November 2016
by Peter Maskell
@PeterM_Cambashi
LinkedIn
The top three markets for PLM and manufacturing design and analysis software are the US, Japan and Germany. They all have big economies, big populations, big manufacturing industries and they all excel at product design.
Cambashi data shows that in 2015 the US spent more than Japan and Germany combined on PLM and manufacturing design and analysis software (I’ll abbreviate to just “PLM” from here). Headquarters to three of the four biggest PLM providers – Autodesk, PTC, and Siemens PLM – the US is the undisputed powerhouse of technical design and analysis.
Source: http://www.cambashi.com/. PLM Software refers to PLM software revenues, it excludes services
Sitting in position number two is Japan followed by Germany in three. Or at least, that’s what I expected. Japan has a bigger economy, a larger population, a rich history of manufacturing innovation and a world renowned reputation of technological advancement. Recently, though, I’ve seen Germany ahead of Japan on a number of measures so I wanted to double check that expectation.
Automotive industry
General software permeates business and consumers alike and is used across almost all industry sectors. PLM software, by contrast, is used almost entirely in a business context and is primarily used in the manufacturing industry. To understand the PLM market you need to understand the industries in which it is used.
The automotive industry relies very heavily on PLM software from CAD designs, through CAE analysis of those designs, CAM used in manufacture, and lifecycle management software to manage each step of the process from OEMs to parts suppliers.
Automotive is one of the key industries for the PLM market and is probably the first industry that springs to mind when discussing Japan and Germany.
Source: http://www.oica.net
In terms of vehicles produced, Japan is the clear leader here, but after a significant dip during the recession of 2009, production in Japan hasn’t fully recovered.
On the other hand production in Germany has been remarkably constant for the past 10 years, with only a minor dip during the recession of 2009 and a quick recovery to pre-recession levels. Prior to the recession of 2009, Japan was producing almost twice (1.9x) as many cars as Germany; in 2016 that ratio is expected to fall to about 1.4x as many cars as Germany.
It’s interesting to note that Japan’s decline hasn’t resulted in an increase in unit production for Germany. Worldwide automotive sales are increasing, so production must be moving to other countries. Production data shows that the US and China have both seen a massive increase in recent years, with Mexico production also increasing but from a much smaller base.
Aerospace
As with automotive, PLM software is integral to the design and manufacture of aircraft. Cambashi’s models show that per dollar of value added earned the Aerospace industry spends 33% more on PLM software than automotive OEMs.
Source: https://www.gtai.de and http://www.sjac.or.jp. Both converted from local currency to USD using annual average exchange rates from oanda.com.
Here we can see Germany is the much larger market of the two countries with Japan under half the size. For comparison, the UK is of a similar size to Germany, with France slightly bigger and the US over 4x bigger.
Machinery
If aerospace and automotive are the poster industries when it comes to PLM software, then machinery is surely the workhorse. Proportionally it might not spend as much as aerospace and automotive (aerospace spends twice as much per dollar of value added), but the industry itself is huge.
Source: http://ec.europa.eu/eurostat and http://www.stat.go.jp. Both converted from local currency to USD using annual average exchange rates from oanda.com.
Here the value added data (roughly: turnover less cost of materials) shows that Japan and Germany are almost equal in size.
Japan is bigger in automotive, Germany is bigger in Aerospace and both countries have similar sized machinery industries. How does this translate to PLM revenues?
PLM providers
In this next section I’m going to focus on three PLM software providers: Dassault Systèmes, PTC and Ansys. I’ve chosen these three providers because all three are big players in the PLM space and, conveniently, all three publish data on revenues in Japan and Germany.
I’ll finish up with some Cambashi estimates of Japan and Germany for Autodesk and Siemens PLM.
Dassault
The biggest PLM software provider in the world. Dassault makes a range of software from traditional MCAD (Solidworks and CATIA) to factory layout (DELMIA), simulation (SIMULIA) and lifecycle management software (ENOVIA). Its products are strong in all three industries described before.
Source: http://www.3ds.com/investors/
Since 2010 (which is as far back as Dassault has published the country splits), Germany and Japan have been neck and neck, swapping position 3 times in that period. Despite Dassault’s acquisition of CST this year – a German company – Cambashi data predicts that Japan will close the (already very small) gap with Germany in 2016.
