Agilent finds new growth engine

Most technology firms have suffered as consumers reduce their spending on hi-tech products in these tough economic times.

But the world's largest measurement equipment provider, Agilent Technologies Inc, has found a recession-resistant business: bio-analytical measurement.

With the Chinese government recently tightening its controls over food safety, healthcare and environmental protection, Max Yang, president of Agilent Technologies in Greater China, said demands for bio-analytical equipment to analyze the quality of products will see robust growth.

"As China pays more attention to areas such as food safety, environmental protection and public healthcare, demands for bio-analytical measurement is going to see significant growth in the next few years," Yang said.

Yang said Agilent has relied on its electronic measurement business for half its revenues in China.

But as the economic slowdown began affecting many of China's cell phone exporters, Agilent's electronic measurement business declined 20 percent by the end of last year.

However, Agilent's bio-analytical business in China was not affected by the financial crisis.

A series of safety scandals that killed Chinese citizens and hurt the international reputation of the country's exports occurred in the past few years.

The climax came last year, when at least six infants died and some 300,000 people were sickened after consuming milk made from powder contaminated with melamine, a chemical used in making plastics.

After that, the Chinese government approved a broad series of tougher food safety laws that included raising safety standards, increasing punishments and instituting a risk evaluation system that includes monitoring 500,000 companies.

The country strengthened its environmental protection standards for the 2008 Beijing Olympic Games.

Following a series of pollution scandals last year, the country now requires stricter monitoring of water and air pollution in major cities.

Yang said China's stricter standards will create a greater demand from government agencies and commercial companies for bio-analytical measurement equipment.

He said Agilent is the first company to develop a testing solution for melamine following the tainted milk scandal last year.

The company also partnered with China to conduct drug testing of athletes during the Olympic Games, he said.

Agilent's revenues in the second fiscal quarter that ended in April declined 25 percent to $1.09 billion. The decline was blamed on the collapse of electronics production that caused declines in its electronic measurement and semiconductor and board test segments.

However, the company's bio-analytical sector declined by only 6 percent in the quarter.

The company reported last month that it would buy Varian Inc for $1.5 billion to bolster its fast-growing bio-analytical measurement business, which accounted for about 46 percent of revenues for the company in the second quarter.

Analysts said Agilent has long wanted to expand its bio-analytical measurement business, which has a higher profit margin and is more stable than the increasingly commoditized electronic measurement business.

Yang said China is Agilent's second-largest market, accounting for 12 percent to 14 percent of its global revenues.

The company now has about 1,500 employees in the country, and half are research and development staff.

Since 2006, the company has built three open labs in Shanghai, Beijing and Shenzhen. Government agencies and small and medium-sized companies are allowed free use of the facilities.

The company also established a joint research center earlier this month with Shanghai Institutes for Biological Sciences to partner in biological research.

Because Chinese customers are price- and performance-sensitive, Yang said Agilent plans to introduce more low-end products for the Chinese market.

"Our high-end equipment might be capable of testing 20 to 30 kinds of elements, but our Chinese customers probably only need to test five of them at the start," Yang said.

(China Daily 08/24/2009 page3)