2012 State of the Test & Measurement (T&M) Industry
By Jessy Cavazos, Industry Director, Frost & Sullivan
After two years of uncharacteristic growth in the test and measurement industry, the market seems to be heading back towards normalcy, that being mid-single digit growth. Despite challenges such as the economic situation in China and Europe, the industry is growing and continuous trends such as wireless connectivity and Moore’s Law provide for a bright outlook for test vendors in general. Although U.S. defense spending is on the reduction path, most test vendors that cater heavily to this area have seen little impact, as spending continues on technology in areas such as advanced communications, radars, and electronic warfare (EW). Test and measurement leaders remain positive with regard to the future of the industry setting ambitious growth objectives for themselves. Here is a roundup of the performance of the major public market participants in the electronics test and measurement industry over the past 12 months.
General Purpose Test – Danaher and Agilent
Danaher and Agilent share the pole position in the test and measurement industry, both generating around $3.4 billion in revenues in the past 12 months. For the four quarters ended March 30th, Danaher’s Test & Measurement segment generated $3.4 billion, growing by 12.8 percent over the previous four quarters during which it generated $3.01 billion. The key entities making up the company’s T&M division remain Tektronix and Fluke besides Keithley. From a product introduction perspective, besides shipping the Tektronix 70000 Series with 33 GHz of real-time bandwidth, the Multi-Domain Oscilloscope (MDO) 4000 was a home run for Tektronix. “We were pleased to meet customers’ growing need for instruments that enable the design and debug of complex embedded products”, said Kevin Ilcisin, Chief Technology Officer for Tektronix. “Designers are looking to enhance the functionality and connectivity of all kinds of devices. With more effort being put on incorporating analog, digital and RF circuits and chipsets, our new Multi-Domain Oscilloscope enjoyed remarkable success in both industry awards and customer interest.” On its end, Fluke has been active on the power quality analyzers and thermal imagers fronts. For example, the company added energy monetization capabilities to its power quality analyzers, the Fluke 430 Series II, in February of this year, integrating the Valencia algorithm, a mathematical algorithm that resulted from its collaboration with the University of Valencia in Spain. It also released new thermal imagers featuring innovative software that enables the superposition of digital images onto thermal ones. Notable introductions from Keithley included the high-current Source Measure Unit (SMU) and Model 4225-PMU Ultra-Fast I-V Module.
Agilent’s Electronic Measurement Group (EMG) reached $3.36 billion during the four quarters ended April 2012. This was a growth of 9.9 percent over the previous four quarters. On the product introduction front, noteworthy achievements include the 160 MHz analysis bandwidth in the PXA-X Series and application software for 802.11ac specific measurements. “On the commercial side, the latest standards in cellular and wireless networking are pushing for higher data rates and wider bandwidths” says Jim Curran, Marketing Manager for the Microwave and Communications Division at Agilent.” This is necessary for the testing and characterization of new-generation components and devices such as those that support 802.11ac WLAN.” Agilent’s efforts have been heavily focused on phase noise performance to enable the detection of small or weak signals in the presence of larger interfering ones. This is reflected in the PXA X-Series signal analyzer that features Noise Floor Extension (NFE) technology enabling superior phase noise and displayed average noise level (DANL) but also in the phase noise specifications of its PSG microwave signal generators and new MXG X-Series RF signal generators. The latest Infiniium Q Series that offer 63 GHz or 33 GHz of real-time bandwidth on 2 or 4 channels respectively also deliver an extremely low noise and jitter measurement floor.
Semiconductor Test – Teradyne and Advantest
Teradyne generated $1.45 billion in the four quarters ended March 2012, compared to $1.62 billion during the previous four quarters. Heavily focused on the cyclical semiconductor test market, the upturn witnessed in the SOC industry is expected to benefit the company in the near future. “The company is expected to post its best first half totals in nearly a decade”, said Mike Bradley, President and Chief Executive Officer (CEO), during the company’s last financial call. From a product perspective, Teradyne’s UltraFLEX system has been in high demand, as it addresses complex SOC chips used in new mobile devices. The company also foresees growth coming from its storage test product line, specifically its 2.5-inch drive test product, as well as wireless test, which a market the company serves through LitePoint. While LitePoint has contributed around $30 million a quarter, the company expects to boost this performance to $40 million a quarter, resulting in $160 million for 2012.
Similarly to Teradyne, Advantest depends heavily on the semiconductor test business, which represents close to 75 percent of the company’s total revenues. Advantest’s Semiconductor Test division reached $1.27 billion in fiscal year 2011, which ended in March 2012. This was an increase of 52.6 percent over the previous fiscal year. However, it does include revenues from recently acquired Verigy since the second quarter of fiscal year 2011. Increased shipments of smartphones and tablets as well as the use of various types of semiconductors in these mobile devices will be a key growth driver for the company in the future. Commenting on the company’s medium term goals, Advantest’s representative director, president and CEO Haruo Matsuno highlighted ¥150 billion ($1.87 billion) in sales as a top goal for the company to achieve over the next three years.
