Expanding the global footprint Oerlikon further expands in growth markets
China continues to progress along a positive economic trajectory, with private consumption driving a higher share of growth than government spending and investment. Despite bureaucratic complexities and insufficient protections for intellectual property, most business condition indicators in China have improved and key end markets important to the Group remain attractive. China is the world’s largest market and production site for manmade fibers, a market that is expected to grow at a compound annual growth rate (CAGR) of 5 % from 2018 to 2022. Foreign investment in China has also been extended into the aviation sector, which is projected to grow at a 6 % CAGR. In addition to aerospace, potential strong areas of growth include automotive, where an increasing number of top-tier producers are either starting or expanding production, and e-mobility, which is expected to grow because of environmental pressures and government incentives.
Against the backdrop of India’s continued transformation from an agricultural to a manufacturing and serviced-based economy, business conditions have largely stabilized despite ongoing challenges posed by complex tax regulations and corruption. Historically high inflation rates are expected to remain moderate, terms of trade have shifted favorably as the Indian rupee has steadied, and India’s current account deficit is declining as the country’s exports become more competitive internationally. The Group anticipates an 11 % CAGR in the automotive market, with local producers becoming more competitive. The market for polyester fibers is poised to grow by 10 % over the next five years. Bolstered by increasing efficiency in the agriculture sector, the market for heavy equipment machinery is projected to grow at an 8 % CAGR over the next five years.
Japan has exited its recession and there are signs for economic optimism. Although taxes and labor regulation remain as challenges, a current account surplus, high foreign exchange reserves and solid import coverage are contributing to a strong external position. Boosted by increased travel, for example, the MRO segment of the aerospace market is forecast to grow by a CAGR of 5 % through 2022. Following a sharp contraction in 2014 and 2015, the industrial and machinery tooling market is expected to grow at a CAGR of 2 % over the next five years as Japan’s manufacturing industries recover from years of declining demand both at home and abroad. Following global economic recovery, the Japanese automotive industry, one of the largest in the world, recorded production growth for cars in 2017, and is expected to remain an attractive automotive manufacturing and export market.
With strong real economic growth, high consumer confidence, low unemployment and domestic-driven demand, South Korea is both an attractive market and a stable environment for conducting business. South Korea possesses a large, diverse and growing manufacturing sector. Despite a rcent decline in net exports to China, the country's strong manufacurng base is poised to grow and is projected to contribute to an estimated 2 % CAGR in the market for industrial and machinery tooling over the next five years. New emission regulations for heavy machinery will drive demand for replacement equipment.
France enjoys a largely diversified economy and stable market conditions. Several of the Group’s priority industries are expected to grow in the coming years, especially aerospace, which is buoyed by an expected 3 % increase in passenger travel over the next decade and France’s status as one of the world’s top ten clusters for maintenance, repair and operations (MRO). In addition, France is the second largest European market for medical devices, but at half the size of market leader Germany there is strong growth potential. Similarly, the Group expects strong growth in heavy machinery demand to create additional market opportunities, driven by strong exports and construction demand.
With low and falling unemployment rates, cuts in government spending contributing to a more balanced budget and GDP growth that is broad-based across many sectors of the economy, Germany’s sustainable economic outlook has created a compelling environment for business. All industries important to the Group are poised for growth. The German automotive market, the fourth largest in the world, is supported by government incentives for electric vehicles. The market for industrial and machinery tooling is expected to grow by a CAGR of 2 %, bolstered by Germany’s position as the third largest machine tool producer in the world and a global leader in machine tool exports.
Low oil prices and economic sanctions have strained the Russian economy, which is heavily reliant on natural resources and currently suffers from both high inflation and low real GDP growth. Nonetheless, the government is addressing the country’s challenges by establishing industrial capabilities domestically and is investing in energy production and infrastructure. These steps should yield benefits across specific industries. Bolstered by the government’s announcement that it would build up domestic power capacity in response to economic sanctions, the power generation market is forecast to grow at a 1 % CAGR over the next five years. Furthermore, the government’s interest in advanced manufacturing technologies, such as additive manufacturing, has been increasing.
The USA will continue to be a key market for high-tech offerings such as additive manufacturing and medical devices, with the latter market projected to deliver 4 % CAGR from 2018 to 2022. The federal government’s plan for increased infrastructure spending should benefit heavy equipment and machinery sales. Demand for tooling is expected to grow 3–4 % over the next five years, contributing to a 2.5 % CAGR in the market during that period. Although climate policy is in flux under the current US administration, by 2025 the USA will seek to reduce its emission levels by 28 %. That should drive the replacement of conventional coal power plants with gas power plants, fostering both new plant investment and the replacement of parts in gas turbines. The recent reform of the US Federal tax code is poised to make the USA an even more attractive market in which to conduct business operations.