If you have an ACS member number, please enter it here so we can link this account to your membership. (optional)

ACS values your privacy. By submitting your information, you are gaining access to C&EN and subscribing to our weekly newsletter. We use the information you provide to make your reading experience better, and we will never sell your data to third party members.



Top Instrument Firms

Companies in C&EN’s ranking try to boost their sales of analytical and lab instruments at a time when spending is constrained

by Ann M. Thayer
April 29, 2013 | A version of this story appeared in Volume 91, Issue 17

Credit: FEI
FEI Senior Research Scientist Chris Arthur analyzes microscopy data at the FEI/Oregon Health & Science University Living Lab for Cell Biology.
Photo shows FEI Tecnai with iCorr electron microscope at Oregon Health & Science University, Portland Oregon. The person in the photo is Chris Arthur, PhD, Senior Research Scientist with FEI.
Credit: FEI
FEI Senior Research Scientist Chris Arthur analyzes microscopy data at the FEI/Oregon Health & Science University Living Lab for Cell Biology.

Be it for good reasons or bad, there’s no turning back the clock. Analytical and laboratory instrumentation companies are happy to be out of the recessionary period of 2008–09 when industry sales shrank, but they would welcome a return to 2010–11 when the market rebounded. Last year’s growth rate disappointed, and 2013 may bring more of the same as an uncertain economic outlook and government cuts in the U.S. squeeze spending.

In 2012, instrument industry revenues grew just 2.4% after two years of 6–8% growth, according to Strategic Directions International, a Los Angeles-based market research firm. Ongoing economic difficulties in Europe and Japan, and the late-year U.S. government fiscal cliff crisis, were significant limiting factors. Even emerging markets, generally a bright spot for instrument sales, slowed.

C&EN’s annual ranking of the top 25 instrumentation companies—done by sales—reflects these trends. Excluding Danaher’s sales jump because of a major acquisition, 2012 sales were noticeably down for six firms, flat for another eight, and up only modestly for most of the remaining 10. Combined sales for these 24 companies rose just 1.7% in 2012.

In addition, little change occurred between this year’s ranking, generated from 2012 instrument sales, and last year’s ranking, based on 2011 sales. New to the list, Eppendorf posted its results in time to clock in at number 15. The German company’s sales increased nearly 9% in 2012, or 4% without the effect of currency exchange and acquisitions.

A few companies close in size, such as Waters and Shimadzu, traded positions. Waters’ sales growth was flat in 2012, a year that Chief Executive Officer Douglas A. Berthiaume calls “a challenging period.” Meanwhile, Shimadzu says it benefited from a good product mix and strong services and consumables businesses. It was the only Japanese firm to report sales growth.

The other Japanese companies in the ranking—Hitachi High-Technologies, Horiba, JEOL, Nikon, and Olympus—dropped a few slots. According to Horiba, the Japanese economy improved moderately on the back of recovery from the 2011 earthquake, but by spring 2012 demand was negatively impacted by global economic issues, a strong yen, and worsening relations with China.

Comfortably in the lead, Danaher kept the top place in this year’s ranking, followed again by Thermo Fisher Scientific, Agilent Technologies, and Life Technologies. Danaher acquired Beckman Coulter for $6.8 billion in June 2011, and 2012 was the first time it included full-year results from the business, which led to a 40% jump in instrument sales.

Otherwise, acquisitions didn’t cause any big shifts in the ranking. Although the number of deals was about the same in 2012 as in 2011, they were generally smaller. In both years, about nine firms on C&EN’s list together made about a dozen acquisitions, but the total value fell to about $5.0 billion last year from $15.1 billion in 2011. The biggest deal in 2012 was Agilent’s $2.2 billion purchase of the Danish cancer diagnostics firm Dako.

Many companies spent 2012 integrating their previous acquisitions and reorganizing their businesses. Eighth-ranked Perkin­Elmer, for example, made three good-sized purchases in 2011 and one in 2012. It has restructured itself into two major operating arms: environmental health and human health.

The company’s environmental business, led by President Dusty Tenney, offers analytical techniques for air, food, water, and chemical testing. The business’s North American and European customers, unlike their counterparts in the developing world, already have the infrastructure in place and are not expanding much, Tenney says.