PTC
PTC is one of the “big 4” PLM providers with CAD products such as Creo and its lifecycle management software Windchill. In recent years PTC has also been making a big play in the IoT space.
Source: http://investor.ptc.com/
The graph above, conveniently beginning with Germany and Japan starting from almost exactly the same level, shows that the German market has grown significantly more for PTC than Japan.
Ansys
Ansys is a provider of CAE software. Its analysis tools are used in a wide range of industries from aerospace and automotive to fluid flow in process plants and semiconductor industries.
Source: http://investors.ansys.com/
Ansys data for Japan and Germany show that Germany sales saw a decline during the recession of 2009, with a steady increase to the current level. Japan on the other hand, saw sharp sales growth from 2008 to 2012, before declining and stagnating somewhat since. This leaves Germany and Japan at about the same level in terms of sales revenue for 2015. Half year results for 2016 show that Japan is up 12.5% on the same period last year.
Autodesk
Autodesk makes a wide range of software, much of which falls into the AEC (or “BIM”) category, rather than PLM. Even so, it still makes a very big contribution to the PLM market. Worldwide, in 2015, Autodesk made about $700m from PLM software such as Inventor and Fusion 360, with over $200m from AutoCAD (incl LT) used in a manufacturing context (Cambashi estimates).
For Autodesk as a whole (incl AEC/PLM/GIS/M&E software), Japan revenues were reported at $220m in 2015. Autodesk doesn’t publish figures for Germany, but Cambashi’s model of the technical applications market estimates German revenues at about $210m.
Siemens PLM
Siemens PLM, with its products NX & SolidEdge (CAD), CD Adapco & LMS (CAE), Teamcenter (PLM), Technomatix (factory layout) and many others, can provide a full suite of solutions to manufacturing industries. Along with Dassault and PTC, Siemens is a strong player in Automotive with its software used by a number of major OEMs. Siemens PLM is also strong in other industries such as shipbuilding and defence.
As a small (in relative terms) division of the much larger Siemens Corporation there is no published data on Siemens PLM revenues in Japan and Germany. Cambashi models estimate that, in 2015, Germany was about 25% bigger than Japan. With limited public data available, it should be noted that this is an estimate and comes with associated error bars.
Conclusion
It’s clear from the information presented that Japan and Germany are of similar size; to hammer home that point I want to finish up with two more charts that show each country as the overall biggest spender on PLM software. The following information is for the PLM market as a whole, this includes data from the providers we looked at before, but also a very long tail of smaller providers.
Source: http://www.cambashi.com/.
In dollar terms, Germany overtook Japan in 2013 as the bigger spender on PLM software but the picture looks somewhat different if we take away the effects of currency changes. Here is the same graph but shown in constant 2012 dollars:
Source: http://www.cambashi.com/. “Const USD” converts local currency values to USD at the 2012 exchange rate.
So, although the German PLM market is bigger than Japan’s in 2016 (at current exchange rates), much of the reason for Germany’s bigger growth between 2012 and 2016 has been from changes in exchange rates. For PLM vendors, both countries will remain key markets regardless.
To compare any two countries like this, you need to be aware of currency changes and use the appropriate measure. That is why Cambashi developed the 2012 constant US dollar measure to go alongside the Current US dollar, Euro and operational currencies for use in its Market Observatories.
Some additional insights relating to software in Japan:
In Japan, many large companies, e.g. Toyota, still have significant IT departments and these do a great deal of custom software and severe customization. Particularly for the data management of product data, there are still a large number of in-house solutions, whereas there is a greater tendency to buy commercial off the shelf software (COTS) for product design. Until about 15 years ago the big car makers still had their own CAD software – Toyota’s was called TOGO. Gradually they have adopted COTS for design (and have always bought FEA software as COTS) however there are still significant in-house developments in the data management realm, especially where links to shop floor manufacturing software are thought to give Japanese companies a competitive advantage.
There was a historic feature that used to flatter Japan’s market size – prices used to be significantly higher in Japan than in the US and Europe. This is not really true any more, although Yen / Dollar fluctuations do affect the picture of course.
The net of this is that we would expect the Data Management bit of Japan to be much smaller than Germany, whereas we would expect the CAD, CAE bit of Japan to be much the same as Germany.