Mark E. Jagiela
Chief Executive Officer and President of Teradyne at Teradyne
Good morning, everyone, and thanks for joining us. Today, I'll summarize our results for the second quarter and first half of 2021, update on current conditions in both Test and Industrial Automation, and comment on our view for the second half of the year. Sanjay will then provide the financial details on the quarter and our guidance for Q3. The strong demand we saw in Q1 accelerated in Q2 as both our Test and Industrial Automation groups grew substantially in the quarter. The long-term demand drivers we've discussed in the past continue to power demand for our products. In Test, it's device complexity and unit growth; in Automation, it's labor scarcity, the need for resiliency and productivity improvement. Opening further, performance at the company level from 2016 through 2020 saw our sales and non-GAAP EPS grow at a compounded rate of 16% and 32%, respectively. For the first half of this year, sales are running ahead of that rate at 21%, and non-GAAP earnings per share grew at 29% compared with last year. This demonstrates both the vitality of the markets we serve and the efficiency of our operating model. Significantly, in Q2, we saw Industrial Automation demand recover in all major regions, but particularly in North America. As a result, our production and operating teams operated at a high pace in Q2, and that pace is increasing in Q3. For the year, our IA business is on track to grow about 30% from 2019 and about 40% from 2020. Looking closely at the segment level. In Semi Test, SOC shipments grew 29% in Q2 from Q2 of 2020 with particular strength in both the compute and mobility end markets. For the first half, SOC sales grew 19%. For the first time in several years, smartphone unit shipments are helping growth in the mobility segment, where as recent years have mostly relied on complexity growth. IA and compute are the two largest subsegments in SOC. Automotive, analog and industrial demand continues to be strong.
The auto-related semi test market is expected to exceed $500 million this year, the highest level since 2017. This is despite the fact that automobile unit production will be about lower in 2017 -- lower than 2017. A portion of this strength is test equipment. We're also seeing the impact of increased semi content and complexity per automobile, driving the test market. Our memory test shipments also grew in Q2 from Q2 of 2020, up 9%, led by flash tester demand. For the six-month period, overall shipments were up 18% from last year on solid demand for both flash wafer and flash systems. This reflects significant growth in smartphone demand, the build-out of new memory capacity in China and the growth of SSD demand. Looking at the full year, we are again revising up the SOC market for 2021 to now be in the range of $4.3 billion to $4.7 billion with increasing strength in the x86 GPU and display driver segments. Recall that we have lower customer exposure in those markets with much of this incremental growth going to our competitors. So we'll likely see our SOC share around 48% for the year. In memory, at the macro level, our market estimates are unchanged with the test market this year expected to be about $1 billion and our share to be at about the 40% level. I will note that the expected ramp of DDR5 for server applications and the broader adoption of LPDDR5 is pushing out into 2022. Shifting to our System Test group, sales were up 26% in the first half compared with 2020, with strong Storage Test demand and a recovery in our Production Board Test unit driving the growth. For the full year, we see System Test group -- the System Test group grow in the 10% to 20% range. At LitePoint, sales in Q2 were up 12% over 2Q 2020. While 5G millimeter wave demand is lower than expected, the environment in Wireless Test is improving as we move through the year due to the continued WiFi six growth and early WiFi seven investments. In addition, ultra-wideband adoption is increasing, adding a new growth vector for LitePoint. For the full year, LitePoint will likely grow in the 10% range. Moving on to Industrial Automation.
The combination of expanding demand across our major markets and the increase in the range of tests served by our Universal Robots and MiR units drove group sales up 57% in Q2 last year to 45% in the first half. Compared to pre-pandemic 2019, first half sales are up 22%. Supply chain issues have constrained growth a little bit with lead times pushing out about one week. The demand environment for IA has recovered in most regions from last year's slowdown. America was the fastest-growing major region in Q2 with sales up over 90% from last year. Although we did see a lull in some countries in Asia where COVID has spiked in recent months, the second half of the year outlook is quite strong in all our major regions. Our long-term growth strategy in IA continues unchanged, and we expect long-term annual growth in the 20% to 35% range. This year, we will likely have a growth of about 40% from 2020, and we will continue to invest to enable this growth, target 15% gross margins, get a 5% to 15% operating margin during these high-growth years. From an investment perspective, we are expanding our engineering programs to shorten deployment times, increase the served market and improve the customer support experience. We are also growing our capacity to support distributors, integrators and UR plus and MiRGo apps development partners as they engage customers. We are also expanding our sales to OEMs that integrate our robots into their products. Last quarter, we noted the expanding range of applications for UR robots into high-voltage line application with hundreds of [Indecipherable] being deployed. Today, I'd like to highlight the success of UR+ plug-and-play applications for Industrial Automation..There is a long-standing and chronic shortage of qualified welders worldwide with an estimated 100,000 unfilled welding jobs in the U.S. alone.
While automated solutions exist for large applications like auto manufacturing, customers with lower volume and higher mix products are not well served by traditional automation. The integration of a force torque sensor into e-Series cobots enabled the precision needed for this application. And with UR+ integrating with our partners, we began serving this market about three years ago. During this time, welding applications have grown to be about 6% of our global sales and are on [Indecipherable] 1,000 cobots sold in 2021, more than tripling our 2020 pace. As we continue to extend the performance of our UR platform, we expect these high applications had growth vectors to traditional industrial applications. We have similar market-expanding initiatives in play on our MiR platform, but I'll save those details for a future call. Summing it all up, the first half of the year has been a strong sales, strong gross margins and earnings growth [Indecipherable]. Longer term, the markets we serve are showing increasing demand in a future global economy. The importance, pervasiveness and enabling capability of electronics in every aspect of our lives and industry is driving more fab investment, more complexity and more test. Likewise, the broadening application and fast ROI of collaborative robots in a world with labor shortages and productivity challenges is another growth trend. Strategically, we positioned ourselves in line with [Indecipherable] and plan to continue to make [Indecipherable] Test and IA as our full potential while driving world-class returns. While the rate of change in our markets is accelerating, we are well positioned to thrive as a company and to bring additional value to customers and shareholders.
I'll now turn things over to Sanjay to provide additional color on the financials.