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Responsive Vendors Drive The Market

The future for electronic T&M looks bright but will not be without counter-pressures, including intense price pressure and the transition from hardware to software.

In 2017, the electronic test and measurement market encompassing semiconductor automatic test equipment (ATE), radio frequency (RF), and microwave (MW) test equipment, digital test equipment, field testers, and data acquisition (DAQ) generated over USD 10.83 billion in revenue. The market registered high-single digit growth, the result of a high growth in semiconductor ATE and digital test, medium growth in DAQ and field testers, and low single-digit growth in RF test. However, RF test represents the largest revenue opportunity for electronic T&M for the next 5 years. It is expected to generate a whopping USD 20.81 billion from 2017 to 2022.

Growth Drivers

Consisting of one-box testers, spectrum, and signal analyzers, signal generators, and context RF instruments such as power meters and electronic counters, the RF test market will benefit tremendously from the development of cellular and wi-fi technologies, most notably 5G, autonomous driving, and the connected car, as well as Internet-of-Things (IoT) standards.

In the short term, the growth of the RF test market will be driven by core RF instruments, which are used extensively in R&D. In the longer term, these technologies will move down the product lifecycle and generate demand for one-box testers and then portable instruments for network deployment applications.

Increasing mobile device complexity and automotive technologies also drive demand for semiconductor ATE, which is the largest market segment in the electronic T&M market.

Meanwhile, data centers and new standards are boosting demand for high-speed digital test equipment, including oscilloscopes and protocol analyzers. The emergence of new standards including Peripheral Component Interconnect Express (PCIe) gen 5, Cache Coherent Interconnect for Accelerators (CCIX), universal serial bus (USB) 3.2, and double data rate (DDR) 5 has spurred a new cycle of growth in the oscilloscopes market, which is the largest segment in the digital test market.

In addition, 100G and 400G applications are driving growth in bit error rate testers (BERT), requiring higher speed instruments. The demand for greater bandwidth continues to increase, resulting in the need for higher transmission rates. Applications such as differential quadrature phase shift keying (DQPSK) and 16 quadrature amplitude modulation (QAM) are growing and are multi-channel applications. Modulation schemes such as pulse amplitude modulation (PAM) 4 require more channels and upgraded BERTs, driving market growth.

Power management applications also boost revenue growth in the digital test market for both power analyzers and oscilloscopes. Power sequencing and power supplies applications are driving demand for high-resolution oscilloscopes, as engineers strive to maximize their systems’ efficiency. On the power analyzer front, rapid advancements in new applications such as electric vehicles (EV), energy storage, wireless devices, and wireless power transfer drive demand.

On the DAQ front, there is greater demand for more and different types of measurements in DAQ systems. Competitive pressure is forcing engineers to perform product development faster, thus driving demand for higher channel count DAQ systems, while IoT drives demand for distributed applications and boosts the growth of lower channel count DAQ systems.

Finally, field testers are getting a boost from IoT. With customers’ major concerns remaining the safety of their personnel and increasing productivity, connected devices are helping renew the installed base. Market growth also gets a boost from environmental concerns and the need to comply with regulations.

Unstoppable 5G

While a few warnings have been raised about the rush to standardization, deployment, and service launch, and the dangers this may be storing up for the future, T&M vendors have seen that 5G momentum is unstoppable and have done their level best to help the industry get ready with networks, services, and devices that work properly.

They have managed to keep pace with the demands of their network operator and equipment vendor customers and deliver testing equipment and test routines that address pretty much the complete T&M lifecycle.

One thing is to adapt what is already there so that it can be used for 5G. This approach includes, for instance, developing frequency converters so that current spectrum analyzers can be used with new spectrum bands in, for instance, mmWave at 28 GHz and 39 GHz. An alternative is to repurpose approaches and kits developed some years ago for testing 802.11ad/WiGig devices at 60 GHz,
which has the benefit that equipment is more integrated, smaller, and simpler than stacked boxes of converters and analyzers.

A second example relates to testing of 3D beam-forming — a difficult challenge — which is being carried out in new ways, such as over the new eCPRI interface rather than at the RF layer (which would be the obvious approach), because the time and cost of carrying out of a full suite of tests on systems with complex beam-forming algorithms is not economically feasible.

A practical response to the speed of 5G market development is to front-load the testing process. For instance, some T&M vendors are advocating signal and traffic emulation at the base station design stage, rather than the building of physical prototypes that are then tested in the lab. The argument is that network equipment providers (NEPs) cannot afford to make mistakes that would involve having to go back a stage in the development process; lost time will result in costly loss of market share.

