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Volume 21, Issue 3
Realistically, 2005 was a good year for the laboratory analytical and life science instrument industry. Although growth has moderated from that experienced in the 1990s, a general rebound in worldwide industrial demand, and continued spending for life science and strong growth in Asia and North America drove instrument systems and aftermarket sales. Similar to last year, 2006 should be a year of healthy sales growth as global economic conditions support continued market expansion.
According to Instrument Business Outlook (IBO), a publication of Strategic Directions International, Inc. (SDI), a consulting and market intelligence firm specializing in this market, the total worldwide market for analytical and life science instrumentation and related aftermarket and service revenues approached $29 billion in 2005. This represents an overall increase in industry revenues of 5.7% from results in 2004. As with the situation in 2004 and 2005, some uncertainty still persists. The adverse affects of high oil prices, political turmoil in the Middle East, and concerns about trade and budget deficits in the U.S. could set the stage for a dampening of demand for many industries including the instrument industry. Of perhaps more concern is the pharmaceutical industry's approach to its economic and political problems resulting from regulatory and product pipeline shortfalls. The surging demand from China and India has tended to offset some of these concerns, but many question how long this will last. Hopefully, demand in Europe will pickup, as recent indications seem to suggest, which will bring all three major regional markets into sync, North America, Europe, and Asia. New product introductions continue to stimulate sales, and a number of major instrument makers made moves to improve their organizations in order to be positioned for whatever opportunities the market might present. Accordingly, SDI projects a similar, but slightly lower overall industry revenue increase in 2006 of about 5.5%.
Important trends that developed during 2005 included the realization of a definite change in pharmaceutical industry policies towards capital investments, including instrumentation, which changed the focus of many instrument firms to other sectors of the market. Instrument companies have become far more strategically focused which has led to acquisitions and divestitures. Some of this specifically affected spectroscopy market dynamics. The acquisition of Spectro Analytical Instruments by Ametek (Paoli, Pennsylvania) and Thermo Electron's (BEllefonte, Pennsylvania) acquisition of Niton Instruments are noteworthy. Both transactions were of atomic spectroscopy instrument makers and involved arc-spark and X-ray, attesting to the growing importance of those techniques.
Figure 1: 2005 spectroscopy market by sector ($6.5 billion).
There is also a growing interest in the aftermarket aspect of the industry revenue mix, which includes such areas as consumables and customer service. This is in recognition of the growing importance of those areas as the market expands and matures. In fact, in some market segments the aftermarket is growing faster than instrument system revenues and is more profitable. 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.
SDI characterizes the spectroscopy market as being comprised of three distinct sectors: molecular spectroscopy, atomic spectroscopy and mass spectrometry. The applications of the techniques included in each sector and their prospects differ significantly, even within each sector. Overall worldwide revenues in the spectroscopy area totaled about $6.5 billion in 2005, or about 23% of the total laboratory analytical and life science instrument market. The entire spectroscopy market is estimated to have grown about 6.3% in 2005, somewhat better than what we had forecasted last year. SDI projects 2006 growth for the spectroscopy market to be similar to 2005, increasing about 6.1%, which is consistent with the trend over the last few years.
Molecular spectroscopy techniques account for over 41% of the spectroscopy market, although many diverse techniques are represented that address a wide range of applications in almost every industry category. Atomic spectroscopy is the second largest sector at almost 32%, while mass spectrometry represents about 27% of spectroscopy revenues. Please note, that in this year's presentation, we have included single stage mass spectrometers. These are the mass detectors associated with general purpose liquid chromatography–mass spectrometry (LC–MS) and gas chromatography–mass spectrometry (GC–MS) instruments. Previously, this portion of the MS market was not counted as it was considered a chromatographic technique. Accordingly, MS techniques now account for a greater percentage of the spectroscopy market (27% versus 20%). On the other hand, the liquid and gas chromatographic portions of LC–MS and GC–MS are included in the revenue estimates.
Figure 2: Spectroscopy market by product segment ($ billion).
The market for molecular spectroscopy is estimated at around $2.7 billion for 2005. Overall, the total revenues for all categories of molecular spectroscopy grew 6.5% in 2005, a nice improvement over the previous period. However, there were significant differences in growth from instrumental technique to technique, led by the continuing success of the nuclear magnetic resonance (NMR) segment. No single technique dominates this market, but three segments, NMR, UV–vis, and infrared (IR), account for almost 75% of the overall molecular spectroscopy market.
Molecular spectroscopy instruments are especially focused on the important life science industries, including the pharmaceutical, biotechnology, and the agriculture, food and beverage industries, which account for more than 35% of the market. Organic chemicals, academia and government sectors account for an additional 30% of revenues, much of which is also life science oriented. But molecular spectroscopy techniques have an enormous range of applications, so they can be found in every industry segment, including environmental testing and semiconductor manufacturing, which have still not returned to previously high levels of demand.
