Will Yokogawa’s Uchida get his birthday wish?

01 February 2006

In the 30 years since Yokogawa launched the world’s first DCS, the company has acquired a formidable reputation for reliability but made little real impact outside Japan. Andrew Bond attended Yokogawa’s 90th anniversary press conference, and Technology Innovation Fair, where president and CEO Isao Uchida reiterated his determination to lead the global process automation market by 2010.

More than two years ago, Yokogawa president and CEO Isao Uchida went to the ISA Show in Houston and revealed plans to grow the company by 250% over the remainder of the decade and hence become number one in process automation worldwide by 2010. In January 2005 he was back in the US, at the ARC Forum in Orlando, reiterating that message and, just in case anyone still thought that this was more of an aspiration than an actual strategic goal, last October he summoned journalists, analysts, major customers and Yokogawa top brass from around the world to Yokogawa’s 90th anniversary event in Tokyo where he made it crystal clear that he’s still absolutely serious about that 2010 target.

Chief weapon in Yokogawa’s armoury is its extraordinary reputation for quality and reliability. That is epitomised by the claim of ‘Seven 9s’ or, to be precise, 0.999999953 availability for the Centum CS/CS3000 Distributed Control System (DCS). What that means in practical terms, claims the company, is a system
failure, based on the WIB (International Instrument Users’ Association) definition of the simultaneous failure of two or more loops, every 4566 years on a single controller system or every 457 years on one with 10 controllers. Whether that claim is quite as unusual as Yokogawa would like one to think is debatable – another leading DCS vendor argues that, if it applies the same criteria, it too achieves Seven 9s. Be that as it may, there’s no doubt that the perception in the market place is that both Yokogawa’s systems and its instruments are ‘bullet proof’ and it’s that perception that it is now seeking to build on with the more Western style ‘Vigilance’ and ‘VigilantPlant’ marketing initiatives, repeatedly quoting the maxim of the late Peter Drucker that ‘A well managed plant is silent and boring.’

In truth, however, it’s probably Yokogawa’s commitment to continuity and the maintenance of a future upgrade path for all of its users which impresses as much as its sometimes contentious MTBF claims. Yokogawa claims it was the first automation vendor to introduce a DCS back in 1975, beating Honeywell and TDC 2000 by a matter of months. Today it still supports that original Centum system, a point emphasised both by the presence of an example at the company’s 90th anniversary exhibition in Tokyo and, more importantly, by a working example at the recently opened global support centre which, along with its various successors, ensures that any customer’s current implementation can be emulated for trouble shooting purposes.

To fulfil Uchida-san’s ambition, Shuzo Kaihori, until April of last year president and CEO of Yokogawa America and now head of the global Industrial Automation business, is looking for its process automation interests to grow at 10% per annum through to the end of the decade, against an anticipated growth in the market as a whole of just 3%. More specifically he’s expecting the systems and engineering business to
grow at between 8 and 10% against a predicted market growth rate of 2 to 4%; the services business to grow at 12 to 14% against a market growth rate of 8 to 10%; and field instruments to grow 14 to 16% when that market is expected to grow at between 3 and 6%.

What retrieves these seemingly overambitious figures from the realms of fantasy is the geographical distribution of Yokogawa’s current business and its recent track record. With 55% of its revenues still coming from a home market which its major competitors have largely failed to penetrate, growing overall global market share is arguably an easier task for Yokogawa than for any of the other process automation majors. For example, based on ARC Advisory Group’s recently published DCS market share data, Yokogawa needs only to grow its share of the DCS market outside Japan from 5 to 15% to become global
market leader whereas any of the other major contenders needs a 23% share of the non-Japanese market to achieve the same result.

Principal focus of the drive for growth is on Russia, the Middle East and Africa and, most important, China
where, despite received wisdom that for historical reasons it is a particularly difficult market for Japanese
companies, Kaihori-san believes that ‘we have a much more solid base than our competitors.’ Nor does Yokogawa’s track record give its Western competitors any grounds for complacency. Ten years ago it had just 5.1% of the world pressure transmitter market but by 2000 that had more than doubled to 11.6% and by 2004 nearly doubled again to 21.3%. That put it in second place and the target for this year is 30%. It’s also No 4 in analytical instruments and mag flowmeters and No 1 in industrial recorders. The overall plan is pretty simple - to be No 1 in all the process automation markets in which it competes by 2010. Fanciful? It would be a brave punter who would bet against it.

Andrew Bond is the editor of the monthly newsletter Industrial Automation INSIDER and can be reached at editorial@iainsider.co.uk or via the website at www.iainsider.co.uk

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