Another response to 5G challenges is to forge closer links with operators, NEPs, standards bodies, and industry bodies, representing the major new users of 5G services, such as the automotive and the factory automation sectors. The purpose of such links is to develop realistic test cases, some of which will be new; ultra-low-latency has not been possible in previous generations of public cellular technology, yet it is expected to underpin many new applications.

So the T&M industry is being creative and practical, and it is benefiting from this. There is a very large amount of 5G testing going on right now, and some vendors are expecting 15–20 percent annual growth in 5G testing revenues during the next couple of years.

In it to win it

The future for electronic T&M looks bright but will not be without counter-pressures, including intense price pressure and the transition from hardware to software. New technologies require upgraded specifications in RF instrumentation to address higher frequencies and wider bandwidth requirements and drive up the price of such instruments. Moreover, most companies in the electronic T&M industry rely heavily on hardware revenue and are struggling to transform their organizations.

From a competitive perspective, no company holds significant presence across all the segments of the electronic T&M market. This provides room for mergers and acquisitions and strategic partnerships.

In the next 2-3 years, those best positioned in high-speed digital test are likely to grow the fastest. This includes Keysight Technologies, Tektronix, Teledyne LeCroy, and Yokogawa. Positioned strongly in oscilloscopes, network analyzers, and BERTs, Keysight is well set to capture a great part of the revenue opportunity in digital test despite a lower position in power analyzers and protocol analyzers. Although only active in oscilloscopes and protocol analyzers, Teledyne LeCroy’s strong longstanding position in oscilloscopes and leadership in protocol analyzers (the fastest growing segment in the electronic T&M market) augurs well for its future performance.

Over the next 5 years, RF test market participants are the most likely to grow the fastest. This includes Keysight Technologies, Rohde & Schwarz, Anritsu, Cobham, National Instruments, and LitePoint. However, new disruptive technology creates the opportunity for challengers to displace incumbents. Frost & Sullivan expects shuffling at the top of the leaderboard in RF test, as these companies look to cash in on the efforts they have put in in 5G R&D work with industry leaders for as long as the past 5 years.

In semiconductor ATE, the market is highly consolidated in the hands of Teradyne, Advantest, and LTX-Credence. Despite inroads being made by modular instrumentation into the space, current penetration is too low to show at the overall market level. In contrast, the DAQ market is fragmented and provides opportunities for mergers and acquisitions. With technology evolution and convergence driving demand for single systems with broad sensor and signal coverage, market winners will be those able to address this demand while addressing the specific requirements of applications.

In field testers, demand is growing for connected devices. Demand for more functions from a given tool is also driving convergence. With the digital multimeter as the go-to tool for technicians, companies strong in this product segment are best positioned to capture the revenue opportunity provided they have expertise in the functions customers are most interested in.

In the 5G test market, Anritsu, Exfo, Keysight, Spirent, and Viavi are aggressive players.

Key drivers over the next five years

Frost & Sullivan has identified half a dozen drivers for the electronic test and measurement market over the next five years. Those drivers are: autonomous driving; 5G; the internet of things; data centers; power applications; and new, high-speed digital standards.

Of those six, three – 5G, autonomous driving, and the need to design power applications for maximum efficiency – are the most significant electronic test market drivers for the coming years.

“The next wave of growth has begun with the technologies making their way down the product lifecycle, from research and development to manufacturing and deployment. Greater complexity and technology convergence will spur demand across verticals, with the largest opportunities coming from communications, semiconductors, and computing industries, and the fastest growth in industrial and automotive vertical, Frost & Sullivan asserts in a report.

“Greater complexity in end-user technologies calls for an increased cost of test. However, with radio frequency proliferation in consumer devices, there is the notion that the cost of test equipment should follow that trend,” said Jessy Cavazos, industry director for test and measurement at Frost & Sullivan, in a statement. “It will be vital for market participants to come up with a new approach to test in the coming years as the traditional approach is not sustainable from cost and technical perspectives.”

Final Word

Between 2017 and 2022, the electronic T&M is expected to grow largely due to innovation occurring in mobile communications, semiconductors, and automotive industries, the support from aerospace and defence customers, and emerging demand from medical devices. A global market, electronic T&M equipment provides opportunities to companies across regions especially in Asia-Pacific, North America, and Europe. Global hotspots include the United States in North America; the United Kingdom, France, and Germany in Europe; and China, Japan, Taiwan, South Korea, and India in Asia.

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