Historically, electronic test and measurement equipment has been mainly purchased new by customers. Still today, new test equipment purchases represent about 85% of total market revenues, much more than in many other markets with similar characteristics. Times are changing though, and with the emergence of increasingly complex technologies, the cost of test has increased. Facing price pressure from customers, companies across industries have found themselves in a bind and have increased their focus on their capital expenditures (CAPEX), including those for instrumentation and operational efficiency. As a result, the test and measurement industry is expected to evolve over the next few years towards a more balanced contribution between different means of acquisitions, including new purchases, used test equipment purchases, and financial solutions such as rental and leasing services.
With its roots in addressing short-term needs, the rental and leasing test and measurement services market has developed tremendously over the past 3 decades to reach about $300 million in revenues in North America and $250 million in Europe while being nascent in Asia. Although field applications act as the key source of revenue for the overall market, such services have also made inroads in other applications including research, development, and manufacturing. Today, customers across all industry verticals from aerospace and defense (A&D) to communications, semiconductors, industrial electronics, and consumer electronics use such services. As these companies look for more flexibility, having equipment at the right time for the right amount of time and at an optimal cost, the demand for options other than making new purchases is expected to increase and benefit the rental and leasing services market. In addition, the rapid evolution of standards and technologies in the wireless industry and its convergence with other industries, such as automotive, are expected to generate opportunities for leasing and usage-based models as opposed to ownership models. This is due to the inefficiency of the traditional CAPEX model with regard to asset utilization and disposal. With the growth of test asset management services, customers will gain a greater understanding of their test asset utilization and increase it by tracking it via centralized management and facilitating the sharing of equipment between teams. Customers who have adopted test asset management services typically increase the amount of equipment they rent. The test asset management market is expected to act as a key growth driver for rental and leasing services.
The used test equipment market is also expected to get a boost in market share. Fueled in part by the rental market, which needed to refresh its inventory, this market has developed accordingly, reaching about $260 million in North America. The growth of financial solutions naturally leads to the disposal and remarketing of equipment, increasing the supply in the used test equipment market, which has been a restraining factor for market growth. The rental and leasing services market, as well as more active trade-in programs from test equipment original equipment manufacturers (OEMs) and their distribution partners, are expected to increase the supply moving forward. In addition, driven by customers’ desire to better control test and measurement CAPEX and improve their operations, the blooming test asset management services market is expected to augment the supply of used instruments because customers do not hold onto test assets as much as they used to. Instead, they return them after they have been used for a program. As customers get better at test asset management, they will gain a greater understanding of their equipment needs and learn to dispose of equipment while it still has some good value. Over the next few years, there will be asset rotation in the test and measurement industry like never before and more used test equipment will be back into circulation. This will drive growth in this market in addition to a reducing gap in quality and support between new and used instruments. Strong value propositions have been developed around used test equipment in the industry, giving rise to a continuum of price-performance points with different price and service levels. With greater customer awareness about these solutions and a better understanding of their needs, the market share of used test equipment in the test and measurement industry should increase proportionally.
After witnessing significant growth in 2011/2012, the slowdown in LTE deployments over the past few years affected the market growth of the rental and leasing services market. However, this market holds significant growth potential due to low penetration of such services in the industry. Currently, the penetration of rental and leasing services in the test and measurement industry is in the low single digits while it represents as much as a third of the revenues in comparable markets. Penetration is highest in developed regions such as North America and Western Europe, while the market in Asia is nascent, growing mainly from demand from the international subsidiaries of multi-national companies that originate from North America and Europe. Increased awareness about test asset utilization is expected to drive demand for such services.
Rental and leasing services and asset management services increasing asset rotation in the industry over the next few years will also generate growth potential in the used test equipment market. Growth is expected to be higher in North America compared to other regions because trade-in programs are more effective in this region. Although run globally, trade-in programs are more difficult to implement in Asia, restraining the used test equipment market in that region. Also, the culture towards financing varies by country, restraining the market for rental and leasing test equipment services in Europe and Asia. European countries look at leasing and financing differently from each other and there are risks associated with leasing in Asian countries such as China.
Overall, the electronic test and measurement industry is at an inflection point where customers will become much savvier at using test equipment. Several companies, including OEMs, rental companies, and others endeavor to help customers better manage their equipment and get more out of it through the provision of innovative services. These services are expected to grow rapidly and put pressure on sales of new test equipment, which will be a challenge for most OEMs. However, the impact of this trend can be alleviated by offering advanced services.
