It is expected to grow at a CAGR of 7.3% during the forecast period. Growing need for scalable, fast, reliable, and inter-operable communication protocols, increasing initiatives by governments of developing countries to promote adoption of industrial automation, and growing popularity of smart automobiles are contributing to the growth of the industrial Ethernet market. Rising adoption of 5G to act as a growth opportunity for the market players.
The outbreak of COVID-19 has forced almost all manufacturing companies to reassess their strategies and come up with quick responses to stabilize their supply chain. Many manufacturing companies have halted their production, which has collaterally damaged the supply chain and negatively impacted the growth of the industrial Ethernet market. Many industrial communication companies worldwide witnessed a significant reduction in revenue growth in the first quarter of 2020. On the other hand, a few companies witnessed a considerably low impact of the pandemic on their sales and manufacturing units in the first quarter of 2020. However, these companies would witness a high impact in the second quarter of the year.
Market Dynamics
Driver - Growing need for scalable, fast, reliable, and inter-operable communication protocols
Industrial Ethernet is essential for achieving complete transparency within an industrial plant, as well as between the plant and enterprise networks. A reliable communication network is the core of the Industry 4.0 concept. Both industrial automation and industrial communication networks are closely dependent on real-time operational needs. Hence, they must be able to handle information in a deterministic and redundant method. The networks must be scalable across a wide range of equipment operating on multiple different standards with various interfaces. A factory system should be capable of offering fast response times, as well as high efficiency and reliability. To achieve these benefits, designers must the best communication technology, navigate a multiprotocol environment, and cover a wide range of industrial equipment. Therefore, the growing need for scalable and inter-operable protocols has increased initiatives to develop a new set of communication products.
Industrial equipment or devices communicate through various interfaces, technologies, and protocols. The absence of standardization in these communication interfaces and protocols may result in the misrepresentation of data. It also can complicate the integration of systems and hinder the use of plug-and-play features for unrelated systems. For instance, most equipment manufacturers use their proprietary interface protocols for communicating with their devices, which s communication challenges with the use of devices developed by other manufacturers.
There are many communication protocols being used in industrial Ethernet, but only a few vendors offer communication modules supporting most of the protocols. Many vendors offer customized industrial Ethernet modules supporting a few communication protocols, thus, end users find it difficult to switch to other protocols according to their requirements. Lack of standardization with respect to technology complicates the integration of systems and hamper the “plug-and-play” capabilities between communication devices.
The other problem faced by the developers of industrial software and systems is the lack of access to the data of plants. The absence of this critical data poses a challenge in the standardization and interoperability metrics for industrial devices developed by different companies. As several manufacturers are making efforts to achieve high production efficiency, the exchange of key inputs related to manufacturing plants is expected to increase in the coming years.
Industrial communication is a vital element of Industry 4.0. While companies are focusing on making their production process smart, they must consider the most advanced communication technology to achieve it. 5G helps to overcome the shortcomings of other wireless systems. With the onset of 5G technology, the manufacturing industry will experience a major transformation. Attributed to the ultra-low latency and reliability of 5G connectivity, deployment of safe, flexible, and efficient manufacturing systems is possible. 5G enables continued automation of robots and warehouse transportation and eliminates the use of cables.
Industry 4.0 is the evolution of new digital industrial technology in which sensors, machines, and IT systems will be connected along the value chain beyond a single enterprise. These connected systems will interact with one another using standard internet-based protocols and will analyze data to predict failure and accordingly configure the variations in data. The fourth industrial revolution will make it possible to gather and analyze data across machines, thereby enabling faster, flexible, and more efficient processes to produce higher quality products at a reduced cost. This will boost manufacturing productivity, improve plant economics, and fuel industrial growth. This, in turn, will increase the use of digital industrial network protocols such as Foundation Fieldbus and WirelessHART. The impact of this opportunity is expected to be high. As part of Industrial Revolution 4.0 promotion, the European Union (EU) has decided to support the smart use of information and communications technology (ICT) and the integration of micro-, small-, and medium-sized enterprises into digital value chains from 2008 to 2020—it is the EU-funded program for research and innovation.
