The IBO 2009 Industry Forecast

IBO has been publishing its annual instrument industry forecast issue since 1993, but never have we been confronted with the level of uncertainty that hangs over the industry at this time. Normally, economic ups and downs in various regions of the world do not have that much of an impact on the industry because of its focus on R&D in industry, as well as government and academia. Likewise, the emphasis on healthcare, environmental regulation and advanced technology development lends stability to the business from year to year. But this time things are different.

Not a day goes by without hearing more bad news, whether it is the financial meltdown, bankruptcies, growing unemployment, a slowdown in global trade or the gloom surrounding global stock exchanges. The world is clearly in the midst of a recession, which cannot be easily dismissed. Still, we are seeing unprecedented government intervention throughout the world to stem the tide of decline. Stimulus programs in the US, EU, Japan, China and many other countries are bound to moderate the economic problems, as will the fact that interest rates are at extremely low levels, which should, at some point, encourage consumption and investment.

With these developments in mind, and after examining any and all indications of industry activity in 2008 and the prospects for 2009, IBO has generated its forecast for 2009 from the bottom up; that is, by technology segment and the climate that exists for that technology’s market. Because the fourth quarter of 2008 has been unusually affected, our estimates for the growth of the entire analytical and life science instrument industry for 2008 has been lowered to 5.7%, bringing the total 2008 market to $38.1 billion. This growth rate is a little over a percentage point lower than previously forecasted (see IBO 7/31/08). In 2009, IBO forecasts the instrument industry to grow 4.8% to approximately $40.0 billion. While not particularly robust, this growth is a level of expansion that would be very welcomed in many sectors of the global economy, and is not nearly the gloomy overlook that some analysts have predicted for the industry.

Some instrumental techniques, however, will suffer more than others as the primary industries they serve cutback. These techniques’ primary applications are in metals and mining, petroleum and chemical processing, and, of course, the semiconductor and electronics industries. On the other hand, those technique for the life sciences (pharmaceuticals, biotechnology, and food and agriculture testing) will likely weather the storm quite nicely. Likewise, some regions of the world, such as China and India, will continue to offer growth potential, but at a less robust level. However, we do expect the first half of 2009 to be a very difficult time for the instrument industry in general, but we also expect industry growth to pick up briskly in the second half of the year as the recession winds down and the stimulus kicks in.

The fastest-growing market segment in 2009 will be MS (see page 6), followed by life science instrumentation (see page 5). Both segments will benefit from new product introductions and government spending, whether for food testing, as in the case of MS, or research funding, as in the case of life science instruments. The large aftermarket for life science systems is also expected to provide this market with good growth. In fact, revenues from consumables and service should be among the most stable sources of growth, regardless of instrument technique.

Besides the MS and life science instrumentation markets, certain subsegments of other markets are also expected to grow in excess of 7% in 2009. These subsegments include ion chromatography, dissolution testing, X-ray diffraction, NMR, Raman spectroscopy, scanning probe microscopy and confocal microscopy. For each of these techniques, technological advancements, new products and key applications will continue to drive demand this year. The only techniques for which sales are forecasted to decline in 2009 are arc-spark optical emission spectroscopy, color measurement, ellipsometry, surface analyzers and physical testing instrumentation. These techniques are tied to industries severely impacted by the global economic crisis.

Chart: Instrument Industry Revenues and Growth

’04 ’05 ’06 ’07 ’08 ’09 ’10

Revenues: 29.279 30.883 32.894 36.098 38.143 39.989 42.863

% Change: 5.6% 5.5% 6.5% 9.7% 5.7% 4.8% 7.2%

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