Singapore : The Chinese Test & Measurement industry has showed tremendous growth potential reflected not only in terms of revenue but also in technological advancements. The Chinese T&M market still kept a high growth rate of above 10.0 percent in 2008 while the number was about 7.1 percent in the rest of the world.
New technologies are overshadowing old ones with the phasing out of stand- alone instruments and the move towards PC-based equipment. Specific applications such as telecom testing, semiconductor testing, data acquisition, and electronics functional application testing require automatic test equipment, making automation of the existing equipment trends that can hardly be ignored. The Chinese T&M market is highly concentrated with multinational manufacturers dominating the market with long-term efforts, complete product lines and advanced technologies.
According to Frost & Sullivan's China Research Manager for Measurement & Instrumentation Practice David Ren, the global financial crisis has its impact on the Chinese economy. The GDP annual growth rate for 2008 is predicted to be at 9.8 percent in China, the lowest level in five years. In the financial market, the Chinese stock market has lost half of its value in 2008. The nation's consumer price index (CPI) had decreased to 2.4 percent in November 2008. It was the lowest level since July 2007.
"In view of the current economic situation, the Chinese government has announced that it will take $586 billion (RMB4 trillion) stimulus package by 2010 to stimulate domestic consumption and growth as it turns to an 'active' fiscal policy and 'moderately easy' monetary policy. In the future, the Chinese economic growth is expected to be built on a balanced structure of consumption, domestic investment and export," he said.
He continued to say that the stimulus package announced by China is large enough to cushion the downturn in the domestic economy and ensure that the country's economy continues to grow above 8.0 percent in the next two years. "It covered 10 main aspects, and most of them will directly or indirectly stimulate the development of end-user industries such as transportation, healthcare and education, environment in the Chinese T&M market. T&M suppliers will benefit the latest government's stimulus plan in terms of increasing spending and lower cost," he added.
The major challenge faced by the Chinese T&M industry is the processing precision and speeds. Furthermore, end users always demand better price- performance ratio with lower profit margins for T&M vendors. T&M vendors are forced to maintain technology innovation in order to remain competitive in the market.
"Key market drivers are reflected by end user and regulation. In the following years, government's investment will still be the most important drive for the market growth. China is still the most attractive emerging economy for key end-users in the T&M market. On the other hand, increase in demand from major end-user industries such as communication, automotive, life science, industrial electronics industries will drive the growth of the Chinese T&M market," says Ren.
However, he adds, many advanced instruments can not be made by the local companies requiring China to import many instruments from other countries, which incur high expenses every year. Yet, a lot of clients cannot afford the high price. The limited budgetary combined with high price, restraints the demands of the T&M products. Another key market restraint includes integrated instruments. Increasing preference for integrated instruments over standalone equipment restrains the revenue growth.
According to Ren, five technology trends are expected to influence the Chinese T&M industry over the next few years; increased use of multicore or parallel test systems, growth of software-defined instrumentation, the growing popularity of field-programmable gate arrays (FPGA)-enabled instrumentation, the explosion of wireless standards, and emulation-based ATE for System-on-a- Chip (SoC) and System-in-a-Package (SiP) Testing. "All of these trends fundamentally tie back to a need to reduce test costs while looking for ways to keep up with increasing design complexity," he says.
He continues, "Current stimulus plans make attractive investment opportunities in the Chinese T&M market. T&M giants find it's a good opportunity to continue industry consolidation and mergers and acquisitions tide will come soon. In addition, with the development of the Chinese economy, the government pays more attention to hot topics such as and food safety, DTV, and environment protection."
Since 2004, the Chinese government has released a series of regulations and laws on food safety, presenting the seriousness of the situation in food safety and giving the situation great attention. The demands on inspection and testing centers and food supervision management departments to improve test capability from national level to prefecture level are expected to stimulate the food safety T&M market. "The melamine incident brings about a revolution on the Chinese food safety T&M industry. The Chinese government has announced comprehensive nationwide tests for melamine on every dairy product by every producer," Ren adds.
Moreover, he continues, factors such as the Cable TV digitalization, the Satellite TV penetration rate climbing, and the IPTV explosive growth, has promoted the Chinese DTV industry to increase since 2003. With the advent of 2010, Cable TV digitalization process is expected to witness acceleration. Policy and supervision is expected to make progress in the early 2009, decreasing the uncertainties in standards, and supervision responsibilities. This is likely to stimulate the DTV business, in particular IPTV to grow rapidly since 2008.
Current stimulus plans to boost domestic consumption will also provide development opportunities for the environmental protection T&M industry. The Chinese government will invest about $51 billion (RMB350 billion) on environmental protection by 2010. The government still has a long way to go to protect key rivers and lakes from pollution such as Huai River, Taihu Lake, and the Three Gorges reservoir. Environment protection T&M market shows great growth opportunities, which is a huge market for T&M suppliers
