U.S. Maintains Leadership In Global Lab Equipment Market

While imports devastate other domestic industries, most notably the automobile and computer sectors, United States manufacturers of laboratory instruments posted a $2.3 billion trade surplus in 1991, according to U.S. Department of Commerce figures. Though foreign companies are making progress in the industry, the nation's equipment manufacturers can be assured that "made in the U.S.A." will remain a common label in labs throughout the scientific world. U.S. instrument makers have continued to refine tools such as the spectrophotometer and the high-performance liquid chromatograph (HPLC). These innovations, driven in part by basic research advances made by U.S. scientists, have kept U.S.-based manufacturers at the cutting edge of instrumentation, say observers of the scientific equipment market. This has enabled producers to protect their share of the domestic market--the world's largest--and made their instruments competitive abroad. In recent years, however, instrument makers in Japan and Europe have begun to contest the pre-eminent position of U.S. companies, injecting new competition into this global market. Experts disagree on the exact size of the world market for scientific instruments. "Different people include different things in their definitions of scientific instruments," says Marguerite Nealon, an analyst for the International Trade Administration (ITA) in the U.S. Department of Commerce. But whatever the market's exact size, experts agree that laboratories in the U.S. buy 45 percent to 50 percent of all scientific instruments. European countries account for 30 percent to 35 percent of the world market, and the Japanese account for 15 percent to 20 percent. Figures published in a recent ITA report show that U.S. manufacturers have been successful in selling their instruments abroad. According to the report, entitled "Industrial Outlook for 1992," U.S. makers of scientific equipment produced about $13.48 billion worth of instrumentation last year. Exports of $5.1 billion accounted for 37 percent of their sales. Offsetting these export sales were $2.83 billion in instrument imports, with the largest share of these from Japan. Given the overall trade balance favoring U.S. manufacturers, ITA predicted, "Technological improvements to instruments will enable U.S. producers to maintain their advantage in the domestic market, and enlarge their overseas market." Gordon Wilkinson, a physical chemist who edits the London- based Analytical Instruments Newsletter, says U.S. companies have been particularly successful in automating laboratory functions. "American companies have been very innovative with instruments technology," Wilkinson says. "In the last decade, as instruments have become computerized, the American companies have been able to play off their strong base in computer technology and software to make strong exports, particularly in Europe." An example of this phenomenon is offered by Larry Schmid, president of the Los Angeles-based marketing firm Strategic Directions International Inc. Schmid describes how Palo Alto, Calif.-based Hewlett-Packard Co. linked the gas chromatograph, a device that separates substances by weight, to a mass spectrometer, which determines the precise weight of the gases coming from the chromatograph: "The chromatograph and spectrometer are two instruments that have always been very useful around the lab, but combined they are terrific," Schmid says. "The device costs under $100,000 and is easy to use. Previously, mass spectrometers alone cost many hundreds of thousands of dollars and were very complicated in their operation." Schmid says Hewlett-Packard's relatively inexpensive gas chromatograph mass spectrometer (GC/MS) made the device affordable to a whole new class of users. "The mass spectrometer industry had previously been dominated by Europeans," Schmid says. "GC/MS is a good example of an American innovation changing the market." Other manufacturers soon followed suit with their own versions of the machine. U.S. companies have remained innovative because they listen to their scientific users, says Mike Duff, executive director of the Alexandria, Va.-based Analytical Instruments Association, a trade group representing 60 manufacturers of scientific equipment. "This is a very small industry," Duff says. "Our companies tend to sell small numbers of high- priced goods. You find out very quickly how competitive you are, and if you do have a faulty device, the word gets around quickly." The experience of Ann Stock, a biochemist at the Center for Advanced Biotechnology and Medicine (CABM) in Piscataway, N.J., illustrates how scientific users keep instrument makers at the cutting edge. Stock, who is studying the structures and functions of signal transduction proteins, says her research at CABM is partially underwritten by Beckman Instruments Inc., based in Fullerton, Calif. In return, she periodically shows the company's representative new uses she has devised for equipment in her laboratory, or discusses problems she has with existing instruments. Based on feedback of this sort, says Stock, instrument makers have automated data recording in devices like the spectrophotometer. "We