 IHS 14

Industrial motor market insights

© 2016 IHS

Overview of industrial motor market

178M

Siemens

WEG

ABB

Asia

3.0%

EMEA

1.1%Americas

2.2%

Top-3 Leading Suppliers

Americas

28%

EMEA

24%

Asia

48%

15

2015 forecast

unit shipmentsWorld shipments by region (%)

Shipments CAGR (2015-2020)

© 2016 IHS

Global MEPS Timeline

16

Source: IHS; IE4 Low-Voltage Motors - 2015 © 2015 IHS

1997 2004 2006 2008 2009 2010 2011

IE2: US & Canada

IE1: China

IE2: Australia

IE2: Mexico

IE2: S. Korea, Φ1

IE2: Brazil

IE2: S. Korea, Φ2

IE3/NEMA Premium : US

IE2: European Union, Φ1

2012 2013 2015 2016 2017 2020

IE2: Turkey

IE3/NEMA Premium : Canada

IE2/GB3: China

European Union, Φ27.5kW - 375kWIE2+VFD or IE3

*Lot #30 Proposal*European Union0.75kW - 375kW

Exclusively IE3

European Union, Φ30.75kW - 7.5kWIE2+VFD or IE3

World - Legislative Timeline: 1997-2020

Japan 'Top Runner' IE3 or better

IE3/GB2: China

Europe

China: follower

US: Earliest for IE3/NEMAUS: earliest for IE2

© 2016 IHS

Unit shipment growth by efficiency class

17

0

5,000

10,000

15,000

20,000

25,000

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

IE1 - Standard Efficiency IE2 - High Efficiency IE3 - Premium Efficiency

The World Market for Low Voltage Motors by Efficiency Class - Unit Shipments 2014 to 2019

Source: IHS © 2015 IHS

Un

its

(k

)

Brazil starts IE2

EU starts IE2 shift

China starts IE2

shift

US starts IE3/NEMA

Premium shift

Canada starts IE3/NEMA

Premium shift

EU (Phase 2) and Japan

start IE3 shift

EU (Phase 3) and China

start IE3 shift

2015 and beyond are

estimated

© 2016 IHS

WORLD (major players)• ABB (inc. Baldor)

• Siemens

• WEG

• Regal Beloit

• TECO E&M/TECO-Westinghouse

• Leroy Somer

• Toshiba

• Shandong Huali

• Hyundai Heavy Industries/Ideal

• Hyosung Corporation

• NIDEC (US Motors)

Next-tier Competitors

• Toshiba

• Shandong Huali

• Hyundai Heavy Industries/Ideal

• Hyosung Corporation

• NIDEC (US Emerson)

• LEZ Ruselprom

• Gamak

• GE Industrial

• Tech Full Simo

• Cantoni Motor

• Fuji Electric

• Hengshui (OX)

• Crompton Greaves

• Tatung Corporation

• ATB Group (Wolong)

• VEM Group

• Luan JiangHuai

• Anhui Wannan

Low Voltage Motors Suppliers in the World

© 2016 IHS

Low-voltage motors efficiency class allocaation

19

EFFICIENCY CLASS TRANSITIONS (UNITS)

Average Annual Unit Growth ≈ 2.5%

Global Low Voltage Motors - Efficiency Class Transition: 2014 to 2019

2019 Market Size (Units)

51.6 Million

2014 Market Size (Units)

45.8 Million

IE144%

IE234%

IE314%

IE41%

DC1%

Others7%

IE121%

IE241%

IE329%

IE42%

DC<1%

Others7%

IHS has found that efficiency transitions often take 3-5 years until full compliance is underway.

As governments work together and learn from other regions, it is expected that this timeframe will

be shortened over time.

© 2016 IHS

Current allocation of motor efficiency by region

© 2016 IHS

Major motor applications (low-voltage motors)

21

Pumps, fans and compressors account for more than 75% of

worldwide low-voltage motor shipments annually.

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

2014 Revenues Growth 2015 Growth 2016Source: IHS © 2016 IHS

Re

ven

ues (

$M

)

Gro

wth

(%

)

The World Market for Low Voltage Motors By Application - Market Breakdown and Growth

© 2016 IHS

Outlook for motors and motor-driven equipment

SIGNS OF PROGRESS

• Rebound in the construction market

• Rapid urbanization

• Increased demand for comfort

technology

• Municipalities beginning to build

budgets for infrastructure

development

• Bodes well for water/wastewater

investments

• Focus on systems efficiency

CAUSES FOR CONCERN

• Struggles with profitability

• Downward pricing pressure

• Slowdown in the project business

• Overcapacity concerns loom,

especially in China

• Rentals vs new equipment

• Low-cost providers still prevalent

• Downward forecast in machinery

production, GDP

22

© 2016 IHS

Supplier response to economic headwinds

• Increased focus on aftermarket revenues

• New designs; surpass minimum efficiency requirements

• Solutions providers

• Customers don’t want “just a motor”

• Are all IE3 motors the same?

• New manufacturing techniques

• 3-D printing could be the future

• “Industry 4.0”

23

© 2016 IHS

Efficiency: more than just a number

• Full lifetime cost, accessibility and environmental concerns

• Product advancements; smart manufacturing; 3-D printing

• More than just input/output

• 4/10 manufacturers have no visibility into equipment status

• 30% spend up to 4 hours/day searching for equipment

• 50% of suppliers only realize a problem when it’s too late

24

© 2016 IHS

Conclusion

Key Takeaway:

• Worldwide commitment for systems efficiency is best hope for growth in

the motor market amid such difficult economic times

Notable actions:

• With a shift towards efficiency and smart manufacturing, all industrial

players need to be thinking about how to simplify things for their

customers by providing a full holistic solution

• This means that motor suppliers are looking to offer more than just a

motor, but services and extra components, as well, in order to fit in with

the rapidly evolving “Industry 4.0”

25

© 2016 IHS

Questions?

Contact Information:

Preston Reine, Senior Analyst

IHS Manufacturing Technology

Email: preston.reine@ihs.com

Phone: +1 (512) 582 2059