This group covers establishments primarily engaged in manufacturing laboratory instruments and instrumentation systems for chemical or physical analysis of the composition or concentration of samples of solid, fluid, gaseous, or composite material. Establishments primarily engaged in manufacturing instruments for monitoring and analyzing continuous samples from medical patients are classified in SIC 3845: Electromedical and Electro-therapeutic Apparatus; and from industrial process streams are classified in SIC 3823: Industrial Instruments for Measurement, Display, and Control of Process Variables; and Related Products.
334516 (Analytical Laboratory Instrument Manufacturing)
Laboratory analytical instruments manufactured by this industry were used to conduct physical and chemical analyses. Major product groups included clinical laboratory, chromatographic, and spectrophotometric instruments, and mass spectrometers. In the early 1990s, this high technology sector exported 30 percent of its output, which contributed to a $1 billion trade surplus. By 2000, industry shipments were worth almost $7.8 billion, and the industry's work force numbered 36,183 employees.
Devices used to measure the purity of gold date back to the fourth century B.C. The term "analysis," in the chemical sense, was first posited in the 1660s. A series of breakthroughs in chemical measuring methods occurred during the 1800s that preceded the development of more advanced analytic instruments later in the nineteenth century. But not until the twentieth century did the industry begin to resemble the state it achieved in the 1990s.
From about $3.5 billion in 1987, the first year in which this industry was recognized as a separate industrial classification, shipments of laboratory analytical instruments increased to nearly $7.7 billion by 2000, and many expect this growth to continue throughout the early 2000s. U.S. technological superiority and increasing demand for analytical instruments make this an important growth industry.
One of the largest product segments in this industry is mass spectrometry instrumentation, which represented 25 percent of industry shipments in the late 1990s. This type of equipment analyzes chemicals by sorting gaseous ions in electric and magnetic fields. The two major types of mass spectroscopes are spectrographs, which use non-electric means to detect the sorted ions, and spectrometers, which measure ions electrically.
Chromatographic equipment is used to separate chemical substances to determine their content, or to prepare them for further testing. Chromatography instruments are applied in oil refineries and on space vehicles to analyze atmospheres on other planets. This segment accounted for 14 percent of industry sales in the late 1990s.
Spectrophotometric instruments represented 11 percent of the industry's shipments in the late 1990s. These devices are used to view, meter, and record spectrums of light or forms of radiated energy. Spectrochemical analysis usually involves the examination of the emission of radiation by molecules that have been heated or excited by some other form of energy, or the absorption of radiation of particular wavelengths by certain molecules.
In addition to the three major product segments, 50 percent of industry sales were derived from many other devices, including a wide range of instruments made for clinical laboratories, individual parts and accessories, and other specialized instruments. Examples of specialized instruments are titrimeters, which measure the concentration of a substance in a solution; densitometers, which gauge the optical density of a material; coulometric analyzers, which detect the amount of a substance released during electrolysis; and turbidimeters, which measure the scattering of a light beam through a solution that contains suspended particulate matter.
The laboratory analytical instruments industry is an international business dominated by large, innovative companies. In addition, numerous small firms compete by forming alliances or operating in niche markets. The industry is characterized by high profits, an emphasis on advanced technology, and sporadic growth. Companies typically sell their products directly to research laboratories in pharmaceutical firms, food companies, hospitals, and other establishments that work with chemicals or analyze substances.
Rudimentary analytical instruments and measuring devices predate the birth of Christ. Naturalist Robert Boyle of England was credited with introducing the term "analysis," in the chemical sense, in his book The Sceptical Chymist , published in 1661. In 1669, Isaac Newton conducted light spectrum experiments that eventually led to the development of the spectroscope. Also in the seventeenth century, the first precise gravimetric analysis equipment (used to measure specific gravity) was believed to have been created by Friedreich Hoffman, a German physician and chemist. Numerous key inventions and discoveries during the eighteenth century included the flame test for alkali metals, qualitative analysis techniques, and titrimetric analysis.
