Teradyne has the anodyne for electronics makers concerned about quality and consistency. The company is a leading supplier of automated test equipment and a maker of systems for testing semiconductors. Teradyne caters to electronics manufacturing services suppliers, as well as OEMs who use Teradyne's test systems to analyze complex electronics used in the computing, consumer electronics, military/aerospace, and telecommunications industries. Customers include Western Digital, government contractors, and the US government. Teradyne has operations in Asia, Europe, and the Americas; international sales account for about 85% of its business, with Asia/Pacific generating about two-thirds of total sales.
As the chip industry fares, so goes Teradyne. (Semiconductor test systems can represent as much as 90% of the company's sales.) After revenues in its semiconductor test products rebounded in 2010 from the precipitous drop in 2009, demand cooled off again in 2011, driving sales down 22%. The company did report, however, an improvement in the fourth quarter in system-on-chip (SoC) business and expected that to carry through at least to the first quarter of 2012. Teradyne's service revenue increase of 15% in 2011 reflected that most customers were still weathering the down economy by maintaining existing products instead of buying new.
Its systems test business recouped all of the 2010 decline and then some, nearly doubling in 2011 and gaining more than 30% over 2009. Systems test wins came mostly from the Neptune storage test systems product and new customers and product applications. The systems test segment is rounded out with printed circuit board (PCB) and subsystem test products for the military and aerospace (Mil/Aero) sectors, and the circuit board product group that serves in-circuit test on fully assembled and soldered PCBs. Mil/Aero customers include every major branch of the US military except the Coast Guard in addition to commercial clients.
To focus on strengthening its semiconductor testing business, in 2011 the company sold its Automotive Diagnostics Solutions unit to SPX for an undisclosed amount. To the same end, that year Teradyne acquired wireless production line testing equipment LitePoint for about $580 million in cash and tax benefits, creating a new segment (wireless test).
The test equipment market is highly competitive, due to years of industry consolidation and a limited customer base. Most semiconductor companies don't make or test their chips, turning those chores over to outside contractors, many of which are based in Asia. Teradyne also follows the outsourcing trend, contracting production and testing of its FLEX and J750 products (the company's marquee brands) to Singapore-based Flextronics International, which does the work in China.
Teradyne conducts semiconductor test operations in all of its facilities, which are located in China, Costa Rica, Japan, the Philippines, Taiwan, and the US. Systems test facilities co-exist at the company's facilities at its headquarters and in China and Taiwan. Subsidiary LitePoint's wireless test operations are in Sunnyvale, California, where it is headquartered. – less