This industry is made up of companies that manufacture a multitude of analytical devices. Examples of industry output include voltmeters, ammeters, wattmeters, watt-hour meters, semiconductor test equipment, and circuit testers. Establishments that produce monitoring and testing equipment for navigational, radar, and sonar systems are described in SIC 3812: Search, Detection, Navigation, Guidance, Aeronautical, and Nautical Systems and Instruments.
334416 (Electronic Coil, Transformer, and Other Inductor Manufacturing)
334515 (Instrument Manufacturing for Measuring and Testing Electricity and Electrical Signals)
Shipments of instruments to measure electricity increased in value every year from 1991 to 1997. After falling slightly from 1997 to 1998, values continued their upward climb, reaching $16.1 billion in 2000. This industry did not suffer as badly as many did in the recession of the early 1990s. Many establishments came into operation in the 1980s, and employment for this industry was highest in 1984. In the late 1980s, U.S. companies were shipping more than $7 billion worth of goods per year, employing around 90,000 workers, and exporting equipment valued at about $2 billion annually. While shipment values more than doubled from 1987 to 2000, the number of people employed (62,136) was about 35 percent less than 1984's record high of 95,800. The average hourly wage in 2000 was $18.95.
Growth in the mid-1990s was due to demand for automatic test equipment (ATE), a devalued U.S. dollar, and shipments of high-tech devices to telecommunications industries. Despite increased foreign competition, the United States widened its trade surplus to $2.6 billion in 1996 and poised itself for steady global expansion into the 2000s.
The electrical testing and measuring (T&M) instruments industry encompasses eight major product groups. ATE, the largest industry segment, includes T&M instruments for semiconductors, circuit boards, and computer disk drives. Communications test equipment, the second-ranked product group, includes T&M devices for landline, wireless, and fiber-optic communications gear.
Other major industry categories include signal generators, electrical integrating instruments, multimeters, oscilloscopes, and spectrum analyzers. Each of these product groups is comprised of many different devices. In addition, more than half of industry revenues are garnered from a wide range of miscellaneous T&M instruments, such as tube testers, impedance measurers, frequency meters, battery testers, stroboscopes, tachometers, reflectometers, ammeters, and ohmmeters.
Ohmmeters, a common and traditional product of the industry, are used to measure the amount of electrical resistance in a circuit. Likewise, watt-hour meters are most often used to measure the amount of power that is used by a utility customer and are mounted on an outside wall of most homes and buildings. Potentiometers are used to precisely measure direct current or voltage, as are voltmeters and ammeters. The galvanometer, another indicating instrument, indicates extremely small currents. Reflectometers measure the amount of light or energy reflected from a surface. An oscilloscope converts electron motion into a visual display on a cathoderay tube.
In recent years, nearly one-third of the companies in the industry, representing almost 25 percent of total sales, were located in California due to the large defense, semiconductor, and telecommunications industries in that state.
In 1833, Englishman Carl Friedrich Gauss was the first to show that magnetic quantities could be measured in terms of mechanical units. Wilhelm Weber, also of England, defined a system of electrical units in 1851 that foreshadowed the development of the ohm (1864), a measure of electrical resistance. The ampere, a unit used to measure electrical current, soon followed. The United States made the ohm and ampere legal units of electrical measurement in 1894.
Early measuring devices were functional, though generally unreliable for precise readings. The earliest device that would deliver a standard for voltage (electromotive force) for measuring instruments was built in 1836 and was reproducible only to about 1 percent accuracy. The Clark Cell of 1872, which was used to establish a standard voltage measurement, also proved unreliable. The Weston Cell, introduced in 1892, became the first device to successfully provide a standard for electrical measuring.
Following the development of electrical units and credible standards, numerous electricity measuring devices emerged during the early 1900s. Among the first devices were instruments used to measure electrical resistance, such as ohmmeters. In addition, power meters, or wattmeters, became industry mainstays. One of the largest classes of early devices was indicating instruments, such as voltmeters and ammeters.
Many of the first indicating instruments were ironvane devices, which utilized a plate of steel, a spring pointer, and a damper to form the vane, or moving elements of the meter. As electricity passed through a magnetic coil, the vane tipped to provide a reading. These rugged instruments remained the primary indicating devices for much of the twentieth century, despite the development of more advanced meters. Electrodynamic instruments, which were much more precise than iron-vane mechanisms, were also developed in the early part of the twentieth century. These indicating instruments utilized two sets of coils and became popular for laboratory applications.
The development of the transistor in 1947 by Bell Telephone Laboratories led to the introduction of a profusion of extremely accurate electrical T&M equipment during the latter half of the century. Tube-type and electromechanical instruments were soon replaced by devices accurate to within one-millionth of a unit. As the number of applications for solid-state electronics ballooned, the demand for various T&M equipment flourished throughout the 1950s, 1960s, and 1970s.
By the end of the 1970s, electrical T&M equipment manufacturers were shipping about $6 billion worth of goods per year. Although industry growth decelerated during the previous decade, shipments continued to increase and U.S. manufacturers maintained a significant technological lead over their global counterparts. In 1982 the industry had sales of $6.1 billion and a workforce of 90,000 employees.
