Growing Market For General Purpose Test Equipment In China

Growing Market for General Purpose Test Growing Market for General Purpose Test Equipment in ChinaEquipment in China

Which Industries Will Drive Sales over the Next 5 Years?Which Industries Will Drive Sales over the Next 5 Years?

中國未來新興產業對測量儀器市場的推動研究中國未來新興產業對測量儀器市場的推動研究中國未來新興產業對測量儀器市場的推動研究中國未來新興產業對測量儀器市場的推動研究中國未來新興產業對測量儀器市場的推動研究中國未來新興產業對測量儀器市場的推動研究中國未來新興產業對測量儀器市場的推動研究中國未來新興產業對測量儀器市場的推動研究

Presented by:

Wei Wei, Industry Analyst

Jessy Cavazos, Industry DirectorJessy Cavazos, Industry Director

Test & Measurement Group

Guest Speaker:

Rick Nelson, Executive Editor

Evaluation Engineering

December 8, 2011

Today’s Presenters

Wei Wei, Industry AnalystTest & MeasurementFrost & Sullivan

2

Rick Nelson, Executive Editor,


Agenda: Wei Wei, Frost & Sullivan

11 Market OverviewMarket Overview

22 Market Drivers and RestraintsMarket Drivers and Restraints

33 Revenue Forecast: Product Categories and Trends Revenue Forecast: Product Categories and Trends

44 Competitive Analysis Competitive Analysis

3

44 Competitive Analysis Competitive Analysis

55 End-user Segments and Growing Potentials End-user Segments and Growing Potentials

66 Strategic Emerging Industries during the 12th Five-Year Plan Strategic Emerging Industries during the 12th Five-Year Plan

77 Strategic Emerging Industries: Opportunities for the End-user MarketsStrategic Emerging Industries: Opportunities for the End-user Markets

Market Overview

Total General Purpose Test Equipment Market: Revenue Forecast (China), 2010-2017

389.0

527.7

713.5

400.0

500.0

600.0

700.0

800.0

Os30.5%

NA7.1%

PXI6.1%

LA4.7%

VXI4.6%

AWG2.4%

PM2.0%

EC1.0%

Total General Purpose Test Equipment Market: Percent of Revenues by Product Type (China), 2010

Reven

ue (

$ M

illio

n)

4

Note: All figures are rounded; the base year is 2010. Source: Frost & Sullivan

0.0

100.0

200.0

300.0

400.0

2010 2014 2017

SA15.4%

SG13.8%

MM12.4%

Os: OscilloscopesSG: Signal generators AWG: Arbitrary waveform generatorsLA: Logic analyzersNA: Network analyzersSA: Spectrum analyzersPM: Power metersMM: MultimetersEC: Electronic countersVXI/PXI: VXI/PXI-based instruments

Reven

ue (

$ M

illio

n)

Market Drivers and RestraintsM

ark

et

Dri

vers

1-2 years 3-4 years 5-7 yearsCommunication End Users drive market demand

Steady Demand from Aerospace and Defense

Industry

Emergence of New Markets drives market growth

R&D globalization translates into demand for test and measurement

Total General Purpose Test Equipment Market: Key Market Drivers and Restraints (China), 2011-2017

Expanding Use of Home Electronic

Appliances

Chinese Government aids growth of high-tech enterprises

5

Mark

et

Restr

ain

ts

Multi-functional Equipment is Preferred over Stand-alone Equipment

Developing Customized Product and Service Increases Costs

demand for test and measurement equipment in China

Used and Rental Equipment Curtail New Product Demand

Impact: High Medium Low Source: Frost & Sullivan analysis.

Pricing Pressure impedes revenue growth

Uncertainty in China’s Economy

Revenue Forecast by Product Type

50%

60%

70%

80%

90%

100%

Traditional

General Purpose Test Equipment Market: Percent of Revenues by Product Type , 2010-2017

6

0%

10%

20%

30%

40%

50%

2010 2011 2012 2013 2014 2015 2016 2017

Modular

Note: Traditional test equipment includes oscilloscopes, signal generators, arbitrary waveform generators, logic analyzers, spectrum analyzers, network analyzers, power meters, multimeters, and electronic counters. Modular instruments include VXI and PXI-based instrumentation.

