New Technology and Changing User Needs are Structuring Competition and Affiliations in Intrinsic Safety Product Markets

2/25/2003 - A new report from Venture Development Corporation (VDC) titled "European and North American Markets For Intrinsically Safe Equipment" finds that competition is strong, yet there are significant affiliations that benefit both parties in addressing the issues of rapid technological change, and the quest for agility in meeting market demands.

Intrinsic safety is a method used to prevent equipment from causing fires and explosions in areas with hazardous atmospheres, such as explosive gas-air mixtures. Equipment and wiring is intrinsically safe if it is incapable of releasing sufficient electrical or thermal energy to cause ignition of a hazardous atmosphere in its most ignitable concentration. Equipment going into hazardous areas for intrinsically safe applications is classified as either simple or non-simple devices.

Both simple and non-simple devices are connected through intrinsic safety barriers. Simple devices connected to an approved intrinsic safety barrier do not have to be approved as being intrinsically safe. Certification for the design and installation of systems with non-simple devices is required.

VDC investigated the following products used in intrinsically safe applications:

Satisfying demand for intrinsically safe applications has been a primary focus of several small to medium sized firms who have specialized in supplying intrinsic safety barriers and related products. The few firms shown in Table 1 dominate the markets in Europe (accounting for over 89% of the market), and in North America (accounting for about 84% of the market).

With regard to field instruments for these applications, while some vendors publicize the offering of intrinsically safe devices, many of the larger vendors do not. They sell instruments suitable for intrinsically safe applications as part of their lines, and typically this represents a small portion of the sales of these products. In many cases they sell essentially the same instruments for intrinsic safety use as for other hazardous environment protection methods, such as explosion proofing. There are many suppliers of the various field instruments used in intrinsically safe applications, but on the basis of the dollar volume of shipments, the largest shares are those of the large automation control system suppliers such as ABB, Emerson, Endress + Hauser, Honeywell, Invensys/Foxboro, and Siemens.

Currently the majority of the I/O for intrinsically safe applications is implemented with external intrinsic safety barriers connected to local I/O or distributed/remote I/O located in non-hazardous regions. The external safety barriers then connect to the field devices in the hazardous regions.

Two major implementation shifts are occurring:

The latter trend parallels the overall industrial shift away from hard wiring to use of distributed/remote I/O systems, and an increased acceptance of networking/busing connections inside industrial facilities.

Within both the European and North American markets for intrinsically safe applications, the fastest shipment growth rates are forecast for field instruments, and distributed/remote I/O located in the hazardous regions that interface to intrinsically safe network/buses. Figure 1 also shows there are considerable differences expected in shipment growth rates between the various categories of product used in intrinsic safety applications. The two cited implementation shifts are expected to account for much of the differences.

Competitors with strong positions in supplying products for intrinsically safe applications have been put in the position of having to address new challenges. Typically, intrinsic safety barriers incorporated into local or distributed I/O will be for specific controllers and distributed/remote I/O products. Pursuing these markets necessitate establishing affiliations with the controller and distributed/remote I/O suppliers. In addition, vendors sensing the displacement of their intrinsic safety barrier products in the market by intrinsically safe distributed/remote I/O have taken the lead in developing and offering these products.

Increasing demand for intrinsically safe network/bus connectivity with distributed/remote I/O, and directly to field instruments is leading the large control system houses to take increasing interest in these products. First, they are the major suppliers of the field instruments, and secondly they view the distributed/remote I/O for these applications as a logic extension of their control system business. Many are now adding network/bus interface options to their field instruments used in hazardous environments.

The markets for intrinsically safe distributed/remote I/O are still small, and the product designs require special skills. Thus, the large control system houses have entered this market by buying and reselling the products of the specialty suppliers either by private brand labeling, or on an OEM basis. Significant shares of intrinsically safe distributed/remote I/O sales in Europe and North America are via this means.

As this market segment grows, the large control system houses are becoming even more interested and some are now offering their own products, although these have been developed in conjunction with the specialty suppliers. ABB has developed in conjunction with Turck their SA 900 product, and Siemens jointly with Stahl their ET 200iS product.

VDC found still another reason for cooperation between vendors. In the user survey for the study, we found both in Europe and North America, expectations of a shift to buying more of the products as part of intrinsically safe systems (an assembly of interconnected intrinsically safe apparatus, associated apparatus, and interconnecting cables) rather than as individual components. This, likely will lead to more affiliation of the intrinsic safety barrier suppliers with the field instrument and control system vendors, particularly the larger suppliers of these.

The VDC study "European and North American Markets For Intrinsically Safe Equipment" provides markets size, segmentation, and forecasts for intrinsically safe distributed/remote I/O, intrinsic safety barriers, and field instruments used in intrinsically safe applications. Market segmentation and forecasts are provided for Europe and North America, by consuming industries, and by intrinsically safe networks/buses. Market segmentations for the base year are provided for the hazardous environment classifications where the equipment is used, and channels of distribution for the products.

The study includes results of an extensive investigation throughout Europe and North America into user needs and perspectives regarding intrinsically safe products. Included are findings relative to usage of various alternative means of hazardous environment protection, expected trends in hazardous region classifications, in methods of I/O implementation for intrinsic safety applications, and in methods of purchase of these products (as components or as part of intrinsically safe systems). Key product and vendor selection criteria are identified.

Discussion is provided on certification standards, approval procedures and categorization systems for the application of intrinsic safety methods in Europe and North America. An assessment is made of the efforts to harmonize the various standards, approval procedures and marking systems that exist both inside Europe and throughout the world. The impact of these efforts on product designs and future competition is discussed.

An analysis was conducted on competitors currently in the market and the likelihood of new entrants. Partnerships and alliances are examined, along with the impact of new technologies. Vendor market shares are provided for the products, with rankings of the leading suppliers in the major consuming industries, separately for Europe and North America.

The study provides strategies and recommendations on how vendors in each product category can enhance their market positions on a global scale. These cover product offerings, product characteristics and features, targeting consuming industries and regional markets, meeting safety classification needs, channels of distribution, promotion, pricing, buyer education, service, alliances, mergers and acquisitions, and other success factors.

Venture Development Corporation is a technology research and management consulting firm serving the worldwide electronics industry. It was founded in 1971 by graduates of the Harvard Business School and MIT. VDC offers in-depth market research, as well as custom strategic planning and consulting services in the areas of industrial automation, instrumentation, electronic components, computers and peripherals, communications, office equipment, and consumer electronics.

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