Trump defense budget increase, open architectures, and export reform
Every month the McHale Report will host an online roundtable with experts from the defense electronics industry – from major prime contractors to defense component suppliers. Each roundtable will explore topics important to the military embedded electronics market. This month we discuss the potential impact on the Trump Administration’s proposed $54 billion increase to the defense budget, open architecture initiatives, and export regulation trends.
This month’s panelists are: Doug Patterson, Vice President, Military & Aerospace Business Sector at Aitech Defense Systems; Manuel Uhm, Director of Marketing, Ettus Research, a National Instruments company and Chair of the Board of Directors of the Wireless Innovation Forum (formerly the SDR Forum); Ray Alderman, Chairman of the Board for VITA; Chip Downing, Senior Director, Business Development, Aerospace & Defense at Wind River Systems; and John McHale, Group Editorial Director with Military Embedded Systems and Proprietor of The McHale Report.
MCHALE REPORT: President Donald Trump has promised to increase defense funding by $54 billion in his Fiscal Year (FY) 2018 budget request and also asked for an additional $30 billion be added to the FY 2017 budget to help rebuild the military and fight terrorism. What applications do you think will likely get the most funding in a Department of Defense (DoD) budget increase and why? Unmanned systems? Electronic warfare (EW)? Radar upgrades? Other?
ALDERMAN: Trump can make recommendations, but Congress has the purse strings so it will be a political issue. Military spending is not going to jump up until congress does something, and then there’s a lag-time after budgets get increased. Right now the Navy is looking to significantly expand its fleet, the Air Force wants parts for grounded aircraft, and the Army is concerned that it only has three divisions that are combat ready. In other words all the services want more funding for various reasons.
Which applications will get funding depends on mission priority. For example as the country makes pivot toward Asia to combat threats from adversaries such as North Korea and China you will see more funding for cyber warfare, radar, sonar, and electronic warfare technology. In the case of North Korea, they are playing at asymmetrical warfare, essentially building their missiles with cheap technology and materials. And the best way to defeat low tech is with high tech that stays three to five generations ahead of your enemies. The Russians, Chinese, and especially the Iranians are way behind us in combat technology. The only area where China and Russia are really competitive is with cyber so expect much more funding to go toward offensive and defensive cyber efforts.
While nations like North Korea are using cheap commercial components to build their weapon systems, we are using parts you can’t get anywhere such as FPGAs [field-programmable gate arrays] and special algorithms they can’t access. So expect funding to also continue heavily for the electronics and algorithms necessary to design and create superior radar, sonar, and electronic warfare.
PATTERSON: I suspect that proposed increases will be allocated more to getting all the military services back up to fighting strength, including personnel, training, and equipment. This means a portion of the increase will be allocated to fixing the air- and ground-vehicle “hanger queens” and getting them back into service and stop raiding them for parts to keep the existing fleet up and running.
Defeating ISIS will consume part of this uptick also. In fact, we’re already seeing increased use of U.S. forces and equipment in the region to re-capture Mosul, Iraq. Biggest winners in this budget uptick should be the Navy/Marines and Air Force, and hopefully fixing the broken Veterans Administration, but this remains to be seen. I would expect very little increases in the RDT&E [Research, Development, Testing, and Evaluation] side of the defense budget, staying flat to maybe less than one percent growth.
UHM: It’s no secret that electronic warfare is one of the fastest growing segments of the defense industry. I expect this trend to continue and to benefit from any additional defense funding. Spectrum situational awareness is a key driver for this trend as RF spectrum is getting more congested and those assets which can best communicate and gather intelligence in such an environment have an inherent advantage.
In addition, I expect that funding for cybersecurity will also be a major beneficiary. Cybersecurity is becoming increasingly recognized as a major threat to the security of the nation. We have so many layers of systems, all of which are ultimately dependent on the Internet, with varying levels of security, which creates a number of vulnerabilities. Fixing all of these vulnerabilities is a major effort.
