By John Swezey, Bishop & Associates Inc.

The world terminal block market in 2006 and early 2007 will continue as a strong and mature marketplace. Many of the product styles offered today have been available in a similar form for years. This is particularly true of terminal block designs native to the North American market. Over the years, European manufacturers have coupled aggressive marketing strategies with innovative design and high quality, and have become dominant in many regions around the globe. Additionally, the IEC terminal block specification is the most accepted spec in many regions. This market thrust began in the mid- to late 1980s, and has continued to the present. European styles continue to gain acceptance and market share in each region of the world; however, the trend has slowed a bit from prior years.

The decline in the connector industry in 2002 was also felt by terminal block manufacturers. Connectors were down -9.6% in 2002 compared to 2001. Particularly hard hit were the sizeable telecom/datacom markets and computer/peripheral markets. Telecom and datacom were down -28.6% worldwide, and the computer/peripheral market slid -9.9%. Even the industrial and instrumentation markets slipped in 2002 by roughly 10%.

In 2002, terminal blocks were down slightly less than connectors. Bishop & Associates’ research shows the terminal block market declining -4.5% in 2002 versus 2001. In terminal blocks, the telecom/datacom markets were down -12.0% and power supplies were down -5.5%. Industrial controls—the largest market—was down a lesser degree at -4.0%. HVAC—the second largest market—was down -3.0%. By region, North America declined -5.0%, while Europe fell -6.0%.

In 2003, the terminal block industry began a recovery and grew at a +5.2% pace by year-end. As a comparison, the connector market was up 11.2% in 2003. China, broken-out by Bishop & Associates for the first time, led regional terminal block growth with an 11.7% gain. Second to China was Europe, with +6.3% growth. However, most of this growth was not a “real” gain, but was the result of currency conversion of Euros to U.S. dollars. This also can be said, to a lesser degree, for growth in the Japanese market. North America, in 2003, grew at a modest +2.3% rate.

From an industry standpoint, industrial controls grew +6.0% and HVAC +6.4% in 2003. However, telecom/datacom remained negative with a –1.1% decline. Power supplies and transportation gained slightly at +3.4% each. Terminal blocks used in instruments grew at a substantial +6.4% pace.

The size of the world terminal block market in 2003 was $1.675 billion. Sectional (modular) terminal blocks made up 55.4% of the total. PCB-mounted types were 21.6%, and barrier blocks were 5.0% of the market. Power blocks and “all other” types made up the balance of 18.0%.

In 2004, the terminal block industry grew decisively at a +13.8% rate to $1.9 billion. Industries leading the charge in 2004 included medical equipment at +20%, instruments at +16%, industrial controls at +14.5%, and office equipment at +14.6%. Automotive, transportation (non-auto), and telecom/datacom grew slower than the market average, but were still acceptable growth areas. As for world regions, in 2004, terminal blocks in China grew in the range of 20 to 25%, Europe around 14%, and Japan in the 12 to 14% range. North America and Asia/Pacific regions grew less than the market average.

In 2005 and 2006 the industry grew at more “normal” rates of +5.4% and +6.1%, respectively.

Europe uses more terminal blocks than any other geographic region, consuming 44.4% of the world total in 2005. North America is second with a market share of 22.3%. China, Japan, Asia/Pacific and rest-of-the-world (ROW) share in the balance of 33.3%. China and Asia/Pacific have increased its share from 9.7% in 1997, to 13.9% in 2005.

The leading industry for terminal block usage is the industrial controls market at $1.0 billion in 2005. HVAC and instruments are a distant second and third, consuming $237 million and $189 million, respectively.

Bishop & Associates’ forecasts that the world terminal block market will grow to $2.6 billion by 2010. This is a +5.3% compound growth rate, and compares favorably with historical rates. PCB-mounted types will grow the fastest at a +6.4% compound rate, while barrier blocks will plod along at a +2.1% per year growth rate. Sectional blocks are forecasted to continue growing at a +5.1% rate.

From a geographic perspective, China will grow the fastest, at +17.6% compounded, and reach $301 million in 2010. North America will achieve growth of +3.4%. The very mature and terminal block-saturated European market will grow at a +3.3% rate. Europe will retain its leadership role with a 40.3% share of the world market, down from 44.4% in 2005.

The largest industry segment, industrial controls, is the third fastest growth segment. Terminal blocks used in industrial controls will grow at a +5.5% pace and reach $1.331 billion in 2010. Terminal blocks for telecom and datacom applications will grow at +5.6%. This assumes the communication industries continue to regain a good portion of their former activity levels.

Other terminal block markets, including business equipment, HVAC, power supplies, and transportation, will grow at rates between 4.0% and 5.4%. Instrumentation, at +5.7%, will be the fastest growing segment in the 2005–2010 timeframe.

Important trends continue to influence the world terminal block market:

• The miniaturization of terminal blocks to reach even higher densities in the same or less space.
• The trend to greater operator safety with the use of “finger-safe” terminal block designs.
• The greater use of multifunction, multipurpose, and more intelligent blocks.
• And, the trend to reduce total installation costs to users. Some of these trends have slowed from prior years, but continue to be important to manufacturers and users.
  The overall price trend in terminal blocks is up. Price increases vary by product and are noted below. Increasing material costs are the major culprits in these market price increases.
• Barriers are up.
• Sectional blocks are up.
• Standard DIN rail prices have increased slightly more than NEMA-style prices.
• PCB-mounted blocks are down.
• Power blocks are up.