used to have to record data and plot it on a graph separately," she says. "Now the specs have programmable computers built in, or interfaces that let you send the results to a computer. "Everything has been scaled down and made easier and faster. The instruments allow for significantly more control with less intervention, and make it a lot easier to do things that we used to do manually before." Beyond such technical fixes, Stock says, domestic companies benefit from breakthroughs that occur in U.S. labs. "One reason American instrument makers are doing as well as they do is that American scientists are doing well," she says. "Our cutting-edge development pulls the companies along." The classic example of this is the polymerase chain reaction (PCR), the breakthrough technique that generates large amounts of DNA from minuscule specimens. PCR is based on the discovery by scientists at Emeryville, Calif.-based Cetus Corp. (recently absorbed by neighboring Chiron Corp.) of the Taq enzyme, which remains active throughout the required temperature fluctuations. "There, the development of the basic biology came first and the companies said, `We can automate that,' " Stock says. Sabina Slavin, director of worldwide sales support for Perkin-Elmer Corp. of Norwalk, Conn., agrees that scientific innovation in the U.S. has driven the fortunes of instrument manufacturers. But she predicts more competitive times ahead for both U.S. instrument makers and the scientists they serve. "We can't rest on our laurels here," Slavin says. "There are very good scientists doing very good work abroad." In addition to relying on innovation, Slavin says, instrument makers have to improve their manufacturing. "We have to design products that cost less and are more reliable." One factor driving competition for the U.S. market will be the pressure on research budgets from problems such as federal budget cuts and the recession, experts say. "People I talk to in the instrument field are not enjoying good years," says Herbert Kahn, an analytical instruments consultant in Weston, Mass. "There is some postponement of purchases. Scientists are playing vendors off against each other." Kahn says rising equipment prices have forced scientists to scrutinize purchases more carefully. Spectrophotometers, for instance, can range from $4,000 to $400,000. As scientists pay more attention to price and less to cutting-edge features, Kahn says, the sales equation shifts in favor of instruments made by Japanese manufacturers, such as Shimadzu Corp., which may not be first with innovations but quickly follow with instruments of comparable function. "They are beginning to compete with some fair success," Kahn says. ITA figures show that in 1990 the U.S. imported just over $1 billion in instruments from Japan, and U.S. companies exported $667 million worth of instruments to that country. "Imports from Japan continue to pose competitive challenges to U.S. instrument makers," ITA reports. >From his London office, Wilkinson provides a global overview of the market. "Each year I do a ranking of the top 300 to 400 companies in the scientific instruments business," he says. "Of the top 10 companies, five are from the U.S., three from Japan, and two from Europe." Wilkinson says these top 10 companies account for 60 percent to 70 percent of all the scientific instruments sold. Two U.S. companies, Perkin-Elmer and Hewlett-Packard, top his 1991 list, followed by Fisons plc of the United Kingdom and Shimadzu of Japan. U.S. companies now sell about half of all scientific instruments used in Europe, Wilkinson says. He predicts that competition will be keenest on that continent, as all the major companies target new markets in Eastern Europe and the former Soviet republics. Perkin-Elmer's Slavin says instrument makers are indeed looking to expand into the former Eastern Bloc. "Right now the Russians are more interested in buying bread than instruments," she says, "but that will change." The globalization of the market complicates an already tough selling task for smaller companies that make and sell scientific instruments. "Any company with more than $10 million in sales has to look to the export market," Wilkinson says. The daunting cost of fielding a worldwide sales force has driven a series of mergers in the U.S. and abroad. "There are some advantages to the economies of scale a larger company provides," Wilkinson adds. Amid this global jockeying, manufacturers would be wise to remember that they are battling for the hearts and minds-- not to mention budgets--of scientists like Ann Stock. "When an instrument breaks down, it can bring research to a halt," she says. For that reason, she often rates service as high as price in making a decision. "It is not a consideration to me whether I'm buying American or not," she says. "What's really important to me is that the service is here." For U.S. instrument makers, the message is clear. To keep their home markets and expand abroad, they'll have to continue to do what they have apparently been doing--building better instruments. Tom Abate is a freelance science writer based in Brooklyn, N.Y.

U.S. Maintains Leadership In Global Lab Equipment Market

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