Source: Frost & Sullivan analysis.

Competitive Analysis - Market Share

AgilentTechnologie

sOthers

Total General Purpose Test Equipment Market: Percent of Sales, China, 2010

Total General Purpose Test Equipment Market:Types of Competition, China, 2010

Tier 1: Large, multinational, publiclytraded or privately held companies.- Global presence- Multiple products in diverse segments- Lead the market in some product

segments

7

Note: All figures are rounded. Source: Frost & Sullivan analysis.

Tektronix IncRohde & Schwarz

Fluke Corporation

Anritsu Corporation

Others include: , LeCroy Corporation, National Instruments Corporation,

Yokogawa Electric Corporation, RIGOL Technologies Inc, Aeroflex Inc, Keithley

Instrument Inc, ADLINK Technology Inc, Teradyne Inc, Giga-tronics Inc, VTI

Instruments Corporation, and so on.

Tier 2: Medium-size international or regional companies- Offer products for a specific niche

segment- Offer some price advantages to cater

local customers

Major local test equipment manufacturers: RIGOL Technologies Inc, Ningbo Zhongce ElectronicsCo., Ltd., Atten Instruments, Uni-Trend Group Limited, Siglent Technologies, The 41st Institute ofChina Electronics Technology Group Corporation, and so on.

Key End-user Segments

Communications

Aerospace and Defense

Industrial Automotive

General Purpose

Test Equipment

8


Electronic Manufacturing

Others

Others = Educational Institutions, Government R&D Laboratories, Hospital Electronics, Power Measurement Applications, Repair and Maintenance, Chemical industries, etc.

Source: Frost & Sullivan analysis

End user Segments: Growing Potentials

Communications

Aerospace & Defense

Industrial & Automotive

Semiconductors

Consumer Electronics

General Purpose Test Equipment Market: Growing Potential by End-user Segment , 2010-2017

High Potential Medium Potential Emerging Applications

TD-LTE

Green Engineering

New Energy Auto

9

Po

ten

tia

l

Po

ten

tia

l

Industrial & Automotive

Education & Medical

Source: Frost & Sullivan analysis

Denotes Long Term Potential

Strategic Emerging Industries during the 12th Five-Year Plan

The 12th

Five-year

New-generation Information Technology

High-end Equipment

Manufacturing

New Materials

10

12

14

16

Contribution of the Emerging Industries to the Overall GDP, China, 2010-2020

Sh

are

in

GD

P (

%)

10

Five-year Plan

2011-2015 New-energy Cars

New Energy

Energy Saving and

Environment Protection

Biology

0

2

4

6

8

2010 2015 2020

Sh

are

in

GD

P (

%)

Source: National Development and Reform Commission of the PRC

Strategic Emerging Industries: Opportunities for the End-User Markets

New-generation Information Technology

• China is particularly interested in developing the next-generation information networks, mobile communication, and the Internet.

• The purpose of next generation Internet project is to gain asignificant position in the future development of the Internetthrough the early adoption of IPv6.

• The government plans to invest in R&D of the "Internet ofthings" and cloud computing, and develop digital and virtualtechnologies.

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Communications

• China intends to build 500,000 3G stations. By the end of the 12th

FYP period, this number is expected to reach 1.2 million.• Large-scale TD-LTE field trial has been conducted in several cities.

Network operators are ready to implement TD-LTE and deploy itover 3G networks. Commercial trials of TD-LTE network will start in2012. 4G network will be built from 2014 when TD-LTE is maturefor commercial use.

• It becomes necessary for the vendors to develop products withincreased functionality to match these new digital standards andtechnologies.

