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Hard times a'comin'? Flat EW market signals trouble for microwave component vendors.

Hard Times A'comin'?

Flat EW Market Signals Trouble for Microwave Component Vendors

Two marketing managers stood in the corner of their company's booth at the recent IEEE/MTT microwave industry trade show, their hands in their pockets and their exhibit, unlike those of most others on the floor, devoid of customers. One looked up to the hall's high ceiling and sighed, like a drought-stricken farmer fruitlessly searching the sky for rain. The funding for new programs is all dried up, said the other. The only available contracts are for R&M upgrades and spot buys, and the competition for those small pools of business is getting tougher -- and not just from US vendors. Outside markets offer no relief, he said; regulations restricting technology export make it difficult to till foreign soil.

These complaints have been sweeping across the flat EW systems market for the last few years, so it should not be surprising to begin hearing them echoed by those who support the system vendors. While the effects of the EW downturn on the members of the microwave component guild are by no means uniform, companies in general appear to be readying themselves for harder times.


One component fraternity currently reeling is the makers of traveling wave tubes (TWTs). While the development of solidstate devices had already caused industry observers to post watch at the TWT's bedside, vendors' current problems are more the result of government indifference than the encroachment of competing technology, according to Robert Woods, marketing manager of the Electron Device and Systems Group at Varian. The lack of support for US industry has enabled European and Soviet TWT technology to outstrip that of America, he said. As a result, the US military has to turn to foreign firms for "critical technology." Woods pointed to recent awards to Thomson of France for the PHALANX program and Siemens of West Germany for MILSTAR components as evidence of this trend.

Coupled with the stretching of programs and a lack of opportunity in general, the effect of foreign competition on the TWT community has been devastating, Woods stated. He cited an informal study he had conducted that showed an 18% decline in manpower across the US TWT industry in the last 12 months.

"What industry needs to do is convince government that there are product improvements that need to be made to existing systems," Woods asserted. He pointed to the establishment of a microwave tube division within the Electronic Industries Association (EIA) as a hopeful sign; words that appear self-serving when uttered by vendors are likely to sound sweeter coming from the EIA, he said.

Some of those words will no doubt be directed at the perceived reliability problems suffered by TWTs. Woods said the nature of the EW mission is at least partially to blame for a lack of sustained performance. ECM tubes are not as well protected as those in radar and other systems, he said. Also, EW applications demand pushing the state of the art, with performance margins held in reserve in other applications being routinely consumed in EW systems.


Not every facet of the microwave component marketplace has felt the heat suffered by TWTs. For example, Steve Perry, sales manager for RF products at Kaman Instrumentation Corp., has a fairly positive outlook -- at least on the near future. Perry has a great deal of confidence in his company's [SiO.sub.2] cable, which he perceives as a worthy competitor to Teflon cabling. Perry does not see a significant threat in his area from foreign firms, and feels there is a significant market for his products in the form of refit programs. He will also aggressively pursue future airframes.

This does not imply that Perry is completely untroubled about the future. He feels the market will tighten, causing him to bid on the smaller programs he might have ignored previously. Price competition will sharpen, and the pressures to expand his application and product base will increase. Finally, he foresees a growing emphasis on customer service. "I think what we have to do is be better marketeers," he said.

James Korcuba, business development manager for the microwave component group at Sanders Associates, agreed that marketing will be important. It will be necessary to be "realistic" in making market projections, particularly at a time when the government is decreasing its orders while simultaneously driving up costs through tougher specs, requirements and regulations. Companies with a hybrid of technologies and products will best cope with the new environment, he said, primarily by taking advantage of preplanned product improvement ([P.sup.3]I) opportunities.

Korcuba also foresees the market becoming more vertically captive, with different divisions of large companies doing more selling to each other. Perhaps because such a scenario would lock out foreign competition, Korcuba did not appear concerned about overseas vendors eroding his market share. He expressed confidence that the government would protect "critical technologies and companies" from falling far behind their foreign counterparts.

The government also will heavily influence the direction of MMIC technology, Korcuba claimed. In its selection of which companies receive development funds as part of the MIMIC program, the government will in large part determine whether the technology will ever enjoy wide application throughout the marketplace, he said. Korcuba believes some companies will hoard MMIC advances, providing them with competitive advantages. What MIMIC developments do see daylight will tend to drive component costs down, he predicted.

Joseph Grzyb, project manager of ITT Defense's Gallium Arsenide Technology Center, is involved in MMIC work (and did not appear to be hiding MIMIC advances up his sleeve). Grzyb's arm of ITT provides MMICs and other ICs to component manufacturers -- as if confirming one of Korcuba's predictions, principally to other divisions of ITT. Most of his product was being used in prototype systems, he said, and he predicted a steady demand at least through the mid-1990s. Phased array antennas appear to be a very good application for MMIC technology, he noted, where power requirements are a principal concern. Texas Instruments is also a strong company in this area of MMIC, he said.

