The recession jammed growth, but strong recovery has brought revenue above prerecession levels
Los Angeles, CA (PRWEB) November 21, 2012
The Gear and Speed Changer Manufacturing industry manufacturers power transmission equipment (e.g. speed changers, gear motors) and gears that are used by different manufactures in the production process. End-users, which include food and beverage processors, paper manufacturers, plastic manufacturers and construction contractors, require power transmission equipment and gears to outfit their equipment. For example, gear motors are used to supply power to electrical tools and other manufacturing machinery.
Similar to other manufacturing industries, the Gear and Speed Changer Manufacturing industry was adversely affected by the recession. When the recession hit in late 2008 and carried through 2009, demand declined for downstream users as consumers reduced purchases in light of falling disposable income. This hindered revenue growth for gear and speed changer manufacturers; however, as the economy began to recover and consumers experienced increasing disposable income, demand for end-users like construction contractors and plastic manufacturers began to grow, which caused demand for gear and speed changer products to jump. Over the five years to 2012, industry revenue will increase at an estimated annualized rate of 0.5% to $3.0 billion. “In addition to shifts in demand, the industry has endured high raw-material costs,” says IBISWorld industry analyst Radia Amari. These challenges remain constant in 2012. Nevertheless, the economy continues to grow, and in 2012, revenue will increase about 4.8%. Profit, as measured by earnings before interest and taxes (EBIT), will amount to about 12.0% of revenue in 2012, up from about 11.6% in 2007. Despite rising raw-material (e.g. steel) prices, industry profit has benefited from falling labor costs and higher average selling prices.
During the five years to 2017, industry revenue is expected to increase. Downstream manufacturing industries will increasingly demand gears and power transmission equipment as production increases. Additionally, exports are expected to continue rising over the next five years, albeit at a slower rate. Higher demand will draw new entrants. The number of companies is expected to increase at an annualized rate of 1.3% to 64. According to Amari, the Gear and Speed Changer Manufacturing industry has a medium level of market concentration, with the four largest firms accounting for an estimated 41.6% of industry revenue. According to US Census data, 79.7% of all industry firms are small- to medium-sized, and have fewer than 99 employees. On the other hand, several large machinery and electronic equipment manufacturers participate in this industry. For example, major player Emerson is a global technology and engineering firms with more than 130,000 employees and only participates in this through industry through a small product segment. Over the past five years, large industry firms have expanded operations and acquired smaller competitors to achieve greater cost efficiencies. Consequently, industry concentration has increased. For more information, visit IBISWorld’s Gear and Speed Changer Manufacturing in the US industry report page.
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IBISWorld industry Report Key Topics
This industry includes establishments engaged in manufacturing gears, speed changers and industrial high-speed drives. These components are used primarily in mechanical power transmissions for industrial machines or vehicles. This industry does not include passenger automobile transmission manufacturing.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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