Source: National Development and Reform Commission of the PRC

Emerging Strategic Industries: Opportunities for the End-User Markets (Continued)

High-end Equipment Manufacturing

• High-end manufacturing industries will strive for breakthroughsin aviation equipment, satellites, rail transportation, marineengineering, and intelligent manufacturing equipment.

• As for aviation equipment, the manufacture of large aircraft willbe accelerated. Regional aircraft and universal helicopters willbe developed vigorously.

• China will also strengthen space transportation and navigationsystems to boost the satellite industry.

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Aerospace and Defense

• The increasing defense budgets are focused on advancements incommunication systems, satellite, and aerospace technology.

• The first flight of the narrow-body airliner C919 is expected to takeplace in 2014, with deliveries scheduled for 2016.

• The 2nd generation of Compass navigation system is planned tooffer services to customers in APAC by 2012.

• The Chinese commercial aerospace EMS provider market isexpected to reach $2.97 billion by 2017, which offers a marketopportunity to high-end test equipment.

Source: National Development and Reform Commission of the PRC; Frost & Sullivan P5DD-28 study


New-energy Cars

• Under the 12th FYP, China will update the new-energy vehicleindustry by integrating two major technologies of electricvehicles and hybrid electric vehicles.

• The annual production volume of pure electric vehicle willreach 500 thousand units by the end of 2015.

• China will invest around 100 billion RMB ($15 billion) over thenext 10 years to support new energy automobile production inorder to make China the world’s largest new-energyautomobile production country.

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• This segment comprises of manufacturers of electronic components and OEMs.

• Production of passenger vehicles in China ranked first in theworld since 2009 and is expected to continue to witness rapidgrowth till 2020.

• Test equipment such as oscilloscopes and multimeters are thekey components of On-Board Diagnostics system. Thedemand for test equipment will increase due to the growth ofautomotive industry.

Source: National Development and Reform Commission of the PRC; The Ministry of Industry and Information Technology


New Energy

• The renewable energy industry in 12th FYP will focus on windpower, solar photovoltaic power, and hydroelectric projects.

• Meanwhile, the development of smart grid will be accelerated toadapt to the new energy projects. Fixed asset investment of smartgrid is expected to be $376.7 billion in 2015.

• Wind power capacity only contributed 4.6% to the total installedpower capacity in China in 2010 and will grow steadily. The solar PVpower is also likely to witness rapid growth in the next five years.

• By the end of 2020, the renewable resource will contribute 15percent of total energy.

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percent of total energy.

Wireless Communication

• Wireless communication is expected to be a significant complement to the optic fiber telecommunication that is currently used in the grid power systems.

• Based on the wireless technology, remote monitoring system forwind power could understand the real-time system status, rapidlyinspect system fault, and improve the reliability.

• The testers can be used to validate the reliability and performanceof complex algorithms used in wind power technologies. Solarpower manufacturers also need simpler, faster ways to performphotovoltaic device output performance tests.

Source: National Development and Reform Commission of the PRC: Frost & Sullivan GIL 2011

Other Key Growing Markets

Electronics Manufacturing

• The applications of electronic devices is overwhelming in people’s ordinarylife. Electronic products and the inner components need to undergo testing.

• Market growth was also led by improvement in the semiconductor industry.Strength in the computers and semiconductor business reflected the growingdemand for cell phones and smart devices.

Wireless Connectivity in High-speed Railway/Automobile

• 3G network is currently available in the high-speed railway system. Since thetrain moves through a number of provinces, it means different 3G operators

15

train moves through a number of provinces, it means different 3G operatorswill impact network coverage and therefore signal performance.

• Automobile manufacturers are developing wireless technology withinvehicles, as well as between vehicles.

Others

• Numerous multinational corporations are establishing R&D facilities inChina.

• The educational sector such as universities and engineering schoolsalso continues to expand in China. This sector is price conscious andrequires lower price for durable testers.