As the T&M industry recovered from a major recession in the late 1970s and early 1980s, revenues jumped to $6.5 billion in 1983 and then to $7.8 billion a year later. Increased defense spending, growth in telecommunications, and a general proliferation in computers and other electronic devices also contributed to growth. In 1986, total sales fell 10 percent from the previous year, from $7.7 billion to $6.9 billion. Then, in 1987, the industry recovered, generating sales of $7.7 billion.
In an effort to maintain profitability, U.S. T&M instrument companies initiated aggressive productivity programs during the 1980s and focused on research and development efforts in high-tech fields. As a result, industry employment dropped to 81,000 by 1989 and to 63,000 by 1997. Still, the United States retained its significant technological lead in high-profit T&M devices, such as ATE and telecommunications testing equipment.
The low value of the U.S. dollar and a resurgence in domestic semiconductor manufacturing spurred electrical T&M device receipts to increase by 6 percent in 1990, to $8.4 billion. Although a global recession pushed sales down 1 percent in 1991, revenues struggled upward 6 percent in 1992 and rose to $9.2 billion in 1993. The value of shipments was $9.5 billion in 1994, $9.6 billion in 1995, and $12.8 billion by 1997.
In addition to healthy demand, producers enjoyed the benefits of massive productivity gains achieved during the 1980s and 1990s. Despite shipment growth, industry employment continued to decline. Improved efficiency allowed some domestic producers to compete in markets for low-priced, traditional equipment. At the same time, however, many companies were striving to move their low-tech production facilities overseas.
Exports also raised the profit margin, as foreign demand for price-competitive, high-tech equipment rose. Overseas shipments were up 4 percent in 1993, 11 percent in 1994, 23 percent in 1995, and 17 percent in 1996. At the same time, import growth was significantly lower than exports from 1993 through 1996 as U.S. firms pelted their competition with efficiency gains and advanced product introductions. In 1996, the United States had a healthy surplus of $2.6 billion.
The value of shipments for 1997 was $12.8 billion, up from $9.55 billion in 1995. Capital investment in the industry was on the decline, falling to $672 million in 1996. Many analysts were surprised at the impressive performance of this industry in the early 1990s, particularly because of drastically reduced spending in the defense sector and the recession. But sales of advanced T&M devices were rising fast enough to make up for slower traditional markets. Shipments of digital oscilloscopes and multimeters that were priced to compete with similar analog devices, for instance, offered significant profit opportunities. Likewise, new products related to wireless communications displayed excellent growth.
ATE was the fastest growing sector of the electrical T&M device industry in the 1990s. After ceding market share to Japanese semiconductor manufacturers in the previous decade, U.S. chip producers turned the tables by dominating the market for a new generation of high-speed semiconductors (called application specific integrated circuits). T&M device makers benefited as U.S. semiconductor shipments from the top four semiconductor companies alone (Intel, NEC, Motorola, Texas Instruments) totaled $47.3 billion in 1997. All this semiconductor production required increased ATE production.
After hovering near $14.0 billion during the late 1990s, industry shipment values spiked considerably in 2000, climbing from $14.1 billion in 1999 to $16.1 billion. Capital investment in the industry also increased. Averaging $659 million during the late 1990s, capital expenditures jumped from $662.8 million in 1999 to $781.5 million in 2000. In the late 1990s and early 2000s, the majority of the industry's capital investment (70 percent in 2000) has gone toward machinery and equipment, with the remainder going toward buildings and other structures.
Unlike the noteworthy growth experienced in 2000, the industry declined in 2001 in the wake of negative economic conditions that rippled through many U.S. industries. Declines were seen in a number of key industry sectors. Electrical test equipment shipment values, which were $14 billion in 2000, fell to $10.6 billion in 2001. Values for coils, transformers, reactors, and chokes for electronic applications—which averaged $1.4 billion during the late 1990s—spiked to $1.7 billion in 2000 and then fell to about $1.3 billion in 2001.
More specifically, the industry was affected by declines in key end markets like telecommunications equipment and semiconductors. In 2000, the semiconductor industry achieved a record year, as sales reached $204 billion. However, the following year sales plummeted to $139 billion. In the February 4, 2003 issue of Electronic News , IC Insights president Bill McClean analyzed what factors contributed to these difficult conditions. As the publication explained, "For the first time ever the semiconductor industry found itself simultaneously facing each of the four major causes of a downturn: global recession, inventory surplus, overcapacity issues and a decline in electronic systems sales." The semiconductor industry's recovery began in the last quarter of 2001 and continued throughout 2002.
