Changing Dynamics in the Electronics Test and Measurement Industry

Published: 28 Jul 2015

After many challenging years, technology trends remain in favor of electronics and connectivity while a growing interest in product quality across industries augurs well for participants in the electronic test and measurement market. While these trends will continue to evolve, significant industry shifts will also take place and provide market participants the opportunity to grow and increase their market share. This article covers three key shifts in the electronics test and measurement industry that all companies involved in or wanting to penetrate this industry sector (or related markets) should be aware of.

Industry Shift 1: Emergence of High Frequency Applications

One of the most significant changes that will occur over the next 10 years is the move towards high-frequency applications that include 5G applications as well as others, such as automotive radars and WLAN applications at 60 GHz. Today, a large part of market revenue is generated by applications that are below 6 GHz. However, this will change in the future with the advent of 5G and other technologies; this is a significant challenge from a technological perspective for all market participants. This will become an even bigger challenge as the requirement increases for wider signal-bandwidth support in the wireless communications and aerospace and defense end-user industries. In addition to the technical challenges that high frequencies bring to market participants, there will also be the challenge of meeting costs. As it has been observed in the past 10 to 15 years, there has been tremendous pushback on the cost of test from customers and this is not likely to change. Market participants will need to find ways to address high-frequency applications while meeting customer expectations on the cost of test.

Industry Shift 2: Disrupting Research and Development (R&D)

Another significant shift that is likely to happen is an increased focus on R&D applications. New technologies are increasingly complex and are pushing testing earlier in the product lifecycle. In addition to such technology drivers, there is also significant impetus from a few companies to disrupt and change the status in this market sector, which has historically been in the hands of a handful of traditional test and measurement companies. The R&D segment of the electronic test and measurement market holds a sizeable share of the total market revenue. R&D is also a rather lucrative business that benefits from lesser price pressure than other sectors of the electronics test and measurement market. There are also many significant opportunities for companies to innovate in the R&D segment, as the instrumentation that serves end users has not changed much in the past 10 to 15 years in comparison to the manufacturing test space. Furthermore, as customers struggle to integrate more complex technologies, they are not only looking for higher performance in test equipment but also for solutions that can help reduce development time.

Industry Shift 3: Stimulation of Competition and Innovation by Refocused Market Participants

Another important and recent change in the electronic test and measurement industry is the resurgence of companies that are entirely focused on the electronic measurement market. In a counter-trend to that of the last few years when companies were focused on other markets besides electronic measurement, there has been a significant refocus towards electronic measurement in this marketplace. Traditional heavyweights in this market have lost market share to smaller competitors over the last five years. This has driven them to refocus their efforts on the marketplace, which is expected to result in significant product innovation. The next few years are likely to experience tremendous innovation that will be reflected in the overall market growth. In addition to organic growth initiatives, strategic acquisitions will also play a significant role in the growth strategies of market participants. This shift will have a seismic effect on the competitive map of the electronic test and measurement industry, thus requiring all market participants to thoroughly rethink their business strategies.

For comments or questions, please contact the author at jcavazos@frost.com.

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