Encoder Market Size & Share Analysis - Trends, Drivers, Competitive Landscape, and Forecasts (2025 - 2032)

Encoder Market Dynamics

Use of High-Resolution and Miniaturized Encoders Is the Key Trend

• High-resolution encoders are experiencing rising demand because they deliver the accurate motion control those robotic systems, aerospace products, and semiconductor production lines require. Highly accurate positioning becomes possible through these encoders, which minimize errors in automated systems.
• Modern technological devices with compact dimensions require miniaturized encoders for integration into medical instruments, electronic devices, and wearable technology. Their compact dimensions make them suitable for small spaces in applications where performance needs to remain unaffected.
• The combination of nanotechnology and microfabrication advancements has produced durable and efficient ultra-compact encoders, which are optimal for high-speed industrial applications, making them a popular product choice among manufacturers.
• Product quality depends heavily on high-resolution encoders, which serve as critical components in optical and semiconductor inspection systems. The encoders serve as precision maintainers for wafer processing operations and circuit board assembly procedures.
• The increasing popularity of electric vehicles combined with autonomous systems drives the market demand for small-sized encoders which enhance the performance of motor control systems and braking mechanisms and navigation systems to improve vehicle efficiency.
• Medical robotics as well as imaging systems require high-resolution encoders to achieve precise motion tracking for both surgical procedures and diagnostic instruments.
• The market demands wireless miniaturized encoders that function without batteries because they provide sustainable maintenance-free operation in industrial and consumer applications.

Rising Adoption of Encoders in Advanced Automotive Systems Drives the Growth

• Due to the increasing use of IoT, in which encoders have different functions, the automotive industry accounts for a significant share of the global market.
• In various industrial automated systems, encoders offer solutions for motion controls, which further drive the industry's growth.
• Moreover, various features, such as endurance, speed, reliability for factory automation, and accuracy and flexibility, help boost the demand for encoders in the industry.
• Furthermore, enhanced automated controls aid in improving performance and productivity and reducing costs for many different industrial applications. Thus, this fuels the demand for encoders in the automotive sector.
• Adding to the overall demand, EVs and autonomous vehicle production have also increased the requirement for precise encoders, which enhance vehicle control systems while improving safety measures and efficiency.

Encoder Market Segmentation Analysis

Encoder Type Insights

The rotary encoders category accounted for larger revenue share of around 70%, in 2024. This is attributed to the rising industrial automation across numerous industries, including healthcare, packaging, aerospace, electronics, and automotive, to measure position, angular speed, and rotation of moving parts in a wide range of applications. These systems offer a wide number of advantages, including reliability, accuracy, high resolution, low-cost feedback, fused optical and digital technology, integrated electronics, and others. Thus, these factors are contributing to the increasing demand for rotary encoders.

Encoder types studied in the report:

• Rotary Encoder (Larger Category)
• Linear Encoder (Faster-Growing Category)

Signal Type Insights

The absolute category is expected to witness the faster CAGR of 10% during the forecast period, owing to its usage in a wide range of applications that need control or monitoring, or both, of mechanical systems. It includes surgical robotics and diagnostic imaging, which help measure the exact position of the product through unique digital codes and provide them with unique position values as soon as they are switched on by scanning the position of the coded element. Also, it provides the data instead of an output of pulses, but an output that is a specific value in a binary format. Technologies like Industry 4.0, smart manufacturing, and AI-driven automation that are functioning across several industries, especially in aerospace, healthcare robotics, and precision engineering, which require accuracy and reliability, are important, are driving the use of absolute encoders.

Signal types include:

• Incremental Encoder (Larger Category)
• Absolute Encoder (Faster-Growing Category)

Technology Insights

The optical sensing encoders are the largest category, as it accounted for the largest revenue share of 55% in 2024. This is because they use light shone through a coded disk that aids in tracking shaft movement. Also, these systems offer many advantages, such as better angular accuracy, high resolution, better reliability, large hollow shaft encoders, operating in extreme environments, and being lightweight.