MCHALE: To really improve defense funding and essentially boost morale among not just the military electronics supplier community, but also the nation’s military as a whole, Trump and the Republican-led Congress need to end sequestration – the automatic, across-the-board cuts to the defense budget. If that happens everybody wins. Sequestration has cost thousands of defense industry jobs, slowed product development, hindered platform upgrades, and, if it continues, will likely hurt military readiness, if it hasn’t already.
With sequestration gone, the budget will be more aligned with mission priorities. Those priorities will determine whether funding addresses more troop deployments or investment in technology research and development (R&D). More mission clarity will enable more certainty on spending directions, enabling industry to channel their internal R&D dollars appropriately. If mission requirements call for more intelligence, surveillance, and reconnaissance (ISR), radar, and electronic warfare technology, then the outlook for embedded computing suppliers will be bright.
MCHALE REPORT: Do you see the investment in open architectures, commercial-off-the-shelf (COTS), and reuse initiatives like FACE (Future Airborne Capability Environment) and SOSA (Sensor Open Systems Architecture) continuing as well? Why or why not?
DOWNING: Open architecture designs are here to stay. System complexity, cost, and manageability are driving this trend. Reuse initiatives like FACE are just getting into production mode. This month’s FACE Technical Interchange Meeting (TIM) sponsored by the U.S. Air Force on March 28, 2017 in Dayton is one more indicator that the U.S. military is now driving open standards into new program designs. Standards like FACE, SOSA, and OMS [Open Mission Systems] will drive far greater levels of interoperability and allow systems deployed today to constantly upgrade their competitive edge for many years to come. Static, proprietary systems of the past will have to open up to maintain their relevance to future missions.
PATTERSON: Yes. Several of the big primes are investing internally in common, open system, computing platform architectures to maximize the reuse of software across varied hardware implementations on multiple platforms. They are also planning for P3I (pre-planned product improvement) upgrade programs and dealing with the near-rampant component obsolescence issues along the way. This process could save millions of dollars by reducing the need to re-invent the wheel every time another major hardware component goes obsolete, especially during the most expensive phases of final design and system qualification process.
UHM: COTS has continued to be a growing trend since [former DoD Secretary] Bill Perry’s COTS memo over 20 years ago. At the same time, there is a pragmatic reality related to an economic make versus buy decision. There is a strong case to be made for making if the system has very specialized requirements or volumes in the thousands of units or above. This won’t change unless there is a fundamental shift in the economics of the supply chain. On the other hand, the capabilities of COTS systems and their cost effectiveness are constantly increasing over time, which has the tendency to favor buy decisions at increasingly higher volumes.
With regard to open architectures, this trend is unquestionably here to stay, both in defense and commercial industries. In the defense space, there is a huge benefit in terms of broadening the ecosystem, increasing competition, avoiding vendor lock-in and ensuring security through source code traceability. Several commercial industries have also firmly embraced open architectures and open standards. Linux may have kicked off this trend in a big way, but in the telecommunications space, the advent of software-defined networking has led to an explosion in support for open source and open standards, such as OpenFlow, OpenDaylight, and OpenStack. At this point, there is no going back! And I believe that’s a good thing.
ALDERMAN: Absolutely. It’s not just about designing chips and algorithms; it’s how we put them together. We need to be in a position to have modularity in hardware and software to do upgrades on the fly, which will save time and money. Modularity does that. What we are seeing are major programs in the Air Force, Navy, and Army for increased modularity in electronic systems. For the Air Force it’s “OpenPod,” for the Navy, let’s call it “OpenBay,” and for the Army, we’ll call it “OpenRack.” How far each of these programs will go is questionable. These modularity schemes could knock-over a lot of big proprietary rice bowls. But, with defense spending under pressure to be more cost-effective, they could each enjoy some level of popularity. So, it’s worth watching as these efforts progress. Modularity makes configurability, maintenance, and upgrades much faster, easier, and cheaper. Even if the Trump budget request were to be approved in full, we still won’t have enough money to do what we need for the services and the DoD. We need to use the money we have more efficiently and these modularity programs are a move in that direction.
