Monday, September 10, 2007

Business and Industry Intelligence: Scientific and Technical Instruments

Overview

Leading companies in the scientific and technical instruments market have experienced strong revenue growth in recent years. Consolidation within the industry, and sustained corporate and state spending, were key drivers of growth.

This diverse industry obtains revenues from instrumentation designed for both measurement and control, with laboratory and field applications. The large and rapidly-expanding US biotechnology industry is driving particularly strong revenue growth in the analytical and bioscience instrumentation sector.

Within the scientific and technical instrument market, input prices and skilled labor costs are increasing. However, end-users in the semiconductor, networking, and similar industries must compete through non-stop innovation, which increases demand for instrumentation and test gear. Long-term increases in healthcare spending will sustain demand for medical instrumentation, while the expanding defense and homeland security budgets will also be a key determinant of revenues for scientific instrument manufacturers.

Leading companies include Danaher, Thermo Fisher Scientific, Beckman Coulter, and Pall Corporation. Players in this industry are diversifying geographically into developing markets and expanding their portfolio of products in order to drive revenue growth. This entails heavy investment into research and development, and acquisition costs. For example, in 2006, Thermo Electron and Fisher Scientific merged forming Thermo Fisher Scientific.

Key Issues

Rising Costs - Prices of raw materials and inputs, such as steel and semiconductors are increasing, endangering profit margins. Domestic salaries for skilled employees are also high. There is currently a shortfall of suitably qualified engineers, pushing salaries higher and further impacting earnings within the market.

Environmental Regulation - Legislation is imposing stringent environmental standards on many industrial processes. This is boosting demand for instruments to monitor emissions, thus driving revenue growth within the market.

Government Expenditure - Massive spending on aerospace, defense and homeland security, and increasing US healthcare spending, has led to significant extra demand for scientific and technical instruments across the US.

Significant Trends

Innovation - Scientific advancement is constantly opening up new opportunities for manufacturers of scientific and technical equipment, in areas such as DNA, life sciences, and nanotechnology; several leading companies have already established strong positions within the life sciences sector through aggressive acquisitions.

Diversification - Players have continued to diversify their product portfolios through research and development and acquisitions. This allows them to heighten market visibility, and offer one-stop solutions for a diverse range of end-users.

Mergers and Acquisitions - Major players within the market are continuing to consolidate their businesses, strengthening their position within the market. Two major players, Thermo Electron and Fisher Scientific, completed their merger in November 2006, forming Thermo Fisher Scientific.

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