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Tuesday, January 1, 2008

Outlook 2008: Avionics Test Market Outlook

With electronics and fleet upgrades driving demand, ATE vendors expect to generate $1.4 billion in 2008

Jessy Cavazos

The market for avionics Automatic Test Equipment (ATE) is alive and well. This is an exciting and dynamic marketplace for vendors in both the military and commercial segment. This article will provide an outlook of the market for 2008 and beyond, covering issues such as industry challenges, drivers and restraints, market trends, and, of course, the competition.

One of the most significant challenges in the avionics ATE industry, which affects vendors in the civil space, is the constant change in terms of maintenance, repair and overhaul (MRO) strategies. After September 11, the airlines went through a downturn that strengthened third-party work and even OEM internal work. The ongoing cycle has a significant impact on what avionics ATE vendors sell, who they sell to and how much they sell.

Another important challenge that affects ATE vendors in the civil marketplace is access to OEM data. OEMs are becoming increasingly concerned about the use of their intellectual property. To overcome this challenge, vendors strive to work more closely with OEMs and set up relationships that are mutually beneficial. As part of this process, some vendors are participating very actively in reviewing or writing standards.

The military segment of the avionics ATE market is in the midst of an electronics upgrade cycle. While this is also relevant to the commercial segment, it is striking in the defense segment. A significant portion of the U.S. Department of Defense budget in the past 10 years has been for R&D. However, projects are ending the R&D phase and moving into deployment. This is a great opportunity for ATE vendors, as the avionics that are now being deployed are beyond the capabilities of the testers that were built 10 years ago. Also, avionics in the military segment continue to evolve, driving demand for new testers. For example, the U.S. Navy is planning the follow-up for its Consolidated Automated Support System (CASS), called eCASS.

In the commercial segment, the trend toward fleet upgrades and standardization of aircraft platforms is driving demand. The increasing number of aircraft and new program launches are key drivers for ATE in the civil space. Boeing’s current backlog is off the charts, with airplane deliveries planned for 2015. On the program front, there is significant activity around the Traffic-alert Collision Avoidance System (TCAS), and more activity is to come as the industry moves to TCAS2.

Other factors such as the obsolescence of avionics ATE should fuel growth in the future. The last important buying cycle for ATE was in the 1980s. A lot of equipment deployed in the 1980s and 1990s is now obsolete. The support/maintenance cost of these systems is high. The economics are favorable for replacing the equipment.

While OEM equipment has increased significantly in terms of reliability over the last 10 years, which, in theory, means that it needs less testing, the No Fault Found (NFF) removal problem hasn’t disappeared. Anywhere between 20 to 50 percent of all line replaceable unit (LRU) removals can result in NFF re-tests, which is a huge driver of cost. A quick re-test on an ATE system will allow the airline to put the LRU back on the shelf as a spare as opposed to sending it to a repair center for real repair work. The cost of spares and repair work definitely justifies the price of an ATE system.

Another negative factor for market growth is consolidation in the airline industry. However, any of the negative effect from consolidation is more than offset by the growth of the airlines’ business and the volume of airplanes.

As a result, the total avionics ATE market expects to generate close to $1.4 billion in 2008. Although growing at single-digit rates, some vendors in the market are witnessing double-digit growth. Such performance depends on the vendor’s ability to offer innovative products.

Leading market participants include Lockheed Martin, Boeing, Northrop Grumman, EADS Test & Services and BAE Systems. EADS and Aeroflex are probably the main general-purpose platform providers for the civil marketplace. However, the most significant competition is the OEMs when they decide to insource.

From a geographic perspective, the North American market remains strong for both segments. However, vendors have witnessed strong growth in Asia. Some vendors are very active in this area. For instance, Aeroflex, Plainview, N.Y., recently opened two new avionics repair centers in Asia with the ability to work on avionics ATE systems. The company has a service group in Singapore that services both instruments and ATE, as well as a service team in Beijing that does instruments and has the ability to do ATE service and support. Aeroflex recently negotiated an agreement with Ameco in Beijing to do avionics test equipment repair.

The good news regarding Asia is that it is reaching the point where customers are no longer willing to trade performance for a lower price. Naturally, vendors also see opportunities in Europe, although it is in terms of updating existing platforms as technology changes. Latin America and the Middle East also offer opportunities.

Market Trends

  • Common Core Test Platforms: In order to reduce cost, customers want to standardize on a common core test platform and buy different configurations for each of their applications.

    For the last 20 years, the industry has built a new tester for each application that emerged, simply because it was a different requirement. The idea of the common core is that there are some aspects that remain the same for various applications, such as the software environment, the debug environment, the runtime, common spares and maintenance training. Customers can then add onto it for aspects that are unique for their application.

    Having a common core drives costs down and increases flexibility. This trend has taken momentum and vendors witness it in virtually every electronics factory they visit.

  • Tester-per-pin: Customers have long awaited "tester-per-pin" architecture, and the wait has been worthwhile. A typical digital card has 64 channels, which allows the customer to program two different level sets and then select one of these level sets for each of the pins. For the most part, it meets end-user needs. However, with today’s electronics, and particularly complex LRUs, there are voltage levels that need to be dealt with.

    With the tester-per-pin architecture, the customer can program each pin independently, instead of choosing from two voltage levels. This simplifies fixture and test program development, saving time and money on fixture development and reducing the need for fixture redesign. Sometimes, it is when the Test Program Set development gets into the debug stage that the customer realizes a pin on the LRU is wired to the wrong place on the channel card, requiring a redo of the fixture. That is quite expensive and can be avoided.

  • Parallel Test: Parallel test refers to analog measurements being performed at the same time instead of one after the other. Customers get a higher quality of test because they are operating the LRU more like it is in the system. Also, the test time comes down significantly; when there is a failure, the customer has to go back and run the whole test again, burning hour after hour. Parallel testing is a very powerful concept, one that will be increasingly used in avionics.

  • Synthetic Instrumentation: The idea behind "synthetic instrumentation" is that the customer can reconfigure it based on the test that is needed at the time. This concept is valuable to avionics ATE end-users in both the defense and commercial segments. For example, Teradyne, North Reading, Mass., offers a bus test instrument (Bi-series) that can perform testing for Mil-Std-1553, or RS232, RS422 or RS485 standards, etc. In the commercial segment, Aeroflex has found some attractive ways to incorporate synthetic instruments into their traditional ATE systems for aerospace, including the use of PXI-based equipment.

  • Footprint reduction: There is certainly a drive for footprint reduction in the marketplace. For instance, there is no reason for a DMM to take up a whole PXI card. As such, there is a mix of PXI (for the quantity items) and VXI (for the high performance items) in systems. Virtually every system that some vendors ship contains a mixture of technologies.

  • Programming language: Due to a lack of expertise on legacy languages in the market, end users are almost forced to shift all of their test program developments to C and C# languages. Plenty of engineers coming out of school know C#. While legacy languages may have offered customers many advantages, the bottom line is that there are no engineers who know them. Hence, they are making the trade-off to go to C#.

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