Dave Pheteplace examines the performance of six companies to determine how the instrumentation market regains ground with strong semiconductor sales.
Bishop & Associates tracks six companies in the instrumentation market sector. This market has shown strong improvement over the last three quarters, as measured by these six companies’ revenues.
In 2013, these companies grew 1.1% year over year. In 1Q14, the combined revenues of these companies grew 11.6% year over year and in 2Q14 grew 18.0% over the prior year. In comparison to these companies, the cable assembly market for the worldwide instrumentation market sector contracted 2.3% in 2013 and is forecasted to grow 5.5% in 2014.
Bishop follows electronic interconnects sales trends in 13 markets. The combined annual revenue of all the market sectors was $4.24 trillion in 2013 and grew 0.8% over 2012. Of the 13 market sectors, instrumentation was the seventh fastest growing market sector in 2013 at 1.1%, with combined revenues of $29.3 billion. Profitability was $3.3 billion at 11.3% of sales.
ThermoFisher Scientific had the most growth of the instrumentation companies at 27.9% year over year in the first half of 2014 with sales of $8,225 million. The company manufactures lab and diagnostic equipment and consumables, and provides integrated lab services. The revenue growth from the prior year is partially the result of acquisitions in 2013.
Teradyne had the second largest increase in sales in the first half at 19.4% year over year to $847 million. 2Q14 revenues were up 22.6% year over year. The company produces test equipment used in semiconductor, wireless, and system testing and also provides services. 80% of its 2Q14 sales were in semiconductor testing, and that market continues to be strong. Year-to-date July, semiconductor sales were up 10.3% worldwide.
Mettler Toledo grew 5.1% year over year in the first half of 2014 to $1,159 million. The company manufactures equipment used in labs, industrial, and the food retailing industries. The company grew 4.2% year over year in 2Q14 and its lab business was up 6% from the prior year.
The following table shows the results for the six companies we track in the instrumentation market sector.
Instrumentation Market Sector – Sales and Net Income
As shown in the following chart, year-over-year sales growth has been increasing since 3Q13. Sequentially, 2Q14 sales grew 8.8% from the first quarter of 2014.
Trends in the Instrumentation Market
- The instrumentation market was negatively impacted by the downturn in the semiconductor industry in 2012. Fewer computers and peripherals sold meant less semiconductor chips tested, which equaled lower sales of automatic test equipment. Sales stabilized in 2013, and growth for these companies has been robust in 2014.
- The demand for general instrumentation has been reduced by lower funding levels for academic and government programs.
- There continues to be a higher adoption rate of software instrumentation, which significantly improves the efficiency of test and measurement systems. This approach combines the advantages of open, industry-standard PC technologies, modular instrumentation, and proven instrument control options. Through this approach, test engineers achieve savings in capital equipment and system development with lower maintenance costs and faster execution. Newer integration technologies allow the measurement integrity offered by handheld instruments.
- Growth of the wireless infrastructure is resulting in growth of the test equipment used for these systems. Business in the wireless-test-equipment market is being fueled by the growth in mobile data traffic; by the increased penetration of smartphones as well as connected devices such as laptops, netbooks, and tablets; and by higher-bandwidth-consuming applications and services.
Bishop & Associates projects the worldwide market for instrumentation cable assemblies to grow 5.5% in 2014 to $3.4 billion. At 8.7% year-over-year growth, China will be the fastest-growing region in 2014 for this market sector.
Dave Pheteplace, VP, Bishop & Associates, Inc.
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