Most instruments and methods before the eighteenth century yielded qualitative analyses. In the nineteenth century, however, French chemist Antoine-Laurent Lavoisier ushered in quantitative analysis, or the determination of the amounts and proportions of chemicals or elements in a substance or gas. Major breakthroughs in analytical instruments and methods during the 1800s included electrochemical analysis methods and gas analysis. In addition, German chemists Gustav Robert Kirchoff and Robert Bunsen introduced the first practical spectroscope in 1859. This important development led to the discovery of new elements. Spectrographic equipment improved greatly during the late 1800s and early 1900s with the introduction of mass spectrography, in 1920; flame photometry, in 1928; and radiochemical methods developed after World War II.
Perhaps the greatest innovations in the history of this industry related to the development of chromatography. Although first conceived in 1903, workable chromatography equipment was not built until the early 1940s. Gas chromatography and other advanced techniques that emerged during the 1950s significantly expanded the breadth of the analytical instrument industry. These pivotal innovations, combined with steady market growth during the post-World War II economic expansion, resulted in healthy revenue gains for instrument manufacturers. The United States assumed a global technological lead that it enjoyed throughout the 1960s and 1970s.
Although shipments of all types of U.S. laboratory equipment surged during the 1980s, not until 1987 did the U.S. government classify analytical instruments as a separate industry. By that time, sales of goods in this sector had grown to about $3.5 billion and were rising rapidly compared to most laboratory equipment industries. Indeed, sales jumped 11.5 percent in both 1988 and 1989, and, in 1990, as the U.S. economy slumped into a recession, shipments grew 14 percent to almost $5 billion, then increased more slowly to $5.8 billion in 1995. In addition to steady growth in domestic demand, U.S. producers reaped the benefits of a global interest in their hightechnology products. U.S. exports soared from $1.3 billion in 1989 to nearly $2.7 billion in 1996, while imports climbed more slowly, from $654 million to only $1.3 billion during the same period.
The laboratory analytical instruments industry prospered during the 1990s because of four key factors: (1) the increased concern over the spread of viruses, such as acquired immune deficiency syndrome (AIDS); (2) an intensified quest for new drugs by pharmaceutical companies; (3) a proliferation of environmental concerns and regulations, and; (4) strong demand overseas for high-technology, high-profit instruments. As a result, industry shipments rose from $6.8 billion in 1997 to $7.7 billion in 2000.
During the same time that manufacturers in this industry were boosting sales and profit margins on high-technology items, many were also increasing their profits through gains in productivity. Increased automation, advanced information systems, and management restructuring allowed many competitors to cut costs. At the same time, the size of the work force began to wane, falling from 36,820 in 1997 to approximately 36,183 in 2000. Production workers in 2000 numbered 12,930, compared to 13,660 in 1997. Gains in productivity were partly offset by higher research and development costs.
In the late 1990s, manufacturers focused on product quality, customer service, and new product introductions. Environmental and pharmaceutical markets offered the strongest growth domestically, but demand from food processing, biotechnology, and chemical industries remained relatively healthy.
In the long term, makers of laboratory analytical instruments were predicted to become increasingly dependent on sales of advanced technology products utilized by highly industrialized nations. Gas chromatography and mass spectrometry equipment were anticipated to be major growth segments, as were several newer niche product groups, such as capillary electrophoresis devices. Markets for low technology products were expected to be controlled by low cost producers in emerging regions, such as Mexico and East Asia.
Market share in the laboratory analytical instruments industry is concentrated, with a few industry leaders controlling the market. High start-up costs and rigid technological requirements discourage new entrants. Beckman Coulter, headquartered in Fullerton, California, is the largest manufacturer, attaining its status through the acquisition of Coulter by Beckman Instruments in 1997. In 1998, its sales reached $1.7 billion and its workforce nearly 10,000 employees worldwide.
Thermo Instruments Systems, Inc. (Waltham, Massachusetts), a subsidiary of Thermo Electron Corporation, had 1998 sales of $1.6 billion and 9,700 employees. The company has several subsidiaries that produce measurement instruments for a range of industries, including industrial production, food and beverage production, life sciences research, and medical diagnostics.
PerkinElmer Corporation, (formerly EG&G) of Wellesley, Massachusetts, generated $1.4 billion in 1998 sales while employing 13,000 people. About 60 percent of PerkinElmer's sales come from outside the United States.