Grzyb envisions foreign competition, principally from Europe and Japan, in the fairly near future. However, he noted that the custom nature of most MMIC work ran contrary to Japan's tendencies toward market penetration through generalization. This may slow Japan's progress in the US market.

Another man with an eye on foreign competitors is Denis P. Ritchie, director of microwave product marketing at AEL. While he foresees stiff competition from Japan and Europe, he said the US does enjoy a technological and price/performance edge in such areas as frequency generation capabilities, channelized receivers, compressive receivers, RF signal processing and DRFM.

One country the US does not lead is Israel, Ritchie claimed. "Every major company I know has a guy from Israel on staff," he commented. This includes AEL.

Unlike many marketeers, Ritchie plans to pursue European opportunities aggressively. AEL Systems International markets the company's products overseas, including nonmicrowave equipment and services. Ritchie would like to see a stronger effort in the firm's overseas microwave effort, perhaps to the point of direct sales.

Ritchie also predicted that companies will begin to look for other markets for their EW components, with communications and radar modification programs likely targets. Companies will focus on what Ritchie termed "benchmark products," equipment and areas in which each company is strongest; product lines outside the core business will be shed, creating a "product window," in Ritchie's opinion. Once this is accomplished, only those programs that appear in the company's window will be pursued.

The money saved by shutting down product lines will be invested in designs and processes that reduce cost, he said; this will hone price competition. Through these tactics, companies like AEL can then pursue increased market share at the expense of their competitors. Development of new benchmark products also will be investigated.


The impending downturn of the US market for EW microwave components has not deterred European companies from attempting to gain a beachhead. One such adventurer is Lucas Aerospace, which recently purchased Epsco, a manufacturer of high-power and narrowband amplifiers for radar and communications jammer applications. The company also has provided an exciter module for the LANTIRN program.

The Lucas acquisition took place last August. According to Wayne Coffin, who is president and CEO of what is now Lucas Epsco, foreign ownership has not yet proven a problem in bidding for programs. However, he did predict that security concerns would prevent him from becoming a systems producer, and may bar him from some COMSEC opportunities.

The tallest immediate hurdle for Coffin is integrating his company into an ever-growing Lucas operation in the US. (The British firm also has purchased Weinschel Labs and Zeta Labs, which have ties to the military marketplace as well.) Despite the fact that "Lucas has its fingers everywhere," this is its first foray into EW, Coffin said. The firm appears to have confidence in the marketplace, at least for now; Coffin reported no pressure from his superiors to move into commercial markets. The company is investigating the pursuit of second source work, following the lead of its new sister firm, Zeta.

EEV Inc. also has a British parent, EEV Ltd. (which is in turn owned by GEC PLC). While he was reluctant to discuss his company's EW-related activity, Frank Oakes, marketing manager for microwave products, did reveal that EEV's offshore manufacturing had been a barrier against entry into some programs. Still, the company was involved in radar, countermeasures and other programs, with particular success in systems for export back to Europe.

M.C. Kennedy, marketing manager of the UK company's Travelling Wave Tube Div., was more open about EEV's activity in Europe. EEV has had particular success marketing components to pod manufacturer Marconi Defence Systems. The Sky Shadow system used on the Tornado is home to EEV components, he said. EEV also is heavily involved in naval expendables.

Kennedy pointed to the EFA program as presenting the biggest potential opportunity in the European marketplace in the near future. He conceded that the US is still dominant in the European EW marketplace; while he declined to predict how long this would last, he did say the 1992 plans to bind the European common market more tightly together will have profound effects in the next decade. He pointed to a recent agreement between the UK and France, aimed at reducing duplication of effort in military technology, as a precursor of the future.


Just as the EFA represents the brightest star on the European horizon, there are a few programs in the US which microwave component manufacturers hope will bring some much needed business their way. These include the joint service INEWS program and the Navy's Advanced Special Receiver (ASR) effort. The trend toward refurbishing older equipment systems instead of buying new ones, while limiting new system money, will produce opportunities for upgrade and refitting work. The key to longterm survival will be acquiring places in these programs, and hoping they continue. Meanwhile, as evidenced by the fact that exhibit space for next year's MTT show is already 95% sold, companies will be pushing the marketing buttons harder than ever.

Even if this effort proves successful, the winners will not be breathing easily. Consider Loral Microwave/Wavecom, for example. It has components on both versions of the ALQ-165 Airborne Self Protection Jammer (ASPJ), so will come out ahead no matter what the Air Force and Navy decide. An enviable position, one would think, given the impending downturn. What does William Harrison, director of advanced development, think of the market?

"It's not as much fun as it used to be."

PHOTO : TWT manufacturers have already begun to feel the pinch of a flattening EW market.

PHOTO : MMIC technology, such as that incorporated in this amplifier, should lower costs.
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Title Annotation:electronic warfare
Author:Hardy, Stephen M.
Publication:Journal of Electronic Defense
Date:Aug 1, 1989
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