by Jessy Cavazos, Industry Director – Frost & Sullivan
The radio frequency (RF) and microwave test and measurement equipment market is on the verge of major changes over the next 5-10 years, principally with a shift of focus in the commercial space from low frequencies to millimeter-wave frequencies. Historically, the sub-8GHz market was associated with general purpose and wireless applications and frequencies above 8 GHz were associated with aerospace and defense applications. The assumption that the higher frequencies are not for commercial applications will no longer be valid.
Key Growth Drivers: Cellular and WLAN Standard Transitions
Currently though, lower frequencies still represent the bulk of the market revenues for RF test equipment. Over the next few years, the transition in the cellular space to 5G through 4.5G (LTE Advanced Pro) and 4.9G as well as the transition in the WLAN space from 802.11ac to 802.11ax will fuel growth in this market. Higher bandwidth requirements stemming from the aggregation of existing LTE carriers and the addition of more carriers will be compounded with higher test complexity and drive new test equipment purchases, as current equipment is not capable of handling such high bandwidth needs to test the radios. On the 802.11ax front, specific features in that standard require higher RF performance and more accurate measurements, which will drive customers to upgrade their test equipment over the next 2 years.
Mobile IoT Standards: Opportunity and Challenge
Additionally, a multitude of IoT standards are emerging, including narrow-band IoT (NB-IoT), LTE-M, and the new LTE standard for Vehicle-to-Everything as well as unlicensed technologies such as SIGFOX and LoRa. While these standards represent a market opportunity in the RF T&M market below 8 GHz, the revenue opportunity from a test equipment perspective is questionable due to the low cost of the radios used in such IoT devices. It is estimated that the cost of chips going into IoT devices such as wearables is about one tenth of that going into a handset. Thus, parallel testing is expected to increase as well as pressure on T&M OEMs regarding test equipment prices.
Increased Pressure on Price and Margins
While especially acute in the mobile IoT space, pressure on price on RF test equipment is a growing trend overall, in part due to exponential growth in technological complexity but also fierce competition. Customers have increased their attention on their capital expenditures (CAPEX), leading to significant discounts. Their interest is also growing in asset management services to better understand their actual test asset utilization and better control expenses related to test equipment.
This market has also become a battleground for leaders including Rohde & Schwarz, Keysight Technologies, Anritsu, National Instruments and LitePoint, whose focus has led to significant innovation and product introductions in the past few years. Ubiquitous connectivity has expanded the use of RF across industries, increasing the volume of devices requiring RF testing. Although there is a lot of focus on automotive applications for high frequencies such as automotive radars, there is a significant uptick in connectivity in the automotive industry that is expected to drive demand for RF test equipment. The sheer volume of RF-enabled devices that will require testing creates the need for better and less expensive solutions. Currently, this is driving demand from many customers to augment current testers with PXI-based RF instruments and USB-based instrumentation. Copper Mountain Technologies, Anritsu and Tektronix are examples of companies innovating in this space.
Opportunities in Higher Frequencies
While current applications are majorly below 8 GHz today, the market is expected to shift to higher frequencies in the future with the advent of 5G, automotive radars, and other technologies. Customer requirements for RF instrumentation are expected to change drastically with regard to frequencies, modulation bandwidths, and phase noise performance to be able to perform accurate measurements on complex and smaller devices.
In addition, the satellite space also presents a sizeable revenue opportunity in higher frequencies for T&M vendors, with companies such as OneWeb looking to put hundreds of satellites in orbit. Also known as NewSpace, this movement is set to disrupt the space industry in the future due to a paradigm shift in volumes and the drastically different profile of the participants compared to traditional ones.