The low- to mid-single-digit growth that the business does experience in the West stems from customer desires to increase detection limits or identify new contaminants, he adds. Increasing regulation in countries around the world is also helping growth in testing markets.

Growth was even weaker among Perkin­Elmer’s industrial customers. “The chemicals market seems to be cyclical,” Tenney says. “There was some build-out that took place in 2010 and 2011 and a little slowdown in 2012.” He expects business to improve since many chemical companies are retooling to increase productivity.

In Thermo Fisher’s view, demand in industrial and applied markets was “soft overall” last year, with customers delaying purchasing decisions, CEO Marc N. Casper said during the company’s annual earnings call. Similarly, in the academic and government markets, growth was “muted” because of the uncertain funding environment, which resulted in constrained spending on capital equipment, he pointed out.

Periodically during 2012, Mizuho Securities USA stock analyst Peter Lawson surveyed academic, genomics, diagnostics, and drug discovery companies on their outlook for funding and plans for spending. Customer sentiments were weakest in academia, followed closely by the geno­mics area, he found. Drug discovery and diagnostics users were slightly more upbeat, until the rather dismal fourth quarter.

In early 2013, just before companies reported 2012 earnings, Lawson told clients that only a few companies, including Perkin­Elmer and Thermo Fisher, would perform better than expected. Results would be “weighed down by uncertainty in industrial end markets and U.S. academia,” he said. In general, Lawson favors diagnostics-focused companies over equipment makers. But among the equipment-focused firms, he said, “we selectively like several tools names—Waters, PerkinElmer, and Illumina—with either limited academic exposure or highest-demand products.”

Looking at the market by instrument type, Nick Roelofs, president of Agilent’s life sciences group, says that “most product-based areas are growing, but just barely.” Like its peers, Agilent sells multiple spectroscopy and chromatography tools, as well as software, consumables, and services, across many end markets.

Growth in liquid chromatography, for example, has been coming from the transition from high-pressure to ultra-high-pressure instruments, Roelofs explains. When investing in equipment, many customers want the newest technology but may not have yet switched over all their methods. Suppliers that offer a single instrument that works in either pressure mode are in the best position to serve this need, he points out.

In other areas, such as nuclear magnetic resonance spectroscopy, new technology purchases have apparently stalled. Academic institutions, which buy the vast majority of the priciest systems, got an injection of funding from government stimulus programs in 2010 and 2011. “A lot of stimulus money went into big instruments, and so the last drops and drips of ultra-high-field NMR orders were gone by the end of 2012,” Roelofs says. “The NMR market was flat or growing very slowly in the last half of 2012.”

Credit: Bruker
Bruker workers assemble NMR magnets in Karlsruhe, Germany.
Photo shows NMR magnets being assembled at Bruker location in Karlsruhe, Germany.
Credit: Bruker
Bruker workers assemble NMR magnets in Karlsruhe, Germany.

The effect is likely to linger. Stimulus spending artificially increased the number of ultra-high-field NMR orders worldwide from a typical level of about 10 to closer to 20 or 30 per year during 2010 and 2011. With “two or three years of demand pulled forward, the market has become saturated, and there won’t be a lot of new orders for ultra-high-field NMR systems,” Roelofs acknowledges. As a result, Agilent has decided to focus on lower-field NMR systems for more routine academic and industrial use.

In the fiscal year ending Oct. 31, 2012, Agilent’s chemical analysis group grew about 4%, life sciences was up 6%, and diagnostics was flat, excluding the addition of Dako. “We see life sciences and diagnostics as the growth opportunity,” Roelofs says.

One growth angle is through “restatement,” or transferring traditional measurements onto different analytical instruments. For example, Roelofs explains, diagnostic testing traditionally conducted using antibody-based detection methods can be accomplished through mass spectrometry molecular analysis. In this case, the new approach offers greater sensitivity and reproducibility, especially in large-volume testing situations, he says.

