First, the MIL/COTS segment is the only stable market for embedded board-level products today. That statement comes from industry analysts and respected speakers at industry conferences, not just from me. With consumer and commercial demand declining, the industrial markets will probably see a corresponding decline in factory automation projects that use boards and boxes.
At the same time, telecom will see further decline, even though that market is already terribly depressed as telecom service providers hoard cash, cannot secure loans, and refuse to take the increased risk of upgrading to 3G and 4G services. The telecom market is basically a consumer market, whether you look at services or devices. Consumers are not spending their money on those fads, not with the economic situation in such turmoil and their financial future uncertain. Consumers have lost confidence in their economic situation, and so have manufacturers that make consumer and telecom products.
There is the medical market, but that segment moved to PC-based motherboards (CAT/PET/MRI machines) for image reconstruction and control years ago. Moreover, the remainder of that market is proprietary electronics. So, the medical market is a very small segment of the embedded board and box business and not particularly attractive.
There will be some business here and there in industrial, telecom, and medical, but nothing like what was seen in previous years. Furthermore, as the business opportunities in those segments decline, there will be fierce competition for the few remaining orders.
That leaves the MIL/COTS market. I receive calls all the time from companies asking me how they can enter the military markets. The MIL/COTS market has very high barriers to entry. It takes approximately four years to enter these markets with organically grown products: It takes about two years to get designed in to a major program, and another two years before that program goes to deployment. Not many companies can hold their breath for four years before they see orders and shipments. So, the only efficient way to enter MIL/COTS is by acquiring an established company in that space.
Additionally, designing and manufacturing MIL/COTS products requires a very different knowledge and skill base compared to designing and making telecom or industrial products. So, when the sales-starved refugees from telecom and industrial show up, does that mean some poor-quality products will get into the MIL/COTS supply chain? Yes. It already happened. Some program manager bought some small form factor PC-based refuse from some industrial board company and installed it in a critical weapons system; now those boards are failing left and right. That system is now in redesign, and that board supplier had one of the shortest stints on record as a MIL/COTS supplier. The DoD memo, sent out late last year, deals with such suppliers in a very harsh manner. (Department of the Army Memo, Dec. 6, 2007, "Reliability of U.S. Army Materiel System," from Claude M. Bolton, Jr., Assistant Secretary of the Army.)
That all leads to one question: What does COTS really stand for? Originally, when Secretary Perry sent out his memo in the 1990s, it meant Commercial-Off-the-Shelf. But it is now obvious that not all COTS products can meet the requirements of many military applications. If you enter the MIL/COTS market from the industrial or telecom sector, COTS means: Cannot Operate To Specifications, Confuses Ordinary Telecom Suppliers, and Consumer Offerings Truly Suck.
If you are a program manager on a MIL/COTS system, COTS means: Compromises Our Tactical Systems, Capable Of Terrible Stuff, and Contaminates Other Tested Systems. However, if you buy the right COTS stuff that meets or exceeds the application’s requirements, COTS means: Capable Of Terrific Success, Count On Trusted Suppliers, and Causes Obsolescence To Shrink.
As we move away from the shaky and unreliable semiconductor suppliers of processors and chipsets and use FPGAs, I think COTS means: Cores Over Traditional Semiconductors. Within VITA, COTS has another meaning: Create Open Technology Standards that meet or exceed the requirements of these critical military systems. One look at the list of VITA’s completed standards and ongoing committees will show that.
For more information, contact Ray at [email protected].