Could all the services work together, under a collective “Open Architecture” program, to share commonly needed modules like CPUs or communications interfaces or sensors across different platforms? Maybe that’s what could happen with HOST (Hardware Open Systems Technology) and SOSA (Sensor Open Systems Architecture) activities, but I doubt it. The Army (AR670-1), Air Force (AFI 36-2903) and Navy (NR3501.54) all have different specifications for the same basic black dress uniform shoe. So how can you possibly expect them to agree on a common electronic module specification when they can’t agree on the specs for a simple ugly black shoe?
They might if they continue to move toward a cross-domain a strategy, which roughly means leveraging resources across multiple services and warfare domains. For example, if a Navy resource is at sea and needs to destroy a target offshore it calls the Army or Air Force to take out the target. This cross-domain concept could be the catalyst to force services to come up with more standards for common electronics.
MCHALE: There is really no choice; the country can’t afford another program as expensive as the F-35. To return to old procurement models, where the DoD funded technology development from the ground up or paid more money for proprietary technology based on closed architectures, is just economically unsound. The cost benefits of commonality happen not only on the front end with procurement, but also on the back end with supportability. Every piece of hardware needs personnel trained to both operate and maintain it. Enabling more commonality and reuse provides tremendous maintenance and training savings. The same goes for software, as reusing software components reduces recertification costs.
MCHALE REPORT: Speaking of reforms, have the export control reforms – specifically to the U.S. Department of State’s International Traffic in Arms Regulations (ITAR) and the U.S Department of Commerce’s Export Regulations (EAR) -- of the last administration --- that expanded exports to more countries and moved many controlled items from state to commerce -- seen improved overseas business?
MCHALE: The reforms by the Obama Administration were put in place because previous export regulations seriously hampered the ability of U.S. military and space electronics suppliers to compete internationally. In response the U.S. government implemented rule changes to move a number of controlled items from the State Department’s U.S. Munitions List (USML) to the Commerce Department’s Commerce Control List (CCL). For more details on this read this article by Kay Georgi and Marwa Hassoun of Arent Fox LLP. The products moved to Commerce are now authorized for export to 36 countries – provided the exporters meet all requirements of “license exception Strategic Trade Authorization (STA).” Nations like China, Russia, and Iran are still off limits of course.
What I’ve heard throughout the industry is that the reforms have already had a positive affect. I believe it will take time for them to fully take hold as there are still international customers of U.S. companies who still don’t trust that they will not eventually be blocked by the U.S. export regulations. Many non-U.S. electronics suppliers still advertise they are ITAR-free or U.S. component free. For a time it seemed like every other both at some international trade shows sported such a phrase in big letters.
The reforms were also necessary to keep the competitive edge U.S. electronics suppliers have over international companies. Being unable to get around U.S. export regulations forced the international customers of defense and space electronic suppliers to turn elsewhere, thus creating a stronger European and Asian electronics industries that can compete with U.S expertise on the open market.
ALDERMAN: I haven’t seen much of it, but once again with reform it has to be incremental and that is what is happening. Some countries will be easier to do business with the reforms down the road, but it will not be overnight. Even with the changes, companies that support the U.S. defense industry such as members of VITA need to continue to be diligent with compliance even though they develop products based on open standards.
Within VITA we had an ITAR policy that before any standard was introduced to the entire standards organization it had to be scrubbed of ITAR-restricted data.
The key is to translate your ITAR issues in to technical issues, scrubbing out the ITAR restricted language. For example, instead of saying the standard requires a specific receiver and translator in a specific box, say you need a channel with 10 gigabits per second with a maximum of 30 nanosecond latency. The translation still covers the standard, but it is expressed in technical terms.
PATTERSON: Expanded overseas business and exports have been the only real growth areas for the larger primes serving the military and aerospace market over the past several years. Hopefully this trend will continue.
UHM: Well, I can say that from my perspective ITAR regulations are as daunting today as they have been in the past and I do not believe ITAR is keeping up with the pace of technology. Advances in semiconductor technology in areas such as processor compute density, RF instantaneous bandwidth, and RF tuning and switching time are rapidly extending into ITAR territory, and it’s not clear yet how best to navigate this process to be as competitive globally as possible.