Close behind is PE Corporation, which sold its PerkinElmer name to EG&G in 1999. The company develops, markets, and supports systems consisting of instruments, reagents, and software used in basic life science research, pharmaceutical research and development, diagnostics, forensics, and food testing. PE Corporation had 1999 sales of $1.2 billion and 3,800 employees.
Despite expectations for market growth, future employment opportunities in this industry are questionable. The number of employees was slightly less in 1997 than in 1995, with most labor positions expected to decline 15 to 50 percent between 1995 and 2005, according to the U.S. Bureau of Labor.
Positions for managers, engineers, and sales professionals are expected to diminish about 10 percent. Although workers in the laboratory analytical instruments business will probably fare better than their counterparts in related industries, continued productivity gains, consolidation, and the movement of some manufacturing activities overseas will likely thwart long-term job growth.
The U.S. laboratory analytical industry is the most advanced and productive in the world. Despite lower sales to Canada and western Europe, total exports, which constitute 11 percent of product shipments, grew 5 percent, reaching $178 million in current dollars. Much of this growth came from healthy sales in East Asia. In Japan, U.S. producers achieved an impressive $170 million annual surplus by 1991. Foreign demand for advanced proprietary gear remained strong going into the mid-1990s. Japan, with significant research and development in process, replaced Canada as the major U.S. export market. U.S. exports to Europe dropped in the mid-1990s, because of competition and Europe's economic problems. U.S. imports nearly doubled, but exports more than doubled and so did the trade surplus, going from $618 million to $1.4 billion.
The export market for U.S. goods is extremely fragmented, suggesting solid long-term growth potential. Product categories realizing the greatest overseas demand in the mid-1990s included chromatographs and electrophoresis instruments, general chemical instruments, and viscosity measuring devices.
Demand is expected to increase with the growing biotechnology field, more stringent requirements for environmental testing, and increased capital spending by the pollution control, semiconductor, paper, automotive, and food industries. Development of new foods and flavors has increased both demand and sales of laboratory equipment for assessing moisture content, quality, and shelf life. U.S. sales to Europe were not expected to increase noticeably, because of their slow economic recovery. Exports to East Asia and Mexico are expected to grow, however, with imports remaining relatively flat in comparison.
Many competitors in the mid-1990s felt that a global industry presence was a necessity in light of rising development costs and maturing domestic markets.
Major technological trends in the mid-1990s included the proliferation of combined equipment, such as single units that integrated both chromatograph and spectrometer functions; smaller instruments, particularly portable environmental field equipment; increased quality and precision; and growth in information systems and robotics. The growth in information systems and robotics was evidenced by rising installations of laboratory information management systems (LIMS), as well as a growing demand for automated sample preparation systems for bio-pharmaceutical applications. A new system introduced in 1993, for example, handled multiple-sample preparation tasks and was operated by Windows-based personal computer software for easy use. Several other automation and robotics systems, offered by companies such as CRS Plus Inc. and Zymark Inc., were aimed at relatively inexperienced users that wanted to conduct complex sample preparations and analyses.
Similarly, manufacturers were also introducing easier-to-use chromatography and mass spectrometry devices. Advanced systems automatically optimized and tuned themselves during operation, thereby eliminating much of the practice and guesswork associated with conventional instruments. In addition, many newer instruments combined up to three major functions into one unit. While these high-technology workhorses were regularly priced at more than $200,000, they were typically easier to operate and less expensive than two or more side-by-side units with commensurate capabilities.
In early 1997, MEMS, also known as micro-electromechanical systems, began to make their appearance with the promise of an impact as profound as the microchip. Many small American companies are bringing new MEMS applications to the market.
In December 1999, Beckman Coulter and Third Wave Technologies announced a high-throughput automation platform that provides researchers access to an automated nucleic acid analysis platform for SNP (single nucleotide polymorphism). SNPs are differences in genetic codes that account for variations among people and are believed to determine susceptibility to many diseases and individual responsiveness to treatments. This analysis tool is expected to make it possible to cost-effectively develop and use tens of thousands of individual pharmacogenetic assays that will be required for drug development, clinical trials, patient profiling, and personalized medicine.
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"Third Wave Technologies and and Beckman Coulter Team-Up for Automation of High Throughput SNP Studies." Beckman Coulter Press Release, 21 December, 1999.
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