It is that time of the year again to peer into our crystal ball and proffer the future of the analytical and life science instrument industry. This year’s task is somewhat easier than that which confronted IBO in January 2009 (see IBO 1/15/09), although some uncertainty still persists. A year ago we were trying to deal with a period in which the last few months had no resemblance to the previous six to nine months, and the future looked bleak; yet, the gravity of the situation was only just beginning to emerge. The one thing we now know is that most of the industry is glad to see 2009 end, and the consensus is that 2010 will be much better.

A year ago, IBO lowered its estimate for 2008 growth from 6.8% to 5.7% and predicted that 2009 growth would be just 4.8% (see IBO 7/31/09), the lowest rate of growth in over 25 years. Sad to say, we were not nearly pessimistic enough. In July 2009, IBO lowered its forecast to a decline of 3.1% (see IBO 7/31/09). IBO now believes 2009 sales actually declined 3.0%, the first such decline since 1983. Clearly, the global recession, especially as experienced in the US and Europe, impacted industry revenues. Customers cut back or delayed purchases of new instruments, and even trimmed aftermarket purchases and service-related spending.

In turn, the analytical and life science instrument industry reduced payrolls, cut costs by reducing travel and discretionary expenditures, and became more serious about outsourcing. Some companies saw this slowdown coming in the fourth quarter of 2008 as orders plunged and made pre-emptive cuts. Many others followed suit in the first quarter of 2009 as the “great recession” became a reality.

With this sobering experience behind us, IBO now looks to 2010 and 2011, chastened but still mildly optimistic. Basically, much of the negative news of 2009 has been replaced by encouraging tidbits that generally suggest a rebound in economic activity. While our industry tends to be somewhat insensitive to economic cycles—global recessions not withstanding—general economic upturns are welcome. It is also clear that government spending in the US, Europe, China and many other areas will be a boon to our industry, and indications are that it is already taking place.

IBO has closely followed developments for the last year and believes better times are at hand. Thus, IBO forecasts that the analytical and life science instrument industry will grow 5.2% to approximately $38.8 billion in 2010, about the same rate as we now believe the industry expanded in 2008. So, for our industry, we see a V-shaped recovery, which will probably be more pronounced than overall economic activity in the developed world.

In October 2009, the International Monetary Fund issued its “World Economic Outlook” forecast that indicated that World output would increase 3.1% in 2010 from 2009, or about the same increase as in 2008. It predicted that Advanced Economies would only increase about 1.3%, but other regions would grow faster, especially Developing Asia, which would likely expand 7.3%. Since then, the IMF, the OECD and other forecasting groups have been becoming steadily more bullish, as economic trends are encouraging.

Instrument sales prospects will vary by technique, application and region (see page 14) based on the fundamentals in those areas. End-user markets also present major dichotomies (see page 13). Instrumental techniques will also experience varying levels of prosperity in 2010. Sales of molecular spectroscopy (see page 9) and MS (see page 6) techniques as a group will likely increase at over 8% in 2010, although within each group, prospects can be quite profound. Materials characterization (see page 11) and separation (see page 4) techniques will each be below-average performers.

Chart: Instrument Industry Revenues and Growth

’05 ’06 ’07 ’08 ’09 ’10 ’11

Revenues 31.071 33.187 36.070 37.989 36.854 38.774 41.242

% Change 5.9% 6.8% 8.7% 5.3% -3.0% 5.2% 6.4%