Key Growth Drivers Shaping the Testing Equipment Market

Technological advancements and customer feedback driving innovation

Technological advancements and customer feedback are pivotal in driving innovation within the testing equipment market. Companies like Thermo Fisher and Keysight emphasize strong customer relationships and AI-driven technologies, while Amazon and Microsoft focus on enhancing product portfolios and customer experiences to foster growth and efficiency.

"Operator: So just maybe one follow-up there. Can you isolate any products and services where you believe you're prioritizing that are driving potential positive customer outcomes or driving innovation and adoption across AWS right now?" --- (AMZN, conference, 2024/09/09)

"And as we go through this shift, we are focused on two fundamental things: First, driving innovation across a product portfolio that spans infrastructure and applications so as to ensure that we are maximizing our opportunity, while in parallel continuing to scale our cloud business and prioritizing fundamentals, starting with security." --- (MSFT, earning call, 2024/Q2)

"The fact that we have a very strong track record and outlook for innovation, The trusted partner status that we have developed with our pharmaceutical and biotech customers over many, many years and the unparalleled commercial engine that we have that drives share gain and supporting those customers gives us high confidence that we'll grow 2 to 3 points faster than the market and that formula leads to long term 7% to 9% growth." --- (TMO, conference, 2024/05/14)

"But we're watching it very closely. We have very deep relationships with customers and certainly, the underlying drivers for advanced process technologies related back to AI are continuing to be very strong as these applications begin to grow at scale." --- (KEYS, earning call, 2024/Q1)

"We remain focused on driving better experiences for our customers while also delivering efficiency improvements." --- (AMZN, earning call, 2024/Q1)

Industry demand and emerging economies fueling growth

Emerging economies are driving growth in the testing equipment market, with companies like Danaher emphasizing robust demand in bioprocessing and innovation. However, challenges such as tighter credit conditions and supply chain constraints, highlighted by General Electric, may impact this growth trajectory.

"So given this substantial and sustained increase in approvals and production volumes, we expect the growth rate in bioprocessing to remain very robust for many years to come. We continue to make substantial investments in innovation to support our customers as they pursue these life-changing therapeutics." --- (DHR, earning call, 2024/Q2)

"The largest portion of the investment will support growing demand for CFM LEAP® engines as the fleet continues to mature and expand with more than 3,300 LEAP-powered aircraft in service and more than 10,000 additional engines currently in backlog, increasing the global commercial airline fleet by thousands of planes in the coming years." --- (GE, press release, 2024/07/19)

"Additionally, the Company believes that the tighter credit environment contributed to lower year-over-year demand across the segment from emerging biotechnology companies as these customers continued to preserve capital." --- (DHR, sec filing, 2024/Q1)

"It's a clear challenge that we are facing head on, accelerating the use of FLIGHT DECK in partnership with our suppliers as we work to solve the ongoing supply chain constraints. Last quarter, we shared that the common denominator impacting growth across both services and new engines is constrained material supply with 80% of material input shortages tied to nine suppliers across 15 supplier sites." --- (GE, earning call, 2024/Q2)

"And they have done a tremendous job navigating the current environment to support our customers' life-changing work today, while also delivering breakthrough innovation that is reinforcing our long-term competitive advantage. The transformation in our portfolio over the last several years has created a focused Life Sciences and Diagnostic leader positioned for higher long-term growth, expanded margins, and stronger cash flow." --- (DHR, earning call, 2024/Q2)

Impact of regulatory changes on the market

Regulatory changes significantly impact the testing equipment market, influencing product introductions, marketing strategies, and overall demand. Political shifts and climate-related regulations create uncertainty, affecting business operations and stakeholder expectations, as highlighted by Danaher Corporation's recent statements.

"deregulation on demand for our products and services, the impact of climate change, legal or regulatory measures to address climate change and our ability to address stakeholder expectations relating to climate change, labor matters and our ability to recruit, retain and motivate talented employees representing diverse backgrounds, experiences and skill sets, non-U.S. economic, political, legal, compliance, social and business factors (including the impact of military conflicts), disruptions relating to man-made and natural disasters, inflation and the impact of our By-law exclusive forum provisions." --- (DHR, press release, 2024/04/23)

"• With respect to the regulated medical devices we offer, product introductions or modifications may require regulatory clearance or authorizations and we could be required to recall or cease marketing such products; off-label marketing could result in penalties; and clinical trials may have results that are unexpected or are perceived unfavorably by the market, all of which could adversely affect our business and financial statements." --- (DHR, sec filing, 2024/Q1)

"With respect to the regulated medical devices we offer, product introductions or modifications can require regulatory clearance or authorizations and we can be required to recall or cease marketing such products; off-label marketing can result in penalties; and clinical trials can have results that are unexpected or are perceived unfavorably by the market, all of which can adversely affect our business and financial statements." --- (DHR, sec filing, 2024/Q2)

