Electronic Test Equipment Market in Europe: Marching Towards a Brighter Future
By Jessy Cavazos, Industry Director, Test & Measurement, Frost & Sullivan
Facing difficulties in terms of coming out of the debt crisis, Europe has brought challenges to test and measurement equipment manufacturers in 2012. Depending highly upon exports to their Western counterparts, the outlook in Eastern Europe wasn’t brilliant either. Moving forward, the outlook is brighter. The manufacturing Purchasing Managers’ Index (PMI) of key countries in the old continent including those that are most important to general purpose test equipment namely Germany, UK, and France seem to have bottomed out. Frost & Sullivan even dares to predict that the oscilloscopes market (the largest product segment in the electronic test equipment market) will witness growth in 2013 in Europe.
From a longer term perspective, the drive towards connectivity and the smart movement are key Mega Trends expected to shape the future of the global electronic test equipment industry including that of Europe. Coined “Smart as the New Green” by Frost & Sullivan, the advent of a smart world implies the leverage of intelligent technologies and solutions and thereby the proliferation and increasing complexity of electronics, which will be a key growth driver for electronics test gear.
Key industries in Europe for test equipment vendors include wireless communications, automotive, and industrial electronics, all of which are being affected by this trend. From a wireless perspective, hyper connectivity is a significant trend. By 2020, 80 billion devices are expected to be connected worldwide expanding the wireless communications market from smartphones and tablets to a myriad of devices. M2M communications, which is being embraced in Europe, is expected to grow to 75 million SIM connections by 2016 in the region.
Favored by legislations, immediate applications include automotive and energy with eCall for connected cars and smart meters while the next wave of applications, which are driven by business objectives, include healthcare, industrial automation, and consumer electronics.
Aiming at establishing greater communication between machines and products within the manufacturing environment to improve production efficiency, Industrie 4.0 is a hot topic, especially in Germany. But smart also often implies faster communications. This is the case with Industrie 4.0 as real-time information will be critical to the successful implementation of the smart factory concept. Faster communications translate into the need for higher performance test equipment, thereby driving demand for new instruments/upgrades.
In the automotive industry, the connectivity and smart Mega Trends also collide. The number of electronic control units (ECU) has grown exponentially to reach 100 ECUs in certain car models. Multiple interfaces are used in in-vehicle networks and there is a move towards higher speed busses as well like FlexRay or Ethernet for infotainment and telematics.
With such powerful trends at play, there should be smooth sailing for the electronic test equipment industry. Yet, it is not the case, the economy holding it back. Although the number of technologies is increasing, and each is evolving and converging with other technologies driving the need for testing, proportionally increasing spending on testing is simply unfeasible.
OEMs across industries are therefore looking for smarter instrumentation that can reduce their cost of test. Faster and increasing functionality in instrumentation help customers move closer towards this goal. There is also a move towards instrumentation that can evolve over time.
Overall, Frost & Sullivan expects new equipment sales in the European general purpose test equipment market to witness a compound annual growth rate (CAGR) of 2.9 percent from 2012 to 2019 to reach $1.17 billion.
Oscilloscopes, spectrum analyzers and signal generators will be the largest contributors to the total market revenues. The continuous evolution and penetration of serial data interfaces both for low-speed and high-speed communications is expected to sustain revenues in the European oscilloscope market. There is a strong R&D focus in Europe that drives demand for oscilloscopes in the region. For spectrum analyzers, 3G and 4G adoption is a major revenue driver while aerospace and defense (A&D) is expected to provide long-term opportunities. For signal generators, the development and introduction of new wireless standards, along with the need for spectrum management, is expected to drive market growth.
From a competitive standpoint, Agilent Technologies, Rohde & Schwarz, Tektronix, Fluke, Teledyne LeCroy, and Anritsu are major participants in the European general purpose test equipment space. While previously, there was a relatively strong demarcation between companies in the time domain compared to those in the radio frequency (RF) and microwave (MW) domain with Tektronix and Teledyne LeCroy having a forte or only participating in the oscilloscope market segment and Agilent and Rohde & Schwarz being stronger or only participating in segments such as spectrum analyzers, signal generators, and network analyzers, the convergence of technologies is shaking up the competitive landscape. Rohde & Schwarz entered the oscilloscopes market in 2010 and has since witnessed sizeable success. The innovative capabilities of the company on the product front, as well as its position as a global leader in the test and measurement industry have helped it make foray into this typically high-growth segment of the general purpose test equipment market. Agilent Technologies although not a new player in the time domain was in a far second position but over the past three years has had a renewed interest in oscilloscopes that have resulted in significant market share gains. On the other hand, Tektronix, the historical leader in the oscilloscope market, has witnessed success with its MDO product, which is a combined oscilloscope and spectrum analyzer. One of the key trends across end-user industries in the general purpose test equipment market is the convergence of technologies. This is driving convergence in test equipment and this trend has the potential to disrupt the competitive landscape in the general purpose test equipment market.
Impact of Consumer Electronics on T&M
In addition, the general purpose test equipment market is fairly mature. A lot of the focus of T&M OEMs is therefore on improving the design/testing experience to gain market share. As a result, technologies from the consumer electronics world are increasingly present in the T&M marketplace. Instrumentation, for example, is adopting the latest touchscreen technologies. It is also able to interact more and more with mobile devices like smartphones and tablets for access and control. In the future, other mobile devices, such as wearable computing devices like Google Glass, are expected to help further enhance the user experience.
Growing Importance of eCommerce
Purchasing online is also taking hold in the consumer world and Frost & Sullivan expects this trend to spread to industrial markets in the future. In Europe, due to the number of countries and respective languages, distributors play a key role in the general purpose test equipment market. A sizeable amount of the revenue of leading European electronic components distributors is already coming from the online channel and it is expected to continue to increase. Engineers have increased confidence in this purchasing means and seem to appreciate the convenience of purchasing anytime anywhere. Leading distributors have been innovating on this front, facilitating purchases online by large accounts by correlating their systems with that of the customer’s company for approval.
The Last Word
With Europe struggling to come out of the economic downturn, the general purpose test equipment market has witnessed some tough times in this region over the past few years.
However, better economic conditions are ahead and combined with powerful trends involving electronics, the future of this industry looks a lot brighter. It won’t be smooth sailing though and T&M vendors will have to devise innovative competitive strategies to provide greater value to customers and fuel their growth in this space.
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