Strategy Analytics' annual analyst forum at MTT-S took place on Tuesday 7th June and examined the broad theme of "Commercial and Defense Market Opportunities for RF Semiconductors". The ADS service presentation looked at the impact of budget constraints on future defense technology investment.
Defense budgets have gone through numerous cycles that can be characterised by specific periods. As an example, the "cold war" period saw strong support for defense budgets driven by nationalism and a drive towards developing platforms that went "higher, faster, further" than the other guys. Following 9/11, the global war on terror signified a new era of conflict where the enemy was not necessarily clearly defined in terms of national borders and military branches. Budgets went through a growth phase as a new emphasis on ISR capabilities was coupled with urgent operational requirements, e.g. counter IED equipment, being defined by the warfighter in theatres such as Iraq and Afghanistan. The current situation sees multiple fronts with both asymmetric threats continuing as well as more conventional theatres in play such as Libya. This should ideally protect budgets but global economics have forced governments to rethink defense priorities as part of their efforts to balance the books.
The US is the largest global spender as far as budgets are concerned and will continue to be so for the foreseeable future. However, based on current and projected budgetary requests, our analysis suggests that US defense spending will see a decline over the next ten years with a negative CAGR (compound annual growth rate) of 1% through 2021 and the situation will be even worse in Europe.
On the other hand, the threat of new capabilities and pressure from emerging national powers as well as ongoing threat scenarios will mean the spending slowdown will not be universal and across the board for all defense platforms and systems. There is a balancing act being played out between conventional and asymmetric theatres and we are starting to see hybrid warfare scenarios where there are elements of both conflict types in play. Regardless of the type of conflict, technology is the differentiator which will allow allied forces to maintain an edge over the opposing forces and for defense platforms, this means that while budgetary pressures remain, there is an opportunity for emerging platforms as well as a focus on upgrading existing capabilities.
If we take US expenditure on air platforms as an example (excluding RDT&E), Strategy Analytics estimates that US DoD budget expenditure on all major aircraft platforms exceeded $27 billion in 2010 with UAS platforms accounting for 18% of expenditure in 2010. We see expenditure on conventional platforms remaining flat through 2021. On the other hand, UAS expenditure is expected to grow and account for 31% of expenditure by 2021. This translates to US military expenditure on UAS platforms growing at a CAGR of 3% through 2021 growing from an estimated $5 billion in 2010 to over $6.5 billion in 2021 (see US DoD Budget Implications for UAS Electronics Demand).
The other dynamic in this respect relates to the systems being implemented on these platforms as a result of expanding mission envelopes. The electronic content in a UAS platform depends on payload capacity, mission, degree of redundancy, number of sensors, integration levels etc. The proportion attributable to electronics on a UAS platform will depend on the size of the system and mission objectives, which in turn determine the number of sensors and associated electronics required. As these systems and mission objectives become increasingly sophisticated, Strategy Analytics forecasts a 3% CAGR growth in the market for electronic systems from 2011 to 2021, resulting in an electronic systems market worth over $2.1 billion. EW, radar and communications systems will account for around 64% of this demand.
Regardless of the platform, communications, EW and radar systems all have to work in the electromagnetic spectrum and the capabilities that these systems have to bring are expanding while at the same time converging around specific parameters such as broadband performance, power, linearity and digitization.
Looking at the communications systems in general, common trends across the board include a move towards higher frequencies, e.g. land radios moving through to 2.7GHz, coupled with a need to have multi-mode, multi-band capabilities that will enable these radios to act as nodes in the total battlespace. This is coupled with an emphasis on data and efficient spectrum use that will drive linearity requirements as well as the continued development of SDR and cognitive radio capabilities.
For RF-based EW systems, the trends point towards what may be described as a "no channel" concept in which the systems are tasked with looking at complete frequency ranges resulting in multiple channels being handled by one receiver. For jamming applications this has to be coupled with high power capabilities across the frequency range which could conceivably extend through to Ka-band.
Finally, the evolution of radar systems towards AESA (active electronically scanned array) is driving the use of compound semiconductors as thousands of T/R modules provide the basis for multi-role capabilities as well increasing reliability while the scalability enables the use of these advanced radars on an increasing number of platforms.
The next step in examining these systems is to look at the enabling RF technologies of which there is a wide range from Si, SiGe, GaAs, GaN as well as TWTs, with each technology offering specific advantages. While there is a temptation to target a specific technology as representing the panacea for all applications, the reality is that no one semiconductor technology solution will singularly satisfy every system requirement. The result will be segmentation of functionality with different technologies used side-by-side depending on the requirements of the system and platform.