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The innovation and usage of Big Data and analytics has
substantially increased in recent years.  Since this technology is becoming easily
available at low cost, suppliers are expanding their business models and incorporating
more responsibilities from rail operators and infrastructure owners in the product
portfolio.  IoT, remote monitoring, and Big
Data analytics will offer new opportunities in the service space for
traditional suppliers, provided they adapt to the current business models
successfully.

As innovation flourishes, digitization and Big Data
analytics will significantly lower maintenance costs and improve profit margins.  Apart from advances in technology and cost-efficiency,
customers’ preference for asset availability further contributes to this
development.  Digitization is not limited
to rail operations and maintenance, but will also have a huge impact on the
industry’s innovation, and research and development phase.

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Industry Consolidation

As in many other industries, global rail is witnessing a
clear trend toward consolidation and it appears likely that the industry will
experience further consolidation.  In a
few years, there could only be a handful of large suppliers.  One possible scenario might see four to six
large system suppliers providing rolling stock, train control, and
infrastructure systems.

In the last few years, we’ve seen major mergers and
related activity in the rail industry.  Siemens
acquired Invensys Rail.  Alstom acquired
GE Rail Signaling.  CNR and CSR announced
a merger.  Hyundai Rotem had an initial
public offering.  The Hitachi group
acquired Ansaldo STS.  And in September
2017, Europe’s biggest suppliers, Alstom and Siemens Mobility, agreed to merge
their global rail operations.

While the market will remain relatively fragmented,
market pressures mean that consolidation is most likely to continue, but
possibly at a slower pace.  We’re likely
to see further consolidation among the lower tier suppliers, and particularly
the manufacturers of specialist subsystems.  Larger industry participants may start to
break up into separate businesses focused on specific niches.

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