Greg Smith
President and Chief Executive Officer at Teradyne
Thanks, Andy, and good morning, everyone. Today, I will summarize our Q3 results, describe the current business conditions and provide some insight on how we're thinking about 2024 and beyond. Sanjay will then provide the financial details on Q3, our outlook for Q4 and offer some comments on the modeling next year. Third quarter sales and earnings were at the high end of our guidance range as robotics sales came in above plan, and we cleared some supply constraints and tests.
The second half of 2023 is playing out as we described in July. We expect to close out the year with strong robotic shipments amplified by new product shipments at UR and seasonally softer test shipments. In semiconductor test, the mobility correction cycle persists and shipments remain well-below historic levels, while our automotive test shipments remain high in Q3. Memory test shipments in Q3 were down sequentially due to the timing of shipments, but demand remains strong. LPDDR5 and HBM, both of which require higher speed testers drove the results.
In Wireless, demand remained muted in the quarter given the weak smartphone market and lack of new wireless standards this year. In System Test, defense and aerospace and storage test groups were on plan, while production board test softened in the quarter. Robotics demand has stabilized. In the first half of 2023, demand was quite low down 21% versus the first half of 2022. In Q3, demand strengthened with revenue nearly at 2022 levels and up 20% from Q2. Our shipments have stepped up as we execute an aggressive ramp of the new UR 20 product and PMI seems to have stabilized a bit.
Looking at the full year of 2023, our estimates of the SOC test market size are unchanged at $3.7 billion to $4.1 billion, down about 15% at the midpoint from last year. The weakest segment of SoC is mobility, down about 40% from 2022 on slower complexity growth in smartphone semiconductors and year-on decline in units. The compute Automotive and Industrial analog segments of the market will finish the year at similar levels to 2022.
In Memory Test, we expect the market will be at the low end of the $900 million to $1 billion range, also unchanged from our July view. The demand for high-speed DRAM test remains high as we close out 2023, which will help us pick up a few points of memory share for the full year. Teradyne's System Test group will finish 2023 down more than 20% from 2022. Within this group, we expect Defense and Aerospace will grow 10% year-on-year as global defense spending ticked up.
The other segments of the business were negatively impacted by oversupply in the HDD market and mobility weakness. Shifting now to robotics. The macro environment for industry is incrementally better than last quarter with global PMI stable or improving slightly. The highlight of the quarter was a well-executed volume ramp of our UR 20 collaborative robot. We delivered more than 300 units in Q3, and we expect to deliver a multiple of that in Q4.
The UR 20 extends UR's ease of use and quick ROI to higher payload and longer reach applications, expanding the market in many segments. The strongest segments for UR 20 so far are well in palletizing. The distribution channel transformation that we described in past calls is also making steady progress. Complementing our existing distribution channel with direct coverage at large accounts and adding OEM partners is a long-term project, and we're beginning to see positive benefits.
For example, in the OEM space, we have added 48 new OEM partners so far in 2023, bringing the total to 144. And we have seen direct OEM orders grow nearly 20%, driven by the high demand from the palletizing market. At MiR, our account strategy continues to deliver with our top 10 customers expanding their collective installed base by over 15% year-to-date, a rate that's more than 50% greater than the overall installed base growth.
Shifting to the future, I'd like to describe our current thinking about 2024. Please bear in mind that it is still too early and visibility is too limited to be certain about what will happen next year. However, there are some longer-term trends that we expect to play out. As we've previously discussed, we expect the SOC market and our revenue to grow from 2023 on broader 3-nanometer adoption in the mobility space, driving market growth and continued strength in the compute market.
The real question is the magnitude of the mobility recovery, which depends on smartphone unit growth, complexity growth and how quickly the industry can consume idle test capacity. For reference, we estimate subcon tester utilization is still low, up only marginally from our July estimate and well below the typical Q2 to Q3 increase. The automotive test market has been sustaining at a higher level in 2023 than we originally expected.
It appears that channel inventories in automotive are stabilizing, and we have seen some spot weakness in the market. We aren't expecting a significant change in the full year market size next year as unit forecasts and semiconductor attach rates driven by the crossover from internal combustion to EV remain bullish. The technology buys that have supported the memory TAM in 2023 should continue into next year, and we expect the memory market to grow as HBM, DDR5 and LPDDR5 penetration expands to support AI and computing growth.
In flash, as protocol interface speeds continue to increase, we expect flash package test demand to grow as well. Overall, we expect the total ATE TAM to be up modestly from this year, and the key factor is the strength of recovery in mobile. Growth in our wireless business, LitePoint will be strongly linked to handset growth, a recovery in the PC market and the start of the rollout of WiFi 7.
The supply-demand imbalance in HDD is likely to persist through 2024, and we expect HDD test to remain weak. System-level test will depend largely on smartphone unit growth in the near term while we expect our defense and aerospace business to grow in 2024 on increased defense investments worldwide.
In robotics, we're finishing 2023 on a positive note in a tough market with Q4 revenues up about 10% year-on-year on the strength of the new UR 20 product introduction. That performance reinforces our optimism in robotics. We see robotics as a marathon, not a sprint. We are serving in an emerging market of $2 billion this year that we expect to grow to tens of billions of dollars per year in the future. Our operating model for robotics is built for that marathon with a strategy that prioritizes product and support investments that deliver value to customers now.
We are counting on building relationships with those paying customers to help guide our ongoing investments to meet their evolving needs for the future. The key to this strategy is driving towards our model of 5% to 15% profit from our robotics portfolio. While we will fall short of this objective in 2023, it remains a key operating metric for 2024. We do this to ensure that we remain focused on our customers' most important automation priorities while we've grown the business.
Rolling it all up, 2024 looks to be stronger than 2023. With all of the uncertainty around chip inventories, low utilization rates and macroeconomic worries. I'd call it incrementally stronger, but we'll get a better view over the next quarter or so. We're also assuming a quarterly revenue profile in 2024, similar to 2023, with Q1 as the low point and then growth from there. While early, we're modeling Q1 sales to be similar to Q1 2023.
As we finish the year, I'm encouraged by indications that our largest market, Semi Test, appears to have troughed in 2023 at a level that delivers an operating profit of 20% for the total company. We are confident about the long-term growth outlook of the semiconductor market as the substantial fab equipment investments made in the recent past have not yet seen matching test investments.
Also, we see consistent investment in tooling to enable continued process development, whether it is building a family of process nodes at 3-nanometer or enabling gate all around and 2-nanometer technologies. While the timing of test investments will be driven by end market chip demand and complexity growth, we are confident that this investment will happen. To be clear, our customers are still cautious about their near-term demand, and we're reflecting that caution in our initial outlook for next year.
But long-term, there is significant upside potential. In Robotics, we have a pipeline of new products, new applications and distribution changes that are now beginning to yield. At the end of the day, the global population trends are inarguable. The long-term demand for advanced automation must grow to deal with the increasing shortage of manufacturing workers that coupled with market conditions that favor low cost, short ROI automation investments and our team's growing execution scope, I expect renewed growth in Robotics in 2024 as well.
With that, I'll turn things over to Sanjay for the financial details. Sanjay?