The extensive use of optical encoders occurs in CNC machines, automated manufacturing systems, and servo motors because precise operation is essential for maintaining operational efficiency and product quality. Optical encoding technology continues to advance through resolution and speed and durability improvements which solidifies its market dominance. The prevalence of optical encoders in the market remains high because they excel in accuracy and performance while maintaining sensitivity to dust, oil, and environmental contaminants.

Technologies covered in the report:

• Magnetic Encoder (Fastest-Growing Category)
• Optical Encoder (Largest Category)
• Inductive Encoder

Application Insights

The automotive category accounted for largest revenue share of 30% in 2024. This is ascribed to the rapid deployment of IoT, in which encoders are used for a large number of reasons. EVs and autonomous driving technologies exclusively drive the automotive industry's wide adoption of encoders. These vehicles require encoders to provide accurate feedback that controls motors as well as steering components and braking systems and thus improves vehicle efficiency and safety. ADAS systems demand precise position sensing through encoders which strengthens their market demand in automotive applications. ​

Applications covered in the report:

• Industrial (Fastest-Growing Category)
• Healthcare
• Printing
• Textile
• Automotive (Largest Category)

Encoder Market Regional Outlook

The North America is dominant because it had 40% of revenue share in 2024. This is attributed to the expanding manufacturing of automotive parts, the surging number of cars, the increasing demand for consumer electronics, and the rising R&D activities in this field for new and advanced technologies. Moreover, a wide range of key players has a strong foothold in the region, thus making it easier for end users to procure these semiconductor components.

Furthermore, North America is the largest market for industrial automation and is widely adopting advanced technologies and machinery that offer improved effective service in the manufacturing industry. These devices are also used in equipment, such as answering machines and PC-based scanners. Additionally, due to the quick acceptance of new technologies and the presence of numerous consumer electronics players, a noticeable increase in the use of encoders in consumer electronics utilities has been observed in the region.

The European market holds the leading position, and it will grow at a CAGR of 10.5% during the forecast period. This is attributed to the fast adoption of advanced and innovative technologies and the presence of key manufacturers in the country.

The European market is also growing significantly, owing to the existence of essential tech hubs across the region and the faster adoption of modern technologies and machinery. In addition, the surging adoption and acquirement of robots in different industries are also contributing to the demand for encoders. The region also has a robust manufacturing base due to the rapid developments in industries and the production of electronic goods.

Regions covered in the report:

• North America
  • U.S.
  • Canada
• Europe
  • U.K.
  • Germany
  • France
  • Italy
  • Spain
• Asia-Pacific
  • China
  • Japan
  • Australia
  • India
  • South Korea
• Latin America
  • Brazil
  • Mexico
• Middle East & Africa
  • Saudi Arabia
  • South Africa
  • U.A.E.

Encoder Market Competitive Landscape

The encoder market is fragmented in nature because it contains many global and regional manufacturers who serve different industrial sectors. The encoder market consists of Omron Corporation, Honeywell International, Schneider Electric, and Rockwell Automation, and specialized market segments served by Baumer Group, Dr. Johannes Heidenhain GmbH, and Grayhill Inc. The extensive list of market participants prevents any one organization from gaining control of the market, which produces fierce competition. The encoder technology finds applications across industrial automation and automotive and healthcare and printing and textile sectors requiring customized specifications for each industry. The diverse requirements from end-users drive multiple companies to enter the market, thus blocking monopolization.

The wide range of technical approaches used in the market drives fragmentation. The encoder market features optical, magnetic, and capacitive encoders, which serve distinct operational requirements. The need for industry-specific customized solutions prompts companies to develop proprietary technologies that help them maintain market differentiation. The market continues to fragment because regional businesses supply budget-friendly industrial solutions that match the requirements of particular local markets.

Encoder Market News

• In July 2024, Baumer launched the EB360 bearingless multi-turn magnetic encoder to serve demanding feedback applications.
• On April 17, 2024, VITAC as part of Verbit Company, partnered with ENCO to create a broadcasting solutions alliance for caption encoding and delivery.
• In July 2024, POSITAL made a product update to its IXARC family of incremental rotary encoders. The updated models use magnetic sensing technology and allow users to set resolution settings that range from 0.125 PPR to 8 PPR through programmable options.