Mark E. Jagiela
President, Chief Executive Officer & Director at Teradyne
Thanks, Andy. Good morning, everyone, and thanks for joining us. Today, I'll cover four topics: the highlights of our third quarter and the first nine months of the year, the changes we're observing in the SOC test market, our outlook for the industrial automation market and how we're thinking about the test and automation markets as we close out this year and look into 2022 and beyond. As our Q3 results demonstrate, demand remains strong across all of our businesses. At the company level, Q3 sales grew 16% from last year's record Q3 and non-GAAP EPS grew 35%. We did experience increased supply chain bottlenecks in our Industrial Automation business in the quarter and under ship demand. Sanjay will describe this in more detail, but we expect these constraints to persist into Q4. Despite this, for the first nine months of 2021, company wide sales grew 19% and non-GAAP EPS grew 31% from the year ago level. In each of our businesses, we are writing long term secular trends that we expect will drive revenue and earnings growth for years to come. In our Test businesses, the unit growth and complexity drivers that power these markets continue unabated.
For example, our semiconductor test business grew 18% through Q3, while, with SOC leading the charge growing 22%. Sales continue to be dominated by our UltraFLEX product line, which is well aligned to the performance requirements of the growing compute and mobility markets. Additionally, sales of our Eagle Test systems more than doubled in the nine month period as Automotive and Industrial Test markets have also rapidly expanded. Eagle's unique architecture hits the sweet spot of these markets by balancing high precision with the stress testing needed for these demanding applications. Within SOC, there's been a clear shift this year to higher demand from the compute, automotive and industrial markets. While mobility is still the largest sub segment of SOC and growing, it has dropped from the high 50% range of the SOC test market in recent years to the high 40% range this year. Over the midterm, we expect mobility will remain the largest SOC submarket and continue to grow but we also expect compute to grow at a faster rate, while automotive should remain at its current elevated levels. For the last decade or so, mobility has made rapid annual advances in semiconductor complexity that has enabled the advancement of smartphone sophistication. The refresh pace has been much faster than traditional PCs, graphics, automotive and industrial end markets, leading to smartphone ICs rapidly progressing along the complexity scale. This is true in many areas of smartphone silicon, apps processor compute engines, graphics engines, AI engines, image sensors, power management and more.
Our leading position in testing these key technologies has driven our growth. At the same time, up until recently, the traditional compute testing market has been relatively flat with slower refresh rates and slower complexity growth. However, the groundwork laid by mobility designs combined with advancing lithography nodes and design tools has enabled new entrants into the chip design space for compute engines. The complexity of these chips whether for laptops, servers, autonomous driving, AI or graphics is incredible and advancing at an accelerated rate. For example, laptop CPUs are now crossing the 30 billion transistor level, which is a huge leap over previous legacy designs. As we've said in the past, increased transistor counts drives increased test time and increased tester demand. We've seen that this year and there's more to come. We're targeting this expanding collection of new players and new designs, leaning heavily into our UltraFLEX family's hardware performance and time to market advantages of our software. We've been adding new design wins every quarter.
And while development pipelines can be long and these new designs can be speculative, we're confident we'll see growing production business from these wins in the future. It's also notable that the traditional chip suppliers in these markets aren't standing still, they are doubling down on their advanced designs too, which is collectively driving WFE investments higher as applications expand and competition heats up. We expect this rate to lead to higher test TAMs and given the higher performance and faster design to market cycle times, more share gain opportunities for Teradyne over the midterm. Our System Test segment last year, sorry, our System Test segment year to date sales grew 11% from 2020 and Storage Test continued its multi-year growth trajectory, expanding sales 12% in the same period. Higher capacity HDDs and more complex SOC devices, which require system level test are driving this demand. Both trends are expected to continue into the foreseeable future. At LitePoint, sales were up 24% through nine months compared with 2020, driven by WiFi 6E production, WiFi seven R&D demand as well as ultra wideband. More connected devices demanding more bandwidth while managing growing congestion drives complexity increases in each new WiFi standard and more tests. UWB, on the other hand, is a whole new wireless standard and application space. It's a new proximity detection wireless technology with the future of many promising security applications.
We expect these trends to continue and to provide a long term tailwind to our wireless Test business. Shifting to Industrial Automation. Universal Robots revenue grew 50% through the first nine months of the year, while MiR grew 40% despite supply chain challenges. Each has a unique story. At UR, it's a combination of increasing sales for existing tasks and the expanding number of UR+ offerings, making it easier for customers to deploy our cobots to do new applications. We highlighted welding in our last call, but other examples include screwdriving and palletizing. The UR+ ecosystem is key to expanding these tasks and now totals over 360 products created by over 300 partners, both riding on and broadening the coattails of our UR platform. This is a key advantage in the combination of our organic investments and our UR+ and OEM partners R&D dollars and creativity that's going into expanding the UR platform and it's unmatched. At MiR, the story is about new products. The MiR250 which was introduced just as COVID hit last March of last year, is now our largest seller by far. This year, we added the MiR Hook to the 250 family to expand its applications into tugging. We've introduced higher payload products such as the MiR 600 and 1350 to expand our footprint in the fast growing logistics market. Unfortunately, with all this good news come supply chain issues that will limit IA growth in 2021 to be between 30% to 40% year on year, but demand is strong.
The long term outlook in IA remains very bright. Looking at the capabilities of UR cobots today, we estimate the penetration rate is less than 2% of the servable market. UR's approximate 45% market share puts us clearly in the lead, and we continue to drive R&D and distribution investments to extend our competitive advantages, expand the servable market and drive penetration higher. It's a similar story at MiR, where we estimate the autonomous mobile robot penetration is under 3%. The AMR market doesn't have a single dominant player like UR cobots, and we estimate we're close to #2 in the broadly defined market. And like at UR, we're making investments in both the distribution and product level to both reinforce our advantages and extend our product reach. In both IA businesses, the fact that our penetration of today's servable market is low single digits and that the servable market continues to expand each year with product enhancements, sets up a fantastic future. So even with very high growth rates in our IA business, we expect the penetration rates to remain low for many years, sustaining our long term annual growth forecast of 20% to 35%. In January, we will update you on the outlook for 2022 and our midterm earnings model. Between now and then, we'll be looking at the rate and timing of new semiconductor fab capacity coming online, especially at the more advanced lithography nodes. And we'll also be looking at the rate of adoption of DDR5 as key swing factors. In IA, we will be looking at the manufacturing output expansion, onshoring trends and PMIs in our principal geographies as tailwinds for continued robust growth. On the other hand, in both markets, supply chain bottlenecks could slow certain industries and become a headwind to growth demand. Short-term demand is influenced by many factors, but we manage our business aligned to the long term trends. The trend of growing prevalence of increasingly complex semiconductors and a myriad of applications drives our semiconductor business and investments. The trend of new increasingly smart, cost effective automation in a world with labor scarcity and onshoring challenges drives our IA business and investment strategy. These systemic long
Term trend paid and exciting future for Teradyne. With that I turn it over to Sanjay.