Agenda: Rick Nelson, Evaluation Engineering

11 Test Equipment Vendors Serving China—Agilent TechnologiesTest Equipment Vendors Serving China—Agilent Technologies

22 Test Equipment Vendors Serving China—TektronixTest Equipment Vendors Serving China—Tektronix

33 Test Equipment Vendors Serving China—Rohde & Schwarz Test Equipment Vendors Serving China—Rohde & Schwarz

44 Test Equipment Vendors Serving China—AnritsuTest Equipment Vendors Serving China—Anritsu

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44 Test Equipment Vendors Serving China—AnritsuTest Equipment Vendors Serving China—Anritsu

44 Modular Instruments in China—Forecast Modular Instruments in China—Forecast

55 Modular Instruments in China—Vendors Modular Instruments in China—Vendors

66 Modular and Instrument Interconnect Standards to Watch Modular and Instrument Interconnect Standards to Watch

Test Equipment Vendors’ Participation in China

Agilent Technologies

•Agilent (originally Hewlett-Packard) co-founder David Packard first visited the People’sRepublic of China in 1977 as a member of a non-governmental committee. Packardwanted his company to be the first electronics company to share in a technologybusiness venture in China.

•An HP Representative Office opened in China in 1981.

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•An HP Representative Office opened in China in 1981.

•HP Labs and the State Science and Technology Commission of China established ahigh-tech joint research program in 1995.

•Agilent announced the China Communications Operation (CCO) in Beijing to serveChina's growing wireline and wireless communications industry in 2002.

•Agilent and Datang Telecom Group announced in October 2011 that they haveestablished the TD-LTE-Advanced Joint Research Lab. The new lab is the second projectcreated by the two firms.


Tektronix

•In 2010, Tektronix China launched its High Speed Serial Test Lab in Shanghai, Beijing,and Shenzhen to provide the customers with pre-compliance test support andconsultancy for their HSS designs.

•Tektronix China has just launched four joint labs with local dealers to provide hands-onsolutions specifically for power test applications in China, including applications involving

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solutions specifically for power test applications in China, including applications involvingLEDs, converters, and inverters. Additional joint labs are planned.

•Tektronix instruments have been deployed in CCTV, for nation’s first 3-D trial channel.

•Tektronix China has won several orders from China’s 985/211 universities in 2011.

•Tektronix has just finished its 2011 “Tektronix Innovation Forum” across APAC in morethan 10 cities in China, Taiwan, Korea and ASEAN countries, and the company isplanning more events for 2012.


Rohde & Schwarz

•Rohde & Schwarz ended its last past fiscal year with a revenue of EUR 1.58 billion,representing a 25% increase over last year's level of EUR 1.26 billion. Rohde & Schwarzsaid it profited from positive developments in the wireless communications market,particularly in the U.S. and China, with those two countries being among the topcontributors to total group revenue.

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•In June 2011 China Mobile Research Institute and Rohde & Schwarz announced theywould conduct joint research on TD-LTE testing technology.

•In February 2011 Rohde & Schwarz said it offers a complete product portfolio fordeveloping and manufacturing chipsets, user equipment, and infrastructure equipment aswell as for network planning, setup, and monitoring to speed the rollouts of LTE-FDD andTD-LTE networks—with one goal, in part, to serve about 60 million LTE users in Chinaalone by the year 2015.


Anritsu

•Anritsu serves the Chinese market with products having worldwide applicability, including the new MA24105A in-line peak power sensor, which provides a range of power measurement capability over a

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measurement capability over a frequency range of 350 MHz to 4 GHz.

•Anritsu offers a portfolio of instruments that can serve TD-SCDMA/HSPA applications, including signal analyzers and generators as well as field test equipment such as the Cell Master..

Cell Master image courtesy of Anritsu

Modular Instruments in China

From Frost & Sullivan Research, "Modular InstrumentationMarket in China—An Insight" (25 July 2011):

•"Primary research indicates an increased interest from China in PXI."

•Modular market growth: from $42.4 million in 2010 to $57.7 million in 2017.

