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  Articles  Out with 2009, enter 2010
Articles

Out with 2009, enter 2010

Ray Alderman, VITARay Alderman, VITA—August 10, 20100
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The year 2009 was a tough year in some board and system market segments, but it was a good year for other segments. The telecom segment suffered the most, with declines in sales of up to 70 percent for some vendors. The industrial market bowed to the financial and economic slowdown and some vendors saw 50 percent declines in sales, especially in Europe. The medical market went on hiatus as the new health-care bill meandered through Congress and caused diagnostic equipment purchases to slow. The major risk of those investments – including the amount hospitals can charge for MRI, CAT scan, and PET scan procedures under the new plan – motivated buyers to sit and wait.

The U.S. DoD budget contained some surprises, too. Everyone expected the F-22’s cancellation, in addition to some of the other program terminations (the new presidential helicopter) and reductions (slowing the replacement purchases of new aircraft carriers). However, the surprise for military vendors was how effectively the new procurement reform initiatives would slow spending on funded programs. Congress did not reduce the military budgets. But the new procurement rules and paperwork have definitely slowed down the issuance of contracts, having the same effect as a budget reduction.

At least for a while, we are done with most of the major reactions to the economic, financial, and technology turmoil of 2009. It is now time to continue to plan for 2010 and beyond.

Telecom: Bankruptcy or growth

The telecom service providers must upgrade their networks, and Wall Street says that both AT&T and Verizon will face serious financial challenges as we move forward. Recent reports claim that the AT&T network is crashing in places because of the data-hungry iPhones it feeds. Another report indicates AT&T needs to spend up to $18 billion upgrading their network for 3G services, but the revenues will fall far short of paying for those upgrades. This is the same for Verizon, but to a lesser degree. As a result, the telecom board segment looks questionable for 2010.

Medical equipment markets: The socialized medicine effect

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The medical market will not settle down until hospitals and doctors know how much they will be paid for their services and the use of their equipment. Municipal budgets are in shambles, so there is not much money available for public hospitals to buy new equipment. That makes this market segment, mostly comprising motherboards for image reconstruction in diagnostic procedures, also questionable until we fully understand the new health-care scheme.

Industrial segment: Pent-up demand for energy efficiency

There is pent-up demand in the industrial segment for more energy-efficient equipment to be installed in all facets of manufacturing.

Recent announcements state that the ongoing Air Traffic Control System upgrades in the United States will consume up to 250 new systems in 2010. The Obama administration has awarded $3.4 billion in grants for the smart grid upgrades and revamping the nation’s electrical distribution and generation system. So this segment (motherboards and small form factor products) looks promising for 2010.

MIL/AERO/COTS markets: Pushing the performance curve

However, I believe the MIL/COTS market will again be the winner in 2010. I expect to see the increased number of technology refreshes and upgrades to existing platforms push VME board sales to a new high.

VPX design-ins promise very high growth rates and shipments in 2010. I see approximately 80 percent of military sales in VME, with about 20 percent in VPX in 2010. And for 2011 and 2012, I see that ratio rising to 70 to 30 percent and 60 to 40 percent, respectively.

When we get to prolific 10G silicon this year, we have some severe technical problems to resolve: Signal-to-Noise Ratios (SNRs) will approach zero, crosstalk will become severe at 10G, and signal integrity will become a nightmare. So in 2010, I think we will see vast engineering resources dedicated to new optical connectors, fibers, and silicon.

VITA sent out an industry-wide invitation in February 2010 to join a special optical feasibility study group to define the state of the art for optical backplanes and the problems that we need to solve. Sometime around 2013, we will begin to field pure optical backplane computers in many traditional applications, and we need to start the standards work now. So 2010 will usher in the transition to optical connections, and that will be an exciting time for our industry as we continue to push the bandwidth envelope.

For more information, contact Ray at [email protected].

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