Serious Challengers: National Instruments and Anritsu
Passing the billion-dollar mark in 2011 and aiming at $2 billion in revenues by 2016, National Instruments is one test vendor to watch out for. The company’s total revenues reached $1.05 billion for the four quarters ended April 2012. This is a growth of 11.7 percent over the previous four quarters. Embracing the concept of open software and modular hardware, the company has been able to bring tremendous innovation to the T&M industry. The PXIe-5665 14 GHz Vector Signal Analyzer (VSA) is testament to that. “We can deliver RF performance in modular instruments on par with the highest performance stand-alone instruments”, said Dr. James Truchard. “We even demonstrated real-world measurements up to 200 times faster than those boxes when the VSA was paired with an FPGA co-processor. This level of performance is disruptive to our industry but extremely compelling for customers”, he adds. PXI for RF applications is certainly a great illustration of the increasing measurement capabilities of modular instrumentation since a few years ago there was the thought that RF would simply not be possible with PXI. However, it is not the only one. Over the past 12 months, National Instruments also introduced a 12.5 GS/s, 5 GHz digitizer (co-developed with Tektronix), a 4-channel SMU and a per-pin parametric measurement unit module for semiconductor test.
Today, modular instrumentation represents a sizeable portion of the general purpose test and measurement industry, and is making foray into semiconductor test. With increased adoption by customers, mainly due to speed, cost and flexibility advantages, it is expected to further increase its penetration in the industry. To fuel its future growth, the company also acquired Phase Matrix and AWR, beefing up its expertise in RF and microwave product and design. National Instruments continues to witness very strong adoption of its LabView system design software, which is a key enabler to its long term graphical system design vision for automated test.
With a growth rate of 31.9 percent from fiscal year 2010 to fiscal year 2011, Anritsu clearly stands out in the top 10, especially since the company achieved such growth organically. The company’s T&M division revenues were estimated at $881.6 million for the 12 months ended March 2012, compared to $668.3 million in the previous 12 months. Its key growth driver was the mobile measuring market, especially for manufacturing applications, due to a spur in unit shipments of mobile devices including smartphones and tablets. Anritsu was also successful in the LTE market in North America. On the general purpose test side, the company continued to innovate notably with the introduction of the ME7838A, its flagship vector network analyzer, for which it just announced expanded measurement capability and frequency coverage. Moving forward, the company expects the same level of business in fiscal year 2012 than in fiscal year 2011. “The results of the fiscal year ended March 2012 (…) turned out to be much higher than the original expectations”, explained Hirokazu Hashimoto, President and Group CEO. “It is difficult to expect the market to grow at the same rate this year. However, we expect the business to continue at the high level of fiscal year 2011”.
More Focused Players Yokogawa
Yokogawa’s T&M revenues were fairly stable from last year to 2012. The company reached $438.7 million in the four quarters ended March 2012 compared to $435.5 million during the previous four quarters. During the past two years, the company has been reconstructing its T&M business, which now focuses on stable growing areas in which it has a competitive edge- electrical and optical test equipment. From a product perspective, the WT1800 high performance power analyzer was very successful based on strong demand and investments in the sustainable power and energy-saving industry. The company also had good results with its optical time domain reflectometer (OTDR) in the fiber to the home (FTTH) installation and maintenance (I&M) market and its optical spectrum analyzers (OSA). Moving forward, Yokogawa expects to build on its success in the optical communications infrastructure and electric energy markets and provide more tailor-made solutions to customers to maximize its growth. “Our success has come from developing products that have high quality, reliability, and accuracy”, said You Kaneko, President of Yokogawa Meters & Instruments Corporation. “We have developed credibility within our customer base and become more of a partner than a supplier. Close relationships is a key factor for our future growth. That’s really how we will continue to move forward in the future.”
Aeroflex Test Solutions, the T&M division of Aeroflex, generated $323.6 million in the four quarters ended March 2012, which was down by 11.1 percent compared to the previous four quarters. The company has faced difficulties due to lower government spending combined with higher expectations on WiMAX and the sooner rollout of LTE. However, the future looks brighter for the company as LTE moves down the network lifecycle into the company’s sweet spot- manufacturing. Aeroflex is also hoping to maximize its growth by expanding vertically, addressing the needs for semiconductors, UEs, and the network. In the past 12 months, one of the major moves made by the company has been to enter the semiconductor test market with the AX-Series. The company also introduced a number of low-cost broadband signal analyzers and generators for the government, enabling the use of these devices to spread from being used by specific military groups to a greater number of users including personnel performing spectrum monitoring. On the radio test set front, Aeroflex made the most extensive software upgrade yet for its 3920 radio test sets, keeping up with the evolution of P25. “We are a diversified company that maintains leadership positions in a number of unrelated markets such as semiconductor, cellular, satellite, spectrum monitoring, radio test, and avionics,” said Ryan Panos, Vice President of Worldwide Sales for the company. “These markets give us the ability to shift focus where necessary to ensure we maintain growth potential. Moving forward, we are most excited about the rollout of LTE and the many new connectivity standards, specifically the 802.11 advances.”
