The manufacturing industry has undergone many improvements over the last few years. This includes the development of revolutionary new materials that bring gains in strength, rigidity, toughness, weight reduction, longevity, and cost-reduction. This has also resulted in a revolution in manufacturing technologies to bring these materials to the form that would enable them to fulfil their function. Precision manufacturing technologies have been able to bring to life designs and help mechanisms perform at a level never thought possible.
Metal cutting machines, as we all know, are stationary power-driven machines used for handling or machining metal or other rigid materials, usually by cutting, boring, grinding, shearing, or other forms of metal removal. Turning, milling, EDM, and laser cutting comprise the major precision cutting technologies that have been widely adopted throughout different industries across the globe.
CNC technology on the rise
Metal cutting is a vital manufacturing process and is used by almost all industries to some degree or another. As a result, the global machine tools market stands at $7.1 billion as of 2020, with metal cutting tools accounting for a 60% share. Metal forming tools made up around 15%, with machine tool accessories making up the remaining 25%. The global metal cutting tools market stands at $4.2 million as of 2020 and is expected to grow at a CAGR of 3% between 2022–25, with almost 90% of revenue contributed by CNC-based metal cutting tools. With mass customisation and precision engineering on the rise, CNC-based metal cutting tools will see an increase in market share.
Lathe and milling processes comprise the lion’s share of the metal cutting tool market with 46% and 32%, respectively. Grinding has a relatively smaller share of 5%, while all other processes put together make up around 17% of the market. Lathe and milling tools are cost-effective and, hence, have found wide applications across industries and geographies. Grinding tool applications are restricted to industries, such as aerospace, defence, and automotive requiring precision engineering.
CNC technology is now used in nearly 90% of all machine tools. A higher share of CNC equipment is fuelled by an increased shift towards automated solutions, to improve efficiency, reduce lead times, minimise defects, and minimise human intervention.
The automotive sector continues to dominate the machine tool demand with 35%. General machinery, electrical & electronics and defence industries are the other major segments with high demand for machine tools. The dominance of metal cutting tools in automotive and metal fabrication industries is primarily owing to their requirement for consistent mass production with minimal human intervention.
The automotive industry will continue to be a major end-user of machine tools. About 65% of a new vehicle is developed with the help of lathe, milling and grinding machine tools. Growth in end industries (construction, packaging, and food processing) has promoted demand for focus machine tools within the general machinery industry. Consistent demand for precision engineering in the aerospace and defence industry for critical components has driven demand for precision cutting tools there as well.
The development of ultras-ophisticated devices in the medical equipment and electronics industries has also led to the need for high-precision components made from exotic materials. Precision cutting technologies have seen extensive application in these industries.
Increased demand from APAC
When the machine tool market is dissected at a geographic level, we can see that the APAC region dominates with nearly 46% of all new machine sales, followed by Europe (27%) & North America (17%). Latin America & MENA comprise around 5% of the market. APAC constitutes the majority demand, owing to an uptick in the local manufacturing capabilities driven by favourable government initiatives, and cheap labour. APAC constitutes over half the demand for lathe and milling machines while higher demand for grinding machines is observed in North America.
Favourable government initiatives coupled with cheap labour have historically driven the manufacturing sector in APAC. The APAC region accounts for the highest demand for machine cutting tools, as it is the manufacturing hub for most major end industries. Europe is amongst the leading manufacturers of automotive, and electrical & electronic products. The US has focused its efforts on reducing dependence on imports from APAC countries and promoting domestic manufacturing. This has led to a surge in demand for machine tools in the US. Some of the US manufacturing capabilities have been shifted to Latin America, to benefit from low production, labour & logistics costs.
Market drivers for higher productivity
Ban on imports of second-hand machinery: Imports of second-hand machinery have been banned by some countries in the APAC region. This is expected to create demand for new machine tools. For example, Vietnam does not allow the importation of any used machinery or equipment that has been discarded or banned by other countries because of its obsolescence, low quality, or its impact on the environment.
Technological advancement & Industry 4.0: Technologies such as AI, 3D Printing and Big Data analytics are being used in manufacturing, resulting in lower operating costs, higher productivity, and higher margins. Since machine tooling falls under the primary manufacturing process, it will be amongst the first to be automated.
Furthermore, precision machine tool demand would witness an uptick as they would be the primary tools required for the development of such technologies.
Faster economic growth: Recovering commodity prices, after a significant decline in the aftermath of the pandemic is further expected to aid market growth. Developed economies are also expected to register stable growth. While developing economies are also expected to register stable growth.
Resurgence of construction industry: Construction activities have been robust in emerging markets such as China, India, Brazil, Indonesia, and Saudi Arabia. Historically, construction activities in emerging markets have been one of the key factors influencing construction machinery manufacturing and demand.
Roadblocks to growth
Sensitivity to general economic downturns: The machine tools market is directly impacted by general economic downturns, owing to their application in the manufacturing of capital goods; this makes the market vulnerable to economic fluctuations.
Lack of skilled labour and training: The limited availability of skilled labour, with workers having proper planning and programming experience, can affect the operations and production capabilities.
Acceptance of EVs: The rise in demand for EVs is expected to adversely impact the machine tool market. The demand for lathe and milling machines could be reduced by ~65%, with the elimination of combustion engines requiring the highest metal cutting applications.
How is technology impacting the precision cutting market?
There are a slew of technology trends that are likely to have an impact on the precision cutting market in the future. This not only includes improvements in processes, but also the way the manufacturing environment is oriented and deployed.
Multifunctional machine tools: Multiple tasks such as boring, milling, drilling, turning, tapping, and other processes can be done on the same machine at the same time with the help of multiple spindles and face cutting (multitasking equipment). There has been significant traction for these machines in North America and European regions. Grinding machine tools will continue to remain a stand-alone requirement.
Higher speed and accuracy: At present, the CNC system uses high-frequency processors (bit-digit) to improve the speed of CNC machine tools. An upgrade to the most advanced multiprocessor and ultra-large-scale integrated circuit structures is used to improve the data processing capabilities of machine tools, boosting the demand for CNC tools.
IoT-ready and automated machine: With the advancement of technology, smart machine tools and robotics will handle a greater percentage of work in industrial settings. IoT-ready and automated machine tools are expected to become more widely used in situations where human workers are not safe to work.
Addictive manufacturing: Addictive manufacturing or 3D Printing is expected to grow more than 18% CAGR during the forecast period. The benefits of addictive manufacturing include a lower production cost, design flexibility, faster production cycles, support for new AI-driven design methods, and lower prototyping and storage costs will lead to exponential growth.
Advancements in CNC software: Software will also facilitate less lag time, faster processing speed, and quicker feedback for machine operators. Advancements in CNC software will also accommodate precision manufacturing.