All in all, 2011 wasn’t a bad year for the electronics test and measurement industry. Various trends riding on top of the economic recovery resulted in nice revenue growth for many leading test equipment manufacturers despite a slowdown in the latter part of the year.
Among these trends, the increasing complexity of electronics across all end-user industries is the overriding factor and is both a boon and a challenge for the test and measurement industry. While challenges lie ahead in key sectors, notably aerospace and defense (A&D), the developments occurring in others such as the increased deployments of Long-Term Evolution (LTE) and upcoming rollout of LTE-Advanced in the wireless communications industry are sure to more than make up for it.
End-User Outlook
Although the wireless communications industry is already a significant end-user market for test equipment vendors, the deployment of LTE is expected to breathe new life in the wireless test equipment market for the next three to four years, especially with network operators as the technologies are incorporated into the network architecture of service providers around the world.
The nature of 4G technology, combined with the increasing complexity of networks with remote radio heads (RRHs) and with Wi-Fi/femtocell offloading as service providers struggle to address the growth of data traffic, will increase the need for testing. Network operators have invested billions in their next-generation network architectures, and they will continue to make significant investments to evolve their wireless networks. They simply can’t afford to jeopardize those investments with issues such as interference, for example.
On the defense side, which is a traditional end-user market for test equipment manufacturers, lower U.S. defense spending is expected to be a challenge for the next few years as the onus will be on capital expenditures. However, while it is expected to be a more challenging environment for test vendors to sell into, it is expected to translate into opportunities for test vendors as the need for repair and maintenance will increase.
Moreover, this industry is expected to become more aware of the types of instrumentation available. This awareness will boost the industry’s demand for instrumentation that lowers the cost of test such as PXI-based test and measurement equipment.
Another segment of the test and measurement industry expected to gain from this would be the rental and lease industry. Defense companies are all aware of the trend toward lower government spending and have taken steps to realign their test strategies. They are expected to review the financial solutions at their disposal and move away from a main strategy of simply purchasing the equipment and lean more toward renting and leasing.
Vendors of used test equipment also are likely to benefit. Test vendors will have to address return on investment and cost of ownership on priority to sell into the aerospace and defense industry. As the industry focuses on cost reduction, it is also likely that testing services will rise as a result of the outsourcing of in-house laboratories.
With the increasing complexity of electronics across a number of industries, wireless communications and aerospace and defense won’t be the only markets presenting growth opportunities to test and measurement vendors. Automotive and transportation will see an increased use of electronic systems, and medical and consumer electronics will see a boost due to innovation.
Challenges Ahead
Yet the years ahead won’t be a walk in the park for test and measurement vendors either. Some of these challenges are more obvious than others, such as the improving yet still uncertain economic conditions. Others are less obvious to the outsider, such as a slowly growing threat like the decreasing need for test in manufacturing.
The increasing complexity of devices that need to be tested is proving to be an increasing challenge in the manufacturing environment, limiting access to components, for example. As such, the industry is expected to move toward system-level testing. This will also mean that test needs to be integrated earlier and earlier in the product lifecycle—actually, in the design process.
Another major challenge for test vendors in the future will be the maturity of the industry. The electronic test equipment industry is far from being new. While several segments and even large key segments like oscilloscopes have experienced double-digit growth in 2011, market participants know that to maximize their growth in the future, they will have to increase their customer reach and take market share away from competitors.
This signifies a significant shift in the distribution strategy of test equipment vendors that have relied heavily on their direct sales force historically. While some companies have made significant inroads in the development of their indirect sales channels, more is to come.
Similarly, while regions such as North America and Western Europe remain significant for test equipment vendors today, test vendors are expected to tap into emerging markets in Asia-Pacific, Latin America, and Eastern Europe. While China is already a significant market for test vendors, countries like Malaysia in Southeast Asia and Brazil in Latin America are some of the markets attracting the attention of vendors.
The globalization of R&D, a result of companies wanting to be closer to their customer base and the increased level of education in those countries, is expected to boost the demand for higher-end test equipment in emerging regions as well. With this, the need for global collaboration will increase tremendously over the next 10 years.
Test Equipment Evolution
Over the years, test and measurement equipment has evolved tremendously. Traditional instruments have made room for modular instruments, and the increasing complexity of devices under test (DUTs) is expected to further fuel demand for flexible instrumentation, which augurs well for modular instrumentation. With the ability to access to components decreasing, Frost & Sullivan ultimately foresees an evolution toward embedded instrumentation.
This increasing complexity of electronics also translates into an unachievable requirement for cross-domain expertise for the user. Combined with an aging expert workforce and increased pressure to accelerate time-to-market, test instrumentation must evolve to ease the burden placed on users. The increased automation of test instrumentation is happening and ineluctable. Another resultant trend is the integration of multiple domains into a single instrument such as time and frequency.
The user interface of test equipment has certainly evolved tremendously over the past few years with touchscreen technology penetrating the test and measurement market significantly. Test equipment based on mobile devices such as Apple iPhones and iPads has also emerged. With the impressive evolution of test instrumentation in terms of size across all applications area but more noticeably in field applications, one can’t help but wonder what’s next. Holographic imaging is one idea.
With the world striving to get information faster and faster, the demand for faster instrumentation continues to rise despite the increasing amount of data that needs to be processed. This has led to the leverage of various technologies on general-purpose instrumentation such as graphics processing units, which are borrowed from the video gaming industry. In parallel, more and more information needs to be processed. To solve processing power issues, cloud computing has been leveraged in some cases. Frost & Sullivan expects the acquisition and processing capabilities of test instrumentation to further evolve in the future.
Along with these trends, Frost & Sullivan expects an ongoing need for wider frequency bandwidth, dynamic range, and higher noise performance as a result of the increasing need for performance of all electronic products, and there will be many. By 2020, Frost & Sullivan expects 50 billion connected devices. Literally, anything and everything will be connected wirelessly.
Final Word
The test and measurement industry is multi-faceted and the needs of various segments vary widely from the laboratory to manufacturing to the field. While reading this article, please keep in mind that I was providing trends at the overall industry level and that some of those trends might not apply to some areas. At the same time, also remember that “we’re limited, not by our capabilities, but by our vision”. As such, these trends may not apply to some applications today but it doesn’t mean they won’t in the future.
Jessy Cavazos is the industry director for the Test & Measurement Group at Frost & Sullivan. She has close to 10 years of research and consulting fulfillment and management experience in the industry, with particular expertise in electronic measurement and design. She holds a bachelor’s degree in international business from the Institut de Formation Internationale, now part of the Ecole Superieure de Commerce (ESC) Rouen, in France.