The life sciences and natural resources areas have become important growth opportunities for electron microscopy (EM), according to Paul Scagnetti, vice president of EM specialist FEI. Materials science and electronics areas have long been the firm’s core businesses. “Our overall approach is really about making electron microscopy interesting for people who haven’t traditionally used it,” he says.

Last year was a record year for the Oregon-based firm, which moved from number 16 to number 14 in C&EN’s ranking. Product sales grew more than 5%, and parts and services revenues jumped 16%.

In 2012, life sciences markets accounted for just 9% of FEI’s business. As part of a strategy to extend microscopy into the life sciences, the company has set up collaborations with Oregon Health & Science University and the National Institutes of Health to create “living labs.” For example, the NIH structural biology research lab in Bethesda, Md., integrates cryogenic EM with NMR spectroscopy and X-ray diffraction. FEI and NIH are developing methods and workflows, from sample preparation through data collection and analysis.

FEI wants to serve markets adjacent to its existing markets, Scagnetti says, including geographic ones. About 40% of FEI’s sales in 2012 were outside the U.S., Canada, and Europe, up from 37% in 2011. Last year the company expanded its manufacturing site in the Czech Republic and acquired its South Korean sales and service agent.

FEI has benefited from a “global interest among governments to invest in health care,” Scagnetti says, pointing to accelerated growth in Brazil, Russia, India, and China—the so-called BRIC countries. And Bruker executives cite growth in funding for scientific research in most of Asia, Latin America, India, the Middle East, and Africa. Food and environmental testing also rank high among emerging-market needs.

Important factors for growth in 2012 included “a strong uptick of new products, strong demand from academic customers outside of the U.S., and continued momentum in Asia-Pacific,” according to Bruker CEO Frank Laukien.

Even though growth in emerging markets slowed somewhat in 2012, it still outpaced what was taking place in established markets. Thermo Fisher’s Casper called emerging markets a “key growth driver” that have brought double-digit sales increases. In 2012, the company expanded manufacturing in China and opened a demonstration lab in South Korea.

As new geographic markets grow, companies see a need to have direct operations, rather than agents, in place. This thinking led PerkinElmer in November 2012 to open a site in Midrand, South Africa, to support business across Southern African countries. It will include a customer center providing demonstrations, application support, and other services.

After BRIC, another wave of emerging markets is called CIVETS, for Colombia, Indonesia, Vietnam, Egypt, Turkey, and South Africa. “There are three other countries inside CIVETS that we are pursuing, and most likely by the end of this year we will also be direct in those,” PerkinElmer’s Tenney says. Interest stems not only from a country’s size and near-term growth rate but also its long-term potential and whether existing customers are moving there.

Emerging markets are the rare bright spot for this year. Most instrument makers believe that the global economic environment will remain challenging. While some predict overall growth between 2 and 6% in 2013, others are unwilling to make predictions beyond the next quarter. Strategic Directions has pegged industry growth for 2013 at 3.6%.

Stock analysts note that the impact of U.S. sequestration of federal funds is being felt, but not as badly as feared. “Academic end markets appear stable despite the implementation of sequester at the beginning of March,” Goldman Sachs analyst Isaac Ro said in a recent report. He believes that China remains poised for continued growth in both applied and research end markets. Meanwhile, Japan could show some recovery in the second or third quarter of this year.

A lack of clarity is a major issue, Agilent’s Roelofs says. Although many customers have money, they are holding back on spending plans until their views of sequestration become clearer. The uncertainty around when and where they’ll spend makes planning difficult for suppliers. “I believe the back half of 2013 will bring clarity,” he says. “It’s a matter of getting through 2013, because this is a long-cycle industry, and the fundamentals are good.”

For the leading instrumentation firms, one dynamic for 2013 is already under way. On April 15, Thermo Fisher announced a $13.6 billion deal to acquire fourth-ranked Life Technologies (C&EN, April 22, page 7). “The most important implication of this transaction will be acceleration in merger and acquisition activity” among instrument firms, Ro said. Although the deal likely won’t topple Danaher from the top spot, if Ro’s prediction comes true, instrument makers could see a reshuffling among the rest of their ranks in the coming year.


This article has been sent to the following recipient:

Chemistry matters. Join us to get the news you need.