Market Assessment of Chile

7. Industrial Process Controls

Market Opportunity

Chile's industrial diversification, modernization and investment in new infrastructure make it a good market for industrial process controls. US industrial controls companies have an immediate opportunity to export controls to Chile and, possibly, to establish a production facility.

Market Conditions

Sales of industrial process controls totaled US$120 million in 1994 and have been growing by 20 percent per year. The controls industry attributes this explosive market growth to Chile's industrial diversification and modernization. As of early 1995, all industrial process control components were imported to Chile and assembled locally. Industry experts do not expect development of local manufacturing capability for several years. However, as mentioned, the market is new and growing significantly. It is still open for more imported controls and, eventually, manufacturing.

The main competitors in the Chilean market are Honeywell, Allen Bradley (Abmatic), Siemens, Telemecanic, General Electric, Asea Brown Boveri, Kogan Industrial, Lureye, and SONDA. Kogan, Lureye and SONDA are Chilean companies with ties to international companies; the rest are US or European. Key process control products include programmable logic controllers, display systems, communication systems and adjustable speed drives (ASDs).

Adjustable speed drives entered the Chilean market only three years ago. Suppliers are not aggressively marketing ASDs yet sales are growing at 10 to 15 percent per year. Many motor companies are also introducing ASDs. According to one manufacturer, the motor industry is focusing marketing and sales efforts on standard motors, not ASDs.

Chile's industrial goals of improving process efficiency and reducing costs support the increased sales of industrial controls. Potential end-uses for ASDs in Chile include conveyor belts, pumps and fans, direct current motors and alternating current wound rotor motors.

In installing process controls, Chilean industry is motivated more by the desire to modernize facilities rather than the goal of reducing energy consumption. According to one controls representative, industry often assumes it is effectively modernizing its process by implementing advanced controls systems, even though it has not employed a systematic approach. For example, some companies install advanced control technology without considering the installation of new motors. This partial modernization can reduce the effectiveness of process controls and miss opportunities for improved energy and process efficiency.⁴⁵

Energy Efficiency and the Chilean Industrial Controls Market

The economics of industrial controls are excellent. According to one manufacturer, one Chilean company's US$300,000 investment in a controls system paid back in energy savings within 6 months.⁴⁶ Chile's Goodyear plant used to have fifty year old technology before it invested US$4 million in controls to update its tire manufacturing process. Reynolds Aluminum invested in boiler controls while pulp and paper industries have invested in burner control systems.⁴⁷

Marketing of Industrial Controls

The industrial controls industry has responded to the lack of awareness among end-users by conducting training courses on the advantages, use and application of industrial control technology. This marketing effort is suspected to have had an impact on the sales of control systems. A coordinated marketing effort by motor and control manufacturers to raise awareness of life-cycle costs could benefit both industries by expanding markets.

Distribution Channels

Distribution channels for industrial controls vary based on the end-users. Controls suppliers are quite diversified and generally serve both large and small industry. Companies sell directly to small end-users and to large industry for new and retrofit projects. Large industrial end-users include cement, mining, pulp and paper, food and fish processing. Companies also sell to engineering companies that serve as intermediaries between end-users and product suppliers.

Some industrial control companies have secured market niches from their domestic experience. For example, Canadian and Swiss control companies have captured a significant share of the market for controls in the Chilean pulp and paper industry.

Notes:

⁴⁵ Personal communication, Sergio Alvaredo, Abmatic, August 9, 1994.
⁴⁶ Personal communication, Juan Luis Pavez, SONDA, November 15, 1994.
⁴⁷ Personal communication, Alvaredo, August 9, 1994.