Industry Snapshot: Electronic Instruments and Controls

The market for electronic instruments and controls primarily consists of all sales of electronic instruments and controls used in the automotive industry, industrial processes, medical equipment and portable consumer goods. The US market for industrial process controls increased by 1.4% from 2002 to a value of $11.6 billion in 2003. This market is expected to grow by 8% from 2004 to 2008 to reach a value of about $12.5 billion.

The industry is facing many issues such as the high levels R&D, increasing rates of obsolescence and product standardization. The high levels of investment that companies are pouring into R&D is perhaps the most important issue facing the industry. Aware of this, Agilent has actually been making reductions in its R&D in order to focus on its core products.

The principal trends within the industry include offshore manufacturing, restructuring and supply chain optimization. Essentially, all of these trends represent an effort to reduce costs whilst not neglecting quality and are generally seen as vital if companies wish to increase their market share.

The leading companies in the US include UQM Technologies, Emrise Corporation, Avnet, Emerson, Johnson Controls and Agilent. Agilent designs and manufactures test, measurement and monitoring instruments, systems and solutions, and semiconductor and optical components.

Key Issues

R&D High levels of competition between manufacturers of electronic instruments and controls are forcing companies to invest heavily into R&D in order to gain market share. However, as it is not certain that the investment will pay off, the increasing costs associated with higher R&D investment are placing many companies on an insecure footing.

Obsolescence - High-technology and electronics companies face a number of challenges including constantly changing new technologies, shortening product life cycles and obsolete inventory. Though technological innovation is driving the demand for new products, it also renders the existing technology obsolete.

Standardization - As more electronics instruments are built into vehicles, standardization is rapidly emerging as a priority for companies across the automotive industry. For example, many automobile manufacturers now use the same electronic parts across many different brands and models. Product standardization reduces costs for manufacturers without being too conspicuous.

Significant Trends

Offshoring of Manufacturing - Customers are increasingly moving electronic equipment production to Asia. This has led many companies in the industry to move their manufacturing base to countries such as Taiwan and China. Some have moved to Eastern Europe as well. Companies like Emerson and Avnet have expanded into Asia to take advantage of lowered costs and capitalize on the increased local demand for electronics.

Restructuring - Most companies are restructuring their operations to meet the requirements of the changing composition of the end market which is driving demand in newer segments such as aerospace, medical equipment and telecommunications. One example is Thermo Electrons which has been divesting its business units as a part of its restructuring program.

Supply Chain Optimization - Companies are increasingly focusing on supply chain optimization in an endeavor to maintain a steady flow of components to manufacturing operations. When supply chains are optimized, efficiency is gained because manufacturers are not forced to delay production because a certain component is missing. By the same token, the amount of components that remain ultimately unused is reduced, thereby having a positive impact on costs.