Industry View: Test talk with Frost & Sullivan

Testing might seem like a prosaic support technology but between emerging technologies and recent acquisitions, there is a surprising amount of activity and change going on in the space. We caught up with Jessy Cavazos, Frost & Sullivan’s industry director for test & measurement research to talk about market position, changing directions, and which companies are best positioned for growth.

Kristin Lewotsky, editor: With increasing technology demands from customers, test vendors need to devote dollars to R&D. Of course, they can only do that in a healthy market. How is the test market position for growth over the next few years?

Jessy Cavazos: I've done some work recently looking at the top 10 or 12 test vendors in the industry trying to see where the industry is heading. We've seen a lot of growth in the test market in the last few years. From my analysis, the growth rates have not been characteristic of the industry. High-end oscilloscope [sales] were growing by 20%. That's not typical of the test and measurement industry. I will see more moderate growth, although the pervasiveness of electronics, the increasing complexity of these products are definitely a trend to drive quite a bit of growth of the test and measurement industry going forward.

KL: Do you expect there to be much change of market share position of the top 10 test suppliers?
JC: I think you have some serious challengers. Anritsu, for instance, if you look at their revenue from last year to this year, they grew by 31.9%. That was really driven by the wireless manufacturing market. For comparison, Danaher and Agilent grew around 12%.

KL: Who else is in a growth position?
JC: National Instruments has set some pretty ambitious goals for itself—to grow to $2.0 billion by the year 2016; they are about $1 billion today.

KL: How does that compare to the market leaders?
JC: The top two remain Danaher/Tektronix and Agilent. These companies make $3.4 billion each annually in test and measurement so there's still a gap, and they're growing as well by 12% annually, as well.

KL: Who is in the number three spot?
JC: I included semiconductor testing in my report, so there's Teradyne and Advantest [in third] but they’re really focused on the semiconductor industry, so sometimes people don't really put them into general test. After that, you have National Instruments and Anritsu.

KL: How do you think Teledyne's acquisition of LeCroy will affect the balance of power in the test industry?
JC: LeCroy is a very focused company. They’re number three in the oscilloscope market behind Tektronix and Agilent but if you look at the total test and measurement pie, although they would be in the top 10, they’re a much smaller company.

Regarding the acquisition, the oscilloscope market is R&D intensive and LeCroy is faced with two very large companies. For Tektronix, it's their bread and butter. Agilent is number one in so many other segments of the test and measurement, except in oscilloscopes, which is the largest sector of the general-purpose testing industry, so they're very aggressive about changing that situation. They've done extremely well, by the way, over the last year in the oscilloscope market.

For a smaller company like LeCroy to be able to stay on the forefront of growth, they had to focus and that didn't really enable them to branch out to other parts of the test and measurement industry. I think with the financial backing of Teledyne, they will be able to develop their offerings in other areas.

KL: What are you most excited about right now in the industry?
JC: It's all about mobility and wireless connectivity. There is a lot of talk about IEEE 802.11ac, and just a continuous increasing of performance. If you look at bandwidth, LeCroy is targeting a bandwidth of 100 GHz in 2013. The progress, the technology barriers that are being taken down are just very exciting.