In its July 15, 2002 issue, Electronic News explained how a downturn in the market for non-memory semiconductors (IC) affected the automatic testing equipment (ATE) sector in the early 2000s. The publication reported that when sales of ICs rose approximately 33 percent from 1999 to 2000, related ATE sales jumped 74 percent. However, when IC sales fell 30 percent the following year, ATE revenues slipped somewhere in the neighborhood of 66 percent. As the industry began to recover midway through 2002, Electronic News commented on prospects for the near future: "Applications technology is growing with new 3G cellular, wireless LAN and gigabit data buses. These technologies will create a smorgasbord of new electronic consumer products. IC diversity will continue to stretch device test requirements."
In the early 2000s, the industry's leading firms were Agilent Technologies, Inc., with 2002 sales of $6 billion; KLA-Tencor Corp., with $1.6 billion; Teradyne, Inc., with $1.2 billion; and Tektronix, Inc., with $843 million.
In 2003, Agilent Technologies was the leading manufacturer of electronic test and measurement equipment, including basic and general purpose instruments, as well as automated test equipment. The company was an established global enterprise, earning more than half of its revenues outside of the United States and serving some 110 different countries. The company was the result of a 1999 spin-off from Hewlett-Packard (HP). HP was founded in 1938 by William Hewlett and David Packard, graduates of Stanford University's electrical engineering program. With $538 in startup funds, the two entrepreneurs developed an audio-testing oscillator that was used by one of their first customers, Walt Disney, for the film classic Fantasia. HP realized steady growth during and after World War II by developing and selling various electrical T&M equipment. The company's first major breakthrough was the HP-524A. Introduced in 1951, this device reduced the time required to measure radio frequencies from 10 minutes to about 2 seconds.
KLA-Tencor was formed by the 1997 merger of KLA Instruments and Tencor Instruments (both founded in 1976). Headquartered in San Jose, California, the company employed 5,700 employees in 2002. Like Agilent, KLA-Tencor derives a sizable portion of its revenues from outside the United States.
Boston-based Teradyne, Inc. led the industry in semiconductor testing equipment in the early 2000s. The company employed 8,400 people in 2001, down almost 18 percent from the previous year. Founded in 1960 by Alex d'Arbeloff and Nick DeWolf, Teradyne produced its first product, the D133 diode tester, in 1961. In 1999 it introduced the AWG2400 10-bit Waveform Generator, claimed to be the highest arbitrary waveform generator in the ATE industry.
A leader in the industry of instruments to measure electricity is Tektronix, Inc. of Beaverton, Oregon. Tektronix employed 4,301 employees in 2002, down from 7,600 in 1999. The company earns more than half of its revenues from the United States. Other leading markets include Europe and Asia. Founded in 1946, Tektronix developed the very first triggered oscilloscope. By 2003 the firm focused on three main markets: communications, computers, and semiconductors. In 1999, Tektronix decided to sell off its color printer operations and focus exclusively on test and measurement equipment.
In 1982 there were about 90,000 workers employed in the industry. This number increased to 95,800 in 1984. However, the total workforce was down to 85,200 in 1987, 77,100 in 1990, 59,600 in 1993, and 55,400 for 1996. In 1997, however, total U.S. employment increased slightly to 63,891. Employment continued to hover around 63,800 during the late 1990s, before decreasing slightly in 2000, reaching 62,136. That year, the industry employed 25,911 production workers who earned an average of $18.95 per hour.
Overall, jobs for most production workers were expected to decline from 20 to 50 percent between 1995 and 2005, according to the Bureau of Labor Statistics. Jobs for general managers and executives were expected to drop 20 percent. Even positions for research engineers and technicians will decrease by 1 to 3 percent by 2005.
U.S. electrical T&M device manufacturers are the most technologically advanced in the world, as evidenced by their strong trade surplus. Their primary competitive advantage is their ability to develop and manufacture high-tech, high-profit devices, such as ATE and telecommunications instruments. In contrast, many firms have licensed their low-end technology to countries such as China and India, where production costs are lower than in the United States.
The industry has maintained a trade surplus since the late 1990s. In 2001, this surplus totaled $2.5 billion. Export values climbed almost 13 percent from 1998 to 1999, and more than 37 percent from 1999 to 2000. However, they dropped more than 24 percent from 2000 to 2001, reaching $5.9 billion. Import values increased almost 10 percent between 1998 and 1999, and more than 36 percent between 1999 and 2000. However, they dropped 8 percent from 2000 to 2001, reaching $3.4 billion.
Although competition increased during the mid- 1990s, particularly from Europe and Japan, U.S. manufacturers in this industry were expected to maintain their technological lead into the twenty-first century. Sales to the viable domestic semiconductor industry will be augmented by strong growth in demand from new wireless telecommunications industries, in which the United States also maintained a technological edge.
"Electronic Products 1999 Editors' Roundup: Oscilloscopes and Computer Boards." Electronic Products , January 2000.
MacLellan, Andrew. "New Forecasts Paint a Divergent Picture of the Chip Market's Future." EBN , 18 November 2002.
Romanelli, Alex. "2001: What Didn't Go Wrong? Researcher Details What Caused the Chip Industry's Worst Year Ever." Electronic News , 4 February 2002.
Smith, Phil. "Managing the Recovery: Change One Thing." Electronic News , 15 July 2002.
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