"For example, elections in the U.S. and other countries may result in significant political shifts and/or disruptions, including changes in the regulatory environment, and recent Supreme Court decisions in the U.S. may also result in regulatory uncertainty." --- (DHR, sec filing, 2024/Q2)

"change, legal or regulatory measures to address climate change and our ability to address stakeholder expectations relating to climate change, labor matters and our ability to recruit, retain and motivate talented employees representing diverse backgrounds, experiences and skill sets, non-U.S. economic, political, legal, compliance, social and business factors (including the impact of military conflicts), disruptions relating to man-made and natural disasters, inflation and the impact of our By-law exclusive forum provisions." --- (DHR, press release, 2024/09/04)

Competitive landscape and its influence on growth

The competitive landscape in the testing equipment market is evolving due to industry consolidation and the integration of AI technologies. Companies like Keysight Technologies are confident in their competitive positioning, driven by growth opportunities in underappreciated sectors and significant investments in automotive and semiconductor industries.

"I think the industry has maybe evolved somewhat over the last year. Can you maybe talk a little bit about how I guess your competitive landscape has maybe changed at all considering some of the industry consolidation that's gone on and one of your peers is now part of a larger industrial conglomerate, National Institutes." --- (KEYS, conference, 2024/08/28)

"We also had in parallel incredible growth in the business and really just an excellent start and excellent execution to deliver strong growth in the quarter." --- (TMO, earning call, 2024/Q1)

"And then we feel really good about our competitive position on our portfolio strength and it's only going to grow as we -- as the industry adopts AI at scale. Adam Thalhimer: Okay. Good color. Thanks." --- (KEYS, earning call, 2024/Q2)

"about a lot of different end markets. What would you say from your vantage point are some of the more are the most underappreciated growth opportunities for Keysight that you think investors should be more focused on?" --- (KEYS, conference, 2024/08/28)

"But the AV and EV investments to drive next gen auto are still intact. In the semi business, you still have the significant efforts to ensure supply and re onshoring and pretty dramatic growth expectations for chip production over the intermediate term." --- (KEYS, conference, 2024/06/05)

Sustainability trends shaping testing equipment development

Sustainability trends are significantly influencing the testing equipment market, with companies like Danaher emphasizing sustainable respiratory testing and GE focusing on reducing fuel consumption and CO2 emissions. Additionally, advancements in semiconductor and battery technologies are driving energy efficiency, reflecting a broader commitment to sustainability across the industry.

"Continued to strengthen our industry-leading commercial engine and deepen our trusted partner status with customers to accelerate innovation and enhance productivity with the ultimate goal of improving patient care." --- (TMO, press release, 2024/04/24)

"The goal of the RISE Program is to develop technologies that enable a future engine to achieve at least 20% lower fuel consumption and 20% fewer CO2 emissions compared to today's most efficient commercial engines." --- (GE, press release, 2024/07/21)

"And we believe that to be a sustainable level of respiratory testing. So when you put all that together, you're looking at a $24,000,000,000 business that is dialed into the most VCM of margin profile, so a VCM of 35% to 40%." --- (DHR, conference, 2024/05/14)

"Through Microsoft's and Noelle's team in particular, they've actually achieved over 30 gigawatts of clean energy power purchase agreements to power many of these assets. And that's a great way of operationalizing our sustainability commitments when it comes to our data center growth." --- (MSFT, event transcript, 2024/08/05)

"We are benefiting from next generation semiconductor. We're benefiting from investments in battery technology, of which both of those areas are very dependent on the cutting edge of electron microscopy and customers that have invested heavily and likely to continue to have a strong investment footprint there." --- (TMO, conference, 2024/05/14)

Future trends in testing equipment technology

Future trends in testing equipment technology are characterized by a shift towards comprehensive test solutions and design engineering, increased automation, and the establishment of certification programs for interoperability, particularly in emerging technologies like Open RAN and 5G.

"So, definitely a shift towards test solutions and design engineering. And so we also expect that to continue in the foreseeable future." --- (KEYS, event transcript, 2024/07/16-17)

"With this technology being implemented at a larger scale, the need for comprehensive testing becomes apparent." --- (KEYS, press release, 2024/04/30)

"To ensure interoperability among Open RAN equipment, the O-RAN ALLIANCE established its Certification and Badging program allowing manufacturers to verify products are compliant with O-RAN specifications by using O-RAN conformance test specifications covering the control, user, synchronization, and management (CUSM) planes." --- (KEYS, press release, 2024/05/30)

"So once a virtual prototype is complete, it's ready for a physical component level, components are integrated in a system, we go back up to the V, we test that system against the specifications. And when that system is ready, it's released to manufacturing and then it's built and tested in volume." --- (KEYS, event transcript, 2024/07/16)

"To meet this need, Keysight and SmartViser have verified the integration of the two platforms to enable UXM 5G Wireless Test Platform users to use the viSer software to run automated test to thoroughly evaluate the battery consumption performance of a device." --- (KEYS, press release, 2024/06/11)