The top five terminal block manufacturers hold 64% of the world market. These leaders are Phoenix Contact, Weidmuller, WAGO, Wieland, and ABB Entrelec. The top 10 companies account for a total of 74% of the market, and include Rockwell Allen-Bradley, WECO, Cooper Bussmann, Molex, and RIA.

Phoenix Contact and Weidmuller stand out as world leaders, holding 16 to 17% of the market each. The next highest, WAGO, has 13 to 15% of the world terminal block market. The leading North America-based company, Rockwell Allen-Bradley, captures 3 to 4% of the world market.

Each of the world terminal block leaders uses the following strategies and competitive advantages to maintain and grow market position:

• Investment in manufacturing automation and cost-reduction processes.
• Offer a broad line of terminal blocks and complementary products.
• Need to provide IEC-qualified products for world sales
• Invest in R&D for enhancements in terminal block design and quality assurance.
• Flexibility on pricing issues.
   
  Some additional observations on the terminal block market:
• Companies have found that having the best technical product is highly important but does not always guarantee success. Technology needs to be partnered with an innovative approach to markets.
• Traditional terminal block manufacturers are looking at other products and markets. Product portfolio management is more critical today than in prior years.
• Time-to-market is a most critical factor today. A company must be able to control its processes from the original idea through the product delivery phase in a few weeks rather than months, in some cases.
• A focus on the individuality of industry segments has also become necessary.
• Terminal block manufacturers are looking at, or establishing, complete facilities in China or other lower-cost producing areas. These facilities will be responsible for material flow, production, quality assurance, and shipment.

World Market Forecast

Historical Growth
From 1991 to 2005 the Asia/Pacific market grew the fastest. Europe ranked next in growth, while North America followed closely. Japan ranked last in long-term growth over this period.

In recent years, Bishop & Associates has broken China out from the Asia/Pacific region, and this country has become the fastest growing market for connectors and terminal blocks.

Forecast by Product

The worldwide terminal block market will grow to $2.6 billion in 2010 from $2.0 billion in 2005. Compound growth rate for this period is +5.3%. Bishop & Associates estimates a 2006 growth of +6.1% to a market size of $2.132 billion. The following table presents the forecast by product category:

Forecast by World Region

The following table presents the terminal block market forecast by geographic region:

 
Market drivers include:

• United States’ GDP is heading toward +5.0% and China is above +9.0%.
• Japan and the Asia/Pacific countries are achieving GDPs ranging from +5.5 to +7.0%.
• New applications in the mobile/wireless equipment environment (infrastructure). Telecom infrastructure is growing again.
• Continuing favorable interest rates.
• Increased military spending.
• Continuing capital spending in most industries.
  Potential market inhibitors include:
• Automotive market instability.
• Continued regulatory uncertainty regarding competition in telecom.
• Another act of war against North America or Europe.
• Slowing of growth rates in the second half of 2006 continuing into 2007.

Forecast by Industry

The following table provides the forecast of the terminal block market by industry served.

Industrial controls will continue to be the largest market for terminal blocks, reaching $1.331 billion in 2010. This industry will grow at a 5.5% annual rate during the forecast period. Growth of this leading industry segment will be fueled by:

• Continuing refurbishment of older plants and equipment.
• New plant construction incorporating modernization of controlling systems and equipment.
• Capital goods industries’ ability to continuously improve control systems as new equipment is introduced.
• Favorable interest rates.

Terminal blocks used in HVAC equipment will grow at a +5.4% rate for the forecast period. China is an important factor in the manufacturing and consumption of HVAC products. New construction is a market driver in this segment.

The remaining industries will grow at rates between +4.0% for transportation and +5.7% for instrumentation. Telecom equipment growth will be a healthy +5.6% for the 2005–2010 period.

Additional comments on industry growth:

• Terminal blocks used in security markets will grow slightly faster than average growth rates.
  • New microprocessor - based control and measurement instrumentation is a growth opportunity for terminal blocks.
• New opportunities continue to appear in HVAC equipment as products continue to be re-designed.
  • Worldwide emphasis is on improving environmental controls
  • Requirement for better air handling controls
  • Emphasis on energy conservation
  • Environmental regulations encourage use of PLC’s and DCS systems
• Instrumentation for petrochemical industries is a strong area but highly cyclical.
• Transportation equipment and controls rely heavily on the willingness of governments to spend in this industry.
• Instrumentation for semiconductor equipment will grow faster than the overall instrumentation market in the 2007 thru 2009 timeframe.

John P. Swezey
Director of Connector Product Research, Bishop & Associates, Inc.

John Swezey has been a part of the connector industry for 40 years. His connector career began with Amphenol Corporation in international sales in 1964. Later, John moved into the Amphenol market research group. In 1974, he joined TRW Cinch Connectors in market research and marketing management. John joined Bishop & Associates, Inc. in 1989.

Swezey graduated from Vanderbilt University in 1956 with a Bachelor of Arts in business, and minor degrees in economics and naval science. Prior to entering the connector industry, Swezey was in sales with Ryerson Steel and also served as an officer in the United States’ Navy.