Figure 3: Estimated growth for each spectroscopy sector in 2006.
Although nuclear magnetic resonance (NMR) spectrometry is the largest segment of the molecular spectroscopy market at about $800 million in annual revenues, it is also one of the fastest growing sectors still increasing at around 10%. NMR is an important technique that provides information on the structural analysis of organic molecules, particularly proteins. Some of the demand in recent years has been fueled by the availability of much more powerful instruments with new features and unparalleled performance. These new instruments incorporate extremely powerful superconducting magnets to improve upon already very high analytical performance. These new instruments also carry very high price tags, which contribute to nice revenue gains each year. Additionally, the development of improved NMR probes is driving strong aftermarket sales, as end-users can upgrade the performance of older NMR systems instead of saving up for all-new systems. As the most capable analytical technique in molecular spectroscopy, NMR is used heavily in the biotechnology industry, which will also contribute to strong growth for the foreseeable future. EPR instruments also are included in this category and are experiencing renewed growth because of their usefulness in analyzing organic compounds with free radicals. We expect the NMR/EPR segment to continue to be vibrant in 2006 although manufacturing delays and budgeting shortfalls in some customer groups could slow expansion modestly.
UV–vis spectrophotometers comprise the second largest portion of the molecular spectroscopy market, but also one of the slowest growing segments. Today, with so many different models and makes on the market, and at relatively low price points, this a classic commodity market. Low-end instruments are experiencing reduced demand except for environmental testing where such instruments are tied to prepackaged reagents and kits. Scanning UV–vis and diode array instruments, faster and more powerful instruments, at marginally higher prices, offer the best prospects for replacing older lower performing instruments as they are retired.
Raman spectroscopy, a specialty technique, continues to experience above average demand, with growth in 2006 expected to approach 10%. The Raman market has been a late bloomer in the world of molecular spectroscopy, but is now reaching significant size thanks in large part to the improvements in laser technology and other electronics. Because Raman is now significantly utilized in both the semiconductor and electronics industry, as well as in pharmaceuticals and biotechnology, it stands to see strong all-around growth. Significant potential for Raman spectroscopy lies in the clinical market, where researchers are learning to diagnose diseases, such as cancer, with the aid of Raman-based instruments.
Table I: Spectroscopy product growth prospects for 2006.
IR and near-infrared (NIR) instruments represent about 27% of the molecular spectroscopy market, and both are experiencing moderate growth in the 5% to 6% range. Both IR and NIR spectroscopy are tied in strongly with the pharmaceutical, biotechnology and organic chemicals industries, which will help to provide consistently moderate growth, although NIR also sees strong demand from the agriculture and food industries. Although the global agriculture and food industry is not expected to see particularly strong growth, it does provide a fairly large industry that will provide consistent long-term growth for NIR. Stronger growth for IR, and particularly for NIR, will come from process applications outside the laboratory in areas such as food process monitoring and process analytical technology (PAT) in the pharmaceutical and biotechnology industries. However, development of these uses outside the laboratory market will lead to a moderate increase in demand for both IR and NIR in methods development applications in the laboratory.
Colorimetry will see moderate single digit growth following the relatively flat growth of recent years. Colorimetry is most heavily used in industries such as printing, textiles, paints and pigments, where it is needed to maintain consistent color in publications and consumer products, although there is some use in the food and pharmaceutical industries, where color is an indicator of food quality and dosage amounts. More advanced spectrocolorimeters and color spectrophotometers have now taken over the colorimetry market, with the market for filter colorimeters declining rapidly. Spectrofluorometers and luminometers are expected to experience marginal growth of less than 3%, as microplate readers with multi-format technologies including fluorescence and luminescence command a larger share of the market since they can handle much higher sample throughputs. Other analytical techniques such as microcalorimetry also compete successfully for traditional fluorescence applications.
Overall, the market for atomic spectroscopy instruments is stable and expected to grow a solid 5% in 2006, similar to recent years. Within this over $2 billion market, however, there are many important differences among the various different product segments. In particular, environmental regulations are having an important effect on the relative strength of the different spectroscopic methods. In addition to application-based market forces, the expanding markets in China and India are providing shifts in the geographical demand that suppliers are trying to address.
Although the atomic spectroscopy market tends to be associated closely with old-line industries such as primary metals and metal fabrication, this sector is beginning to take on modest characteristics of a growth business. This would be particularly true if atomic absorption and ICP techniques were excluded as they represent over one-third of the market, but have growth expectations of less than 3% per year. These techniques, while broadly based, are still somewhat tied to municipal water testing applications where budgetary constraints limit replacement purchases. The situation in the metals sector is decidedly more positive. As the result of a worldwide expansion in manufacturing activity, especially in China and India, the metals industry has boomed in terms of production and profits, and instrument purchases have increased, with arc-spark, elemental analyzers, and X-ray techniques particularly benefiting.
