Ever since the term ‘Industry 4.0’ was coined back in 2013, the term has become the buzzword in the industrial world. Industry 4.0 refers to the fourth industrial revolution, which envisages smart factories with machines communicating seamlessly with each other and with human beings. Both Industry 4.0 and the Industrial Internet of Things (IIoT) envision a smart value chain where the horizontal and vertical are integrated in an effort to reduce, and eventually eliminate inefficiencies throughout the value chain. Within the manufacturing sector, IIoT/Industry 4.0 adoption was expected to increase significantly across various industries. In the context of the pneumatic equipment market, IIoT/Industry 4.0 adoption has been slow primarily due to the lack of a clear and well-defined IIoT/Industry 4.0 strategy. End users are hesitant to upgrade their systems, as technical standards are yet to be established and concerns related to cybersecurity and data ownership remain. While traditional pneumatic systems were ‘dumb’, especially compared to electric systems, modern-day pneumatic systems boast vastly improved levels of intelligence, especially with increased PLC usage. The trend of increased electronic integration in pneumatic systems has steadily been gathering pace over the last decade. This has helped the pneumatic market to post stable growth even after the great recession. However, market saturation is expected over the next decade and new growth opportunities in this market are needed to help this market grow further. Frost & Sullivan believes that the trend of reshoring in developed regions and greater penetration of IIoT/Industry 4.0 will play a major role in future market growth.

Pneumatics is a well-established technology and will continue to be favored for a wide variety of applications owing to its inherent safety in hazardous applications, simplicity, and reliability. However, for all its benefits, there remains room for improvement with respect to energy efficiency, especially when compared with competing technologies such as hydraulic or electric technologies. Energy-efficiency is a key end-user requirement, not only because of worldwide government crackdowns on industrial energy consumption, but also for reducing energy costs that represent a significant portion of operational costs in pneumatic systems. In addition to the compressor, which supplies the compressed air for use in these systems, the key components of a pneumatic system include valves, actuators, air filter regulator, lubricator units (FRLs), and fittings. While all these components can be considered commodity products, IIoT/Industry 4.0 primarily affects the valves and actuators, which are the key engines of growth for this market, as these components tend to influence purchase patterns for other components.

The use of advanced technologies provides benefits in two major areas—maintenance and productivity. Pneumatic valves control the air flow in the system; reducing the air consumption in the pneumatic system will be one of the top priorities for OEMs and end users alike in their quest to reduce energy consumption.  Similarly, enhancing the level of control in pneumatic actuators is also a key end-user requirement. Adding sensors to the system helps the end user collect operational and performance data such as speed, force, air consumption, and cycle time. This data can help the end user identify inefficiencies, whose rectification can improve productivity. In addition, analyzing the data to discover performance profiles that are indicative of deteriorated performance can help the end user identify component failure in advance. This way, a valve or actuator can be replaced at the next scheduled interval, thereby minimizing machine downtime and improving operational efficiency.

However, despite the advertisement and push from major companies and governments for IIoT/Industry 4.0, adoption is still at a relatively nascent stage, as the manufacturing industry on the whole has traditionally been slow to respond to new technology trends, and there are significant challenges that need to be addressed in order to make IIoT/Industry 4.0 a reality. Challenges related to IIoT/Industry 4.0 implementation such as investment in smart technologies, Big Data analysis, and cybersecurity issues are relevant across all industries in the manufacturing sector. Within the fluid power space, pneumatic equipment suppliers are closely following IIoT/Industry 4.0 trends in an attempt to gauge consumer preferences, which could help them gain an edge over the competition.

For pneumatic equipment suppliers, convincing customers to adopt IIoT/Industry 4.0 solutions is particularly challenging for several reasons. Customers (OEMs and end users alike) are price-sensitive and convincing them to increase investment in smart technologies without fully understanding the implications of such an implementation is highly difficult. While the average lifespan of an industrial machine is over 15 years and modern-day valves and actuators are interchangeable—the availability of less expensive alternatives from low-cost manufacturers and end-user reluctance to change manufacturing processes makes it harder to push IIoT/Industry 4.0 solutions. While many end users believe IIoT/Industry 4.0 will be a game-changer and would consider investing in it, there still remains significant doubt about how these concepts can be individually applied to an end-user’s application. This lack of a clear, well-defined IIoT/Industry 4.0 strategy remains the chief cause for the slow penetration of IIoT/Industry 4.0 concepts among users of pneumatic equipment.

The availability of smart valves and actuators has not necessarily translated into large-scale IIoT/Industry 4.0 adoption, as most end users are content with their existing systems. While end users understand the benefits related to energy efficiency and might upgrade a valve or an actuator, a significant portion is still unsure about how to proceed with data analytics.  Lack of major technical standards, questions related to data ownership, and integrating newer technologies with legacy equipment continue to pose major challenges to IIoT/Industry 4.0 adoption. Ultimately, many end users are of the opinion that the risks outweigh the potential benefits and unless these challenges are addressed, they would be reluctant to make major investments in IIoT/Industry 4.0. As a result, the vast majority of end users who are aware of IIoT/Industry 4.0 can be broadly divided into 3 categories.

The first category involves end users who are looking for successful implementations of IIoT/Industry 4.0 by other companies and would prefer to wait until tried-and-tested solutions become commonplace in the market. The second category mainly involves mid-size enterprises that are closely following the success achieved by large top-tier end-users and are interested in adopting similar solutions in their own production facilities. The third category involves companies, mostly large tier I corporations with large R&D budgets, which are able to apply IIoT/Industry 4.0 concepts in some of their production facilities or at least certain areas of their production facilities, and are able to scale-up to cover other areas and facilities. Most manufacturing industry participants that use pneumatic equipment are currently in the first two categories.

However, while adoption is slow at the moment, there are several factors that indicate adoption will increase over the next 5–10 years. The trend of reshoring in developed regions, such as North America and Europe, is expected to increase over the next 5–10 years, as rising labor costs in emerging regions slowly but steadily eliminate production cost gains. In addition to competitive manufacturing costs, reduced shipping time and costs help strengthen the argument to bring manufacturing back to the home country. While these factors are not necessarily new, automation and IIoT/Industry 4.0 now make it possible to stay competitive by manufacturing in North America or Europe. While there is a growing initiative to increase manufacturing output in Europe and North America by their respective governments, changing consumer patterns have a greater impact on influencing investments in automation. The trend toward increasing use of manifolds is expected to benefit IIoT/Industry 4.0 adoption, as smarter solutions will be needed to identify individual valve failures and identify potential air leaks. Similarly, adopting IIoT/Industry 4.0 concepts makes it easier to add production lines in manufacturing facilities as modular solutions become more popular and the IIoT/Industry 4.0 technology is scalable. In conclusion, Frost & Sullivan believes that the macroeconomic trend of reshoring rising end-user demand for lower energy consumption and increased operational efficiency, combined with the continued development of IIoT/Industry 4.0 standards will eventually result in the trickling down of advanced technologies from the largest users of pneumatic equipment down to the smallest market participants.

About Frost & Sullivan

For six decades, Frost & Sullivan has been world-renowned for its role in helping investors, corporate leaders and governments navigate economic changes and identify disruptive technologies, Mega Trends, new business models and companies to action, resulting in a continuous flow of growth opportunities to drive future success.

Frost & Sullivan

For six decades, Frost & Sullivan has been world-renowned for its role in helping investors, corporate leaders and governments navigate economic changes and identify disruptive technologies, Mega Trends, new business models and companies to action, resulting in a continuous flow of growth opportunities to drive future success.

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