In light of recent economic changes, such as the sequester in the United States, Strategic Directions International, Inc.'s
president and CEO Lawrence Schmid provides an updated forecast for the spectroscopy market, specifically the molecular spectroscopy,
atomic spectroscopy, and mass spectrometry sectors.
The global economic situation has deteriorated somewhat as the result of macroeconomic events in the United States and especially
Europe. In addition, developing nation growth has slowed, particularly in China, partly as the result of the global situation,
but also because of developmental difficulties in China itself. During the early months of 2013, most forecasting groups became
more circumspect and began to lower estimates of global economic growth for 2013 and 2014. Prospects in the United States
have been trimmed and expectations for Europe continue to be mostly gloomy, while growth prospects for China and India have
also been lowered.
The economic outlook in the United States dimmed significantly as the result of government actions, although some might say
inactivity. Specifically, something referred to as "sequestration." Actually, the term budget sequestration (or sequester) refers to automatic spending cuts in particular categories of federal outlays. In 2013 specifically, sequestration refers
to a section of the Budget Control Act of 2011 that was initially set to begin on January 1, 2013, as an austerity fiscal
policy. These cuts were postponed by two months by the American Taxpayer Relief Act of 2012 until March 1, 2013, when this
law went into effect.
The reductions in spending authority are approximately $85 billion during fiscal year 2013, with similar cuts for years 2014
through 2021. The cuts are split evenly (by dollar amounts, not by percentages) between the defense and nondefense categories.
The Congressional Budget Office estimated that sequestration would reduce 2013 economic growth by about 0.6 percentage points
(from 2.0% to 1.4% or about $90 billion) and affect the creation or retention of about 750,000 jobs by year-end. The blunt
nature of the cuts has been criticized, with some favoring more tailored cuts and others arguing for postponement, while the
Growth has clearly slowed in the United States and the impact of the "sequester" is being felt more and more as each month
passes. Difficulties in Europe have further impacted the United States because its major export customers are not exactly
in a buying mood given the poor economic conditions, which are not expected to improve until 2014.
Spectroscopy is a key sector of the analytical and life science instrument industry. For many years the overall instrument
industry and the spectroscopy segment in particular, has proven to be quite resilient while serving the scientific requirements
for a vast array of applications in every conceivable industry. Growth has been fairly steady for the last decade, averaging
around 6% annually. This market is now expanding at a lower, but generally stable rate. However, changing global economic
conditions and governmental actions have had an increasing impact.
After assessing these events and trends and reviewing various industry data for 2012 and the developments so far in 2013,
Strategic Directions International, Inc. (SDi), a consulting and market intelligence firm specializing in this market, has
estimated the total worldwide market for analytical and life science instrumentation revenues will expand by about 3% in 2013
and reach a level of around $45 billion. Growth in 2014 is expected to exceed 5%.
Aftermarket purchases of products and services, including such items as consumables (especially chemicals), software updates,
and accessories, has become an important aspect of the analytical and life science instruments market. As the installed base
of instruments grows and the market matures, the aftermarket becomes especially important. In fact, in selected technology
areas the aftermarket is a very significant product segment that is growing faster than instrument system revenues and is
often more profitable. It is also true that for some technologies, instrument systems (hardware) may actually be declining
in unit sales while the aftermarket provides at least minimal growth. So it should be noted that all the revenue projections
in this article include the total mix of revenue sources: instrument system sales, aftermarket, and service.