One of the smaller atomic spectroscopy market segments is inductively-coupled plasma (ICP)-MS, a technique that provides the best sensitivity for many applications. This technique is poised to make significant gains in the next year, due largely to increased demand from environmental testing applications. In both the U.S. and other industrialized nations, restrictions on certain heavy metal contaminants in water (notably arsenic) make ICP-MS a more attractive multi-element measurement method. EPA is soon expected to withdraw approval for ICP-optical emission spectroscopy (OES) as a method for measuring arsenic, leaving AA and ICP-MS as the only approved methods. Other sources of demand for ICP-MS are in testing of ultrapure water in the pharmaceutical and semiconductor industries.
Although the change in the arsenic rule will have a negative impact on ICP, ICP is still approved for a great many other environmental applications, for the testing of both water and petrochemical fuels. These and other stable applications should support growth in the market of about 3%. This makes ICP the slowest growing market within atomic spectroscopy, with the exception of atomic absorption (AA), which is forecast to grow at less than 2%. AA is one of the most mature technologies in the analytical instrumentation industry. Prices are falling and it is only due to increased demand from developing global markets and the introduction of workflow enhancing products, such as autosamplers, that any growth will be experienced in this market at all. Here again China provides a helping hand. For example, last year, Analytik Jena, a German-based instrument firm, reported that it had received an order from the Chinese Environmental Protection Agency for 33 of its AA instruments.
The other bright spot in atomic spectroscopy is in the X-ray technologies, X-ray diffraction (XRD), and X-ray fluorescence (XRF). These techniques are forecast to grow about 7%, respectively, in 2006. Despite the similarity in growth rates, the causes are quite dissimilar. XRD, although it has important applications in materials science and fatigue testing of metals, is the atomic spectroscopy technique with the most connection to pharmaceutical research. Using single crystal XRD, pharmaceutical scientists can determine the structure of pharmaceutical molecules and proteins, as well as monitor the changes in structure and phase that result from the application of heat. These life science applications form a strong source of growing demand for XRD. XRF, on the other hand, remains much closer to its material characterization roots. The main growth driver in this market is, again, environmental regulation. Perhaps the most significant factor is the European Union's Reduction of Hazardous Substances (RoHS) rule limiting cadmium, lead, mercury, and a few other chemical species in electronic components. Compliance with RoHS will become mandatory in July of 2006. Semiconductor and electronics manufacturers are finding XRF an extremely valuable tool in verifying compliance, although ICP and AA also have roles to play.
The elemental analyzer market is something of a catch-all term that covers total organic carbon (TOC), mercury analyzers, as well as other organic and inorganic analyzers. The TOC market continues to experience low double-digit growth, with strong sources of demand from applications ranging from drinking water to semiconductors to pharmaceuticals. Mercury analyzers will get a boost from the RoHS regulations. Other inorganic analyzers will continue to benefit from increased steel production in Asia. Overall, elemental analyzers are forecast to grow at 6.3% for 2006. Arc spark OES continues to enjoy a renaissance of popularity as the metals industry copes with high demand worldwide. This is especially true for the rapidly expanding markets in China and India. North America and European prospects also are peaking as primary metals producers reap high profits at maximum capacity production levels. This, coupled with global interest in recycling, bodes well for a very mature technology although growth will still likely only be around 4%.
The global market for mass spectrometry in the laboratory has grown rapidly into what is now a multibillion dollar business, but it still has strong growth prospects almost across the board despite its size, and should see annual growth of better than 8% for at least the next few years. Single stage LC–MS instruments are more and more viewed as detectors for HPLC, but are continuing to see strong growth in demand. The tandem LC-MS market is where most of the recent major technological advancements in mass spectrometry have taken place. Although the MALDI-TOF market is past its initial golden age of growth, the market has been in rapid transformation in response to the needs of end-users. The FT-MS market is the smallest, but fastest growing of the six major mass spectrometry categories. Magnetic sector is the exception in the MS market, with nearly flat growth in demand. GC–MS is still expected to see moderate growth despite much of the demand for the technology coming from areas outside of pharmaceuticals and biotechnology.
The field of MS is one where high performance seems to be an enticing purchasing motivation, MS, and even molecular biologists, cannot seem to resist buying the latest products with enhanced sensitivity. Sensing this, MS suppliers have introduced a host of new high-resolution mass spectrometers to meet the pent-up demand. However, interest is not promotion driven, rather the technical challenges facing many scientists are daunting and mass spectrometry appears to offer near term solutions. Although the important pharmaceutical and biotechnology industries have re-evaluated their appetite for capital investment, including sophisticated instrumentation, they still represent a substantial customer base for mass spectrometry.