The increasing cybersecurity threats pose a major challenge for industrial communication solution providers due to the ever-increasing instances of virus attacks and hacking. The vital information in computer systems may be tampered by viruses, which can cause a major loss to industries. Thus, the entire information flow could be disrupted if communication software systems are not protected with proper security measures. There is an increasing dependence on web-based communication and off-the-shelf IT solutions that are being used extensively in the industrial sector. The industries implementing such communications are, therefore, prone to malware targeted at industrial systems. With the rise in cyberattacks over the past decade on critical infrastructure, cybersecurity is becoming a central concern among industrial automation users and vendors. For instance, ransomware is a type of computer malware that has replaced the advanced persistent threat (APT) network attacks. This attack was first detected in the last decade and is considered to be one of the major cybersecurity threats today.
Hardware segment to account for a largest share of the industrial Ethernet market by 2026
The hardware segment is expected to hold the largest share of the industrial Ethernet market. Devices such as IP phones and PCs are connected to the internet to enable rapid communication in industries. Machine-to-machine (M2M) communication in the industrial environment helps facilitate efficient plant operations. It accelerates operations and ensures higher reliability and robustness across various industries, such as automotive, transportation, aerospace & defense, pharmaceutical, and food & beverage. However, a secure and robust network is required to protect internet-connected devices from data manipulation or theft. Such a robust application-specific network can be built using networking components. The hardware segment covers the components that are used to build specific communication networks. The components include switches, routers, gateways, power supply devices, controllers, and others.
Ethernet/IP protocol accounted for the largest market share in 2020
Ethernet/IP is an industrial Ethernet protocol developed by Rockwell Automation, Inc. (US) in 1990. It is now managed by the Open DeviceNet Vendors Association (ODVA). Ethernet/IP is one of the leading industrial protocols and is widely used in various industries, including hybrid and process. As Ethernet/IP uses standard Ethernet and switches, it can have hundreds of nodes in a system. This allows for the use of a single network across many different endpoints on a factory floor.
It facilitates users with the tools to deploy standard Ethernet technology (IEEE 802.3 combined with the TCP/IP Suite) in industrial automation applications, enabling the availability of internet and enterprise connectivity at different locations.
Automotive & Transportation end-use industry accounted for the largest market share in 2020
Automotive is one of the largest end-use industries of industrial Ethernet and is expected to continue to dominate the market due to the growing need for advanced automation in automobile manufacturing hubs worldwide. Likewise, water level monitoring sensors, AC drives, and controllers are the crucial components of water treatment systems, and an industrial Ethernet network is used to facilitate communication among these systems. The automotive industry continues to evolve at an impressive pace with the adoption of automation and connectivity. However, component manufacturers strive to address the growing need for bandwidth and cost-effectiveness. An automobile is a complex and technologically sophisticated machine. The manufacturing of cars requires advanced technological methods and processes. To improve the quality of vehicles and overall production efficiency, manufacturers invest substantial time and money in developing and improving the manufacturing process and rely heavily on technological innovations. Industrial Ethernet solutions leverage the benefits of the industrial internet to connect machines, data, and people for attaining an unmatched level of information visibility and manufacturing insight. This helps accelerate production, improve quality, and lower costs.
APAC to account for the largest market share during the forecast period
APAC is currently the largest manufacturing hub for the automobile and electronic companies. To compete with other global players, the companies in APAC use advanced automation systems, which require highly reliable communication networks for machine-to-machine (M2M) communication in their plants. The manufacturing companies in APAC extensively adopt the smart factory concept for implementing advanced manufacturing technologies on the factory floor. This innovative concept has transformed the manufacturing sector in APAC and has increased the implementation of smart automation in factories. The growing acceptance of Industrial Revolution 4.0 in APAC is also a factor driving the growth of the regional market. The decrease in the number of COVID-19 patients in China is slowly normalizing the manufacturing activities in the country. This, in turn, is expected to drive the growth of the industrial Ethernet market in APAC. However, it is likely that this growth will not be as significant as it was estimated in the pre-COVID-19 era.
Key Market Players
Include Cisco (US), Siemens (Germany), Rockwell Automation (US), Omron (Japan), and Moxa (Taiwan) are among the major players in the industrial Ethernet market.
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