The Testing, Inspection & Certificate market is expected to grow at a CAGR% of 3.6% from USD 204.2 billion in 2020 to USD 243.7 billion in 2025. The primary reasons for this rise in demand are the increasing need for safety, surge in the illicit trade of counterfeit and pirated goods, advancements in networking and communication technologies, and inclination toward outsourced TIC services.
COVID-19 impact on global TIC market, by service type, in 2020
Many companies across the world have increased the manufacturing of medical equipment such as ventilators, personal protective equipment (PPE) kits, and N-95 masks, which has provided the players in the TIC market ample opportunities to test and certify this medical equipment. Many companies such as Eurofins and TÜV SÜD have started testing ventilators and masks. Thus, the escalated demand for testing services from the healthcare industry is driving the growth of the TIC market at present. If the coronavirus cases keep on increasing, it will surge the demand for these services in the next few months as well.
TIC Market Dynamics
Driver: Inclination toward outsourcing TIC services
Outsourcing TIC services to third-party service providers is a business practice used by multiple products and component manufacturers to ensure adherence to national and international standards of quality and safety, as well as to reduce recall costs and improve production efficiency by shifting non-core tasks, operations, jobs, or processes to an external third-party specialist for a long time. Outsourcing gives organizations more time to strengthen their core business processes, helps them reduce operational costs, and enables them to provide faster and better services. This facilitates improved productivity and process efficiency, thereby contributing to the increase in the company’s net income.
The trend of outsourcing TIC services to third-party specialists is being widely adopted by both private and government agencies (public firms).
Restraint: Diverse standards and regulations among many different nations
With globalization in trades and businesses, distinct local regulations and standards are likely to create barriers for the acceptance of products internationally. This creates conflicts between the local and international standards, thereby hindering market growth. Variations in regulatory standards across different regions lead to discrepancies in tax rates, thereby incurring additional costs from companies (hiring local staff to handle tax-related issues, etc.). TIC companies are subject to local laws and have to abide by the regulations and norms of countries in which they operate; this may hamper their efficiency. Also, the risk related to the standardization and quality of testing and certification provided by TIC companies always exists.
Opportunity: Rise in demand for TIC services globally
The TIC market has witnessed considerable change in terms of revenue shift from developed countries for the global key TIC players with extensive geographic reach to smaller economies. The revenue shift is largely a result of the ongoing trade war among countries such as the US and China. For instance, the trade war has led to the shift in revenue figures for the key TIC players from China to smaller economies such as Vietnam, Bangladesh, Sri Lanka, and Indonesia for application-specific testing, inspection, and certification services. Vietnam, which had a single recognizable furniture industry for the last 20 years, has benefited from the furniture industry as a result of the trade war leading to shifting in demand for US-based furniture TIC services toward Vietnam instead of China. Currently, Vietnam is the second-largest exporter of furniture in the Asia Pacific and fifth in the world, after China, Germany, Italy, and Poland. With an earlier focus on outdoor furniture, Vietnam has also started focusing on the new indoor furniture lines and has increased investment in advanced production techniques to meet the increasing demand. Also, a representative of the Ministry of Agriculture and Rural Development of Vietnam has plans to develop a world furniture center in the country, to capitalize on the country’s growth, and also encourage trade. As of today, Vietnamese products enjoying zero tax, while Chinese manufacturers (the largest operator in the market) are subject to a 10% tariff. Key players operating in the Vietnamese TIC market offer a wide range of services, such as TIC services for outdoor domestic furniture, office furniture, Children’s furniture, and non-domestic furniture. For instance, SGS offers mechanical testing services for a wide range of furniture to comply with the global markets. A few of the major tests include ANSI BIFMA X5.1, ANSI BIFMA X5.5, ANSI BIFMA S6.5, ANSI SOHO S 6.5, ASTM F 1838, EN 12520, EN 1022, EN 1335, EN 13761, BS 4875, EN 581 Part 1, 2, 3, EN 14749, and EN 16121.
Challenge: Adoption of advanced technologies by smaller TIC players
Globalization has led to the penetration of multiple technologies across different end-use applications. Technology has brought numerous changes in day-to-day operations and activities for personal and professional uses. This incredible pace of technology-driven change and the profound impact that technology is bringing about on businesses is commendable. Technologies such as cognitive, blockchain, cybersecurity, and digital reality are expected to become macro forces and will directly impact the way TIC players perceive the market today. The digital experience is expected to bring new market challenges in the near future for TIC players. For instance, the augmented reality (AR) and virtual reality (VR) testing ecosystem is experiencing an increasingly competitive consumer landscape; brands are continuously trying to differentiate themselves and drive more customer engagement. Testing of the AR/VR technology is a challenge due to the presence of an immersive component that makes it difficult for any automated or lab testing. Hardware testing is a critical component of VR technology due to the presence of a separate hardware component to operate. Hardware testing helps manufacturers to ensure that the device is working properly, fits in the body of the target demographic, and also makes sure that it is compatible with other devices needed to run the simulation. Adoption of testing, inspection, and certification services based on evolving technologies is creating a challenge for smaller players operating in the TIC ecosystem.
In-house testing services are expected to witness the second largest market growth during the forecast period
In-house testing services provide companies complete control over the entire process. In-house testing is conducted by companies when it is associated with their core business expertise. To perform in-house TIC activities, a company must build in-house capabilities in terms of technology, test and measurement equipment, and skilled personnel. Approximately 60% of the testing, inspection and certification services are conducted in-house. This process is particularly evident in applications such as life sciences, utilities, and public sectors. For instance, IBM has a dedicated in-house testing division to conduct its product testing. Certain industries, including food & beverages, agriculture, and chemicals, are focusing on developing their own dedicated in-house testing services. This is primarily due to their short product lifecycle.
The market for certification services to grow at the highest CAGR in the TIC market, by service type, in 2020
Certification services ensure product safety and performance attributes. Certification services mainly include customized audit and certification services with reference to quality, health and safety, environment, and social responsibility. These services are aimed at improving business performance.
The market for agriculture and food application to grow at the highest CAGR during the forecast period
The agriculture and food industries are built on the principles of integrity, safety, and sustainability, and close monitoring of each principle is highly important. TIC services for the agriculture industry are required to ensure quality and improve the productivity of food products. These services also support companies playing a crucial role in trading agricultural commodities and food products by acquiring international certifications.
APAC to hold the largest share of TIC market in 2020
The highest CAGR is due to the presence of giant manufacturing electronic companies in countries such as China, Japan, India, Vietnam, the Philippines, Bangladesh, etc. The domestic markets in APAC are growing rapidly owing to the rising per capita income among the middle-class population. Moreover, there is a growing consumer awareness about the importance of certification. TIC players are increasing their horizons by setting up their testing labs in APAC countries due to the high potential for various applications in this region.
The Asia Pacific is the leading airbags & seatbelts market, globally, by volume as well as value, in 2019
Many economically advanced countries have their manufacturing units in the developing economies of APAC, especially in China and India. These units are required to manufacture products in compliance with internationally accepted standards. The domestic markets in APAC are growing rapidly owing to the rising per capita income among the middle-class population. Moreover, there is growing consumer awareness about the importance of certification. More than 45 countries, including China, Japan, India, Hong Kong, Taiwan, Singapore, Thailand, and Australia, are taken into consideration for the analysis of the TIC market in APAC.