•More than 50% of 2010 modular instrument market represented PXI.

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•More than 50% of 2010 modular instrument market represented PXI.

•VXI persists in legacy aerospace/defense installed base.

•Frost & Sullivan believes that the market share of VXI-based instrumentation is likely tocontinue to gradually decline during the forecast period while PXI-based instrumentationis expected to witness medium/high growth in China.


PXI Vendors:

•National Instruments, which pioneered PXI.

•Agilent, which significantly increased its penetration into the PXI market in 2010.

•Aeroflex, which offers PXI modules and

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•Aeroflex, which offers PXI modules and traditional instruments for RF/wireless test.

•ADLink, which offers data-acquisition modules

•Teradyne, which offers PXI instruments for mil/aero applications. PXI module image courtesy

of National Instruments


National Instruments’ Perspective on PXI

•NI is offering platforms and design tools to engineers and scientists who need to buildtest-and-measurement or industrial control systems in China as well as worldwide. Suchtools serve broad applications, but NI does see intensive adoption in consumerelectronics, automotive, and avionics industries.

•NI says its software-defined modular platform can accelerate innovation in emergingindustries such as green energy and next-generation telecommunications. For example,

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industries such as green energy and next-generation telecommunications. For example,on this year's PXI Technology and Application Conference (PXI TAC), Professor XiaohuiDuan from Peking University gave a keynote speech introducing a "triple play” researchproject based on NI PXI platform.

•NI sees PXI modular instruments gaining more awareness and adoption and becoming amainstream automated test and control platform in China. Professor Shenghe Sun, andexpert in automated test and control in China, gave a keynote speech on this year's PXITAC conference and indicated PXI fits the trend of instrumentation development.


PXI challenges and benefits:

Feature Challenge Benefit

Backplane-based.

Requires chassis, power supply, and controller—an investment that can reach several thousand dollars

One chassis, power supply, and controller can serve multiple instruments; backplane

24

before any measurement capability is added.

permits synchronization and high data rates.

“The software is the instrument.”

PXI modules lack familiar knobs and displays of traditional instruments; developer must know program like NI LabVIEW, GeotestATEasy, Agilent VEE.

One developer can create a simple, easy-to-understand “go/stop” “pass/fail” user interfacethat can serve multiple technicians.


Other Instrument and Instrument-Interconnect standards:

•LXI. Many instruments now come with an LXI (LAN Extensions for Instrumentation) toreplace or augment old interfaces like RS-232 and IEEE-488 GPIB. With Ethernetconnectivity, LXI instruments support coordinated measurements among separateinstruments dispersed over wide geographical areas.

•USB. This ubiquitous interface for PCs is appearing on many instruments, and USBmodules are available that convert PCs into oscilloscopes or other instruments.

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modules are available that convert PCs into oscilloscopes or other instruments.

•AXIe (AdvancedTCA with extensions for instrumentation and test). AXIe is a relativelynew standard based on the Telecom Computing Architecture carrier-grade backplane andinterconnect specification.

AXIe instrument image courtesy of Agilent Technologies

� Communication and wireless broadband will continue to spur the market growth.

� Aerospace &

� Leading multinational companies are actively develop business in China and are likely to continue their dominace.

Conclusions

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Conclusion

� Aerospace & Defense increase market opportunities for high-end test equipment.

�Increasing capabilities of modular Instruments drives the market demand.

� PXI is being supported by leading companies. The flexibility and the lower cost will ensure its broader application.

�Other strategic emerging industries in the 12th FYP increase opportunities for test measurment products.

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For Additional Information

Rick Nelson

Executive Editor


(617) 504-3285

[email protected]

Wei Wei

Research Analyst

Measurement & Instrumentation

(86) 10-6598-9600 x 328

[email protected]

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Jessy Cavazos

Industry Director


(325)-695-6332

[email protected]

Kiran Unni

Research Director


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Growing Market For General Purpose Test Equipment In China