With the increasing importance of the rental/leasing market in the overall T&M industry and the company’s role as Agilent’s Authorized Technology Partner (ATP) in North America, Electro Rent’s performance is a clear indication of the direction in which the T&M industry is heading. The company performed well producing strong financial results and growing by 20.3 percent to $226.7 million for the four quarters ended February 2012 compared to $188.4 million for the previous four quarters. In the past two years, Electro Rent took a number of risks to expand its presence in the market and put to use the cash reserves it had accumulated over the previous five years. The company made significant investments in its rental inventory, buying a substantial amount of equipment in 2011 that complemented the rental pools from the acquisitions of Telogy, LLC and Equipment Management Technology (EMT). As the ATP for Agilent in the North American region, Electro Rent is responsible for selling a number of the manufacturer’s product lines to small and medium-sized accounts in the United States and Canada. Going forward, the company is expected to take on additional product lines from Agilent as well as take on complementary lines of equipment to fuel the growth of its equipment sales business, a recent example being the passive intermodulation (PIM) test equipment product line from Communication Components Inc (CCI). However, the declining defense spending is a challenge for the company and has constrained the company’s growth in the first quarter of 2012. “We remain cautiously optimistic as the defense and aerospace industries adapt to a new operating environment and a potential shift in their spending strategies,” said Daniel Greenberg, Chairman and CEO of Electro Rent while commenting on the company’s third quarter fiscal year 2012 results.
Recently acquired by Teledyne, LeCroy performed well over the past few years, reaching $196.4 million in the four quarters ended March 2012, which was up 17.4 percent over the previous four quarters. Heavily focused on the oscilloscopes market, the company expects to branch out into other segments of the industry such as signal generators by benefiting from the financial backing of Teledyne. Over the past year, LeCroy’s enjoyed success with its 12-bit high resolution oscilloscopes (HRO) that address the need of customers for higher resolution in oscilloscopes through the use of an analog-to-digital converter (ADC) with more bits. The 64Zi and 66 Zi HROs remain the only 12-bit oscilloscopes on the market today. The company expects to expand the product line in the future. LeCroy has also been pushing the envelope in terms of bandwidth, an ongoing battleground among leading vendors of high-end oscilloscopes, with the introduction of the LabMaster 10Zi with a bandwidth of 65 GHz and the announcement that it would introduce 100 GHz in 2013. The other part of LeCroy’s business is its protocol solutions group (PSG). While the company’s product portfolio covers a number of high-speed serial data interfaces, it made significant inroads in the PCIe market over the past year. On the product introduction front, LeCroy launched the Summit T28 for the embedded market along with a range of specialty probes. Recently, it announced SATA and SCSI Express decode support for its PCIe protocol analyzers.
A leading participant in the semiconductor ATE industry, LTX-Credence is no stranger to market swings. The company reached total revenues of $151.4 million for the four quarters that ended April 2012, which included a 9-month down cycle. Having said this, the semiconductor ATE market is on the upswing. Also, the company’s flexible business model has enabled it to continually invest in R&D at a steady pace. As a result, the company launched a series of new individual instruments and test platforms over the past couple of years including PAx for power amplifier testing and ASLx, which enabled ASL customers to preserve the investments they had made in the platform. More recently, LTX-Credence released Diamondx, a product that combines technology from its Diamond product, a Credence-based product, and X Series, an LTX-based product, to address the ASSP market. Cost of test was a top consideration when designing these new products. “All of these products have been designed with cost of test in mind, not just cost of capital but cost of capital, ownership, utilities and service”, said Dave Tacelli, CEO for LTX-Credence. “LTX-Credence is really the first company to focus on the entire cost proposal for the customer including all of these elements.” Moving forward, the company expects to continue to launch more instruments that target the connectivity and mobility space.
Rounding off the top 12, McGrath RentCorp, with its TRS RenTelco division, is also a key player in the T&M industry being a leader in the rental/leasing of such equipment. The company reached revenues of $126.8 million for the four quarters that ended March 2012, which is a 12.7 percent increase over the previous four quarters. Innovation coming out of the leading test equipment manufacturers notably in oscilloscopes but also analyzers, generators and sources is translating into opportunities for the company, who strives to have the youngest inventory in the rental T&M industry. “Over the past 12-18 months, we’ve seen the test equipment rental market rebound from the financial crisis that started in 2009. However, there remains a lot of uncertainty in the market”, said John Skenesky, Vice President and Division Manager for TRS RenTelco. “Test equipment rentals provide companies with an hedge over near-term downturns enabling them to continue to innovate and bring new products to market. That is a key driving factor for our business today and for the foreseeable future”. TRS RenTelco benefits from strong financial backing from its parent company and is expected to continue to invest into new equipment. Recently, TRS RenTelco has been investing significantly in microwave and digital test equipment. The company is highly focused on providing the best product availability, response and execution in the industry. However, the company remains cautious, scrutinizing the demand that drives the need for a given new product investment.
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