Single stage LC–MS, which for the purposes of this article includes only the mass spectrometry portion of complete systems, is viewed largely as a market for high-performance HPLC detectors, and includes both single quadrupole and LC-TOF. Although single quadruple LC–MS is continuing to see growth of nearly 10%, the smaller LC-TOF market has ended up "stuck-in-the-middle" between less expensive single quadruple LC–MS, and higher performance Q-TOF instruments, and has seen growth in demand fluctuate significantly over the last several years.
Tandem LC–MS includes triple quadrupole, ion trap, Q-trap, and most of the Q-TOF market, but also does not include the associated HPLC front ends. Technological advancements have been rampant in what is by far the largest MS market, with major performance enhancements in triple quadrupole and ion trap technology, as well as the recent commercialization of Q-TOF, Q-trap, and most recently, LC-IT-TOF, which is closely related to Q-TOF. The pace of advancements in the pharmaceutical and biotechnology industries continues to be the main driver of the rapid development in tandem LC–MS.
The MALDI-TOF market, which includes Q-TOF instruments installed specifically as MALDI instruments, is continuing to experience a transformation from linear and reflectron instruments towards higher performance tandem and Q-TOF systems, which fill a significantly higher performance niche in MS. Growth for reflectron MALDI-TOF instruments is low, with demand for linear instruments waning, while growth for MALDI-Q-TOF and MALDI-TOF–TOF instruments is substantially stronger.
Although FT-MS has long been considered an esoteric MS technique, recent developments have made these types of instruments much easier to use by more mainstream scientists, and much more financially accessible. These developments are now leading to a dramatic upswing in demand for the technique, primarily in biotechnology and academia. The best example of FT-MS innovation is the Thermo Electron introduction of its LTQ-Orbitrap, which utilizes a uniquely different mass analyzer design that features low maintenance and does not require cryogenic gases for cooling.
The magnetic sector is the one area of laboratory MS that is not seeing any significant growth in demand in any product segment. Typical magnetic sector instruments can no longer provide the performance and capabilities that other MS techniques can offer. Although demand for isotope ratio magnetic sector will continue to inch upwards, and demand for very high performance tandem magnetic sector instruments will improve somewhat, the market for conventional magnetic sector instruments is stagnant.
Like the LC–MS categories, the market estimates for GC–MS do not include the associated GC demand. The demand for GC–MS is the most diversified of any of the major mass spectrometry techniques, with less than 10% coming from the pharmaceutical and biotechnology industries. This diversification will lead to varied growth by sector, but an overall moderate growth rate of over 5% for what is a close to a $300 million market.
In the previous discussion numerous spectroscopy techniques have been mentioned, but there are in fact many variations of the major categories. This is a function of a long period of technological development, but also periodic intervals of innovation. Today, the analytical scientist is presented with an almost endless array of instrumental techniques that can induce a state of indecisiveness and more than occasional uncertainty. This trend is clearly evident within the mass spectrometry sector where the variations are almost endless and the pace of new product introductions continues in somewhat of a frenzy. So the scientist must either stick to established protocols and use the instrumental techniques of old or periodically evaluate the alternatives. The latter approach is highly recommended as changes in performance and economic operation offer significant benefits in today's changing analytical marketplace.
The atomic absorption instruments available now bear little resemblance to models just 10 years old, and spectroscopy innovations in UV–vis and fluorescence continue to emerge, even as those techniques are challenged by other categories. In fact, the competition between seemingly unrelated techniques might require spectroscopists to consider unfamiliar alternatives. Protein analysis can be accomplished with NMR, XRD, or MS, while Raman, NIR, and FT-IR, and MS offer many possibilities in petroleum, pharmaceutical and food and beverage testing. Nowhere is the competition more intense than between techniques being considered for PAT in pharmaceutical and biotechnology manufacturing.
We can thank the many suppliers in the spectroscopy market for creating this delightful dilemma. The continuing stream of easier-to-use, lower cost and higher performance instruments from their R&D labs allow spectroscopists to perform analytical procedures not easily accomplished just a few years ago. Of course, that means continually rethinking the way to best accomplish that next analysis. So it is no wonder why there is such vibrant life in this market.
Lawrence S. Schmid is president and chief executive officer of Strategic Directions International, Inc., Los Angeles, California.For more information on Instrument Business Outlook or other instrumentation research, contact Strategic Directions International, Inc. 6242 Westchester Parkway, Suite 100, Los Angeles, CA 90045, (310) 641-4982, fax; (310) 641-8851, e-mail: email@example.com