1996 saw Microwave Journal publish an in-depth look at the European microwave industry. It considered technological developments, pinpointed areas of activity and attempted to identify trends that would shape the future. In the light of the market's subsequent downturn, particularly in the telecommunications industry and the knock-on effect that this has had on associated markets at subsystems, systems and components level, that report seems to be referring to a different continent, in a different world.
Seven years ago, confidence was high after what was seen as recovery from the recession that had hit the microwave community fairly hard in the early '90s. This was before the unprecedented boom at the end of the decade but even then, the statistics for the growth in mobile communications were described as startling. This was not only for the suppliers but also for the pull-through that had been gained at the components, systems and backbone levels. Digital technologies, particularly the Global System for Mobile (GSM) communication were reaping the benefits of the growth in demand and capitalising on the deregulation of the communications community. The flip side was that the defence and military markets were static in comparison and, not surprisingly, several microwave companies took the decision to change emphasis and graze on the greener grass of the communications industry.
Leaping markets may have been challenging for some vendors. Culturally the microwave industry has seen itself as an almost independent and isolated community. In fact, it is a complex web of interdependencies between highly specialist component manufacturers, subsystem manufacturers and large-scale equipment contractors. Nevertheless, this value chain is both complex and with its own dynamics. It's a value chain that has had to contend with meeting the mass market needs of the mobile communications industry.
Now, in a new millennium, this new report considers the current state of the market, highlights areas of activity and tries to identify the trends that are likely to shape the future. To do so, Microwave Journal has canvassed the views of executives whose companies play a key role in determining the direction and prosperity of the European microwave industry. Their individual views, offering a window into how their companies have faired over recent years and their strategy for the future, form the company round-up at the end of this report.
Of course, the microwave industry is diverse, providing components, systems and subsystems for applications as varied as automotive, telematics, medical, defence, aerospace and satellite communications. The focus of this article is on Europe but technology knows few geographical boundaries, with developments pioneered on one continent impacting on others. Likewise, global macroeconomics affect how companies adapt to the market. The result often is restructuring, partnerships, acquisitions and, sometimes, liquidation.
However, with the emphasis very much on the positive, let us take an overview of a few significant sectors of the market and the factors impacting on their development.
Wireless Technologies
It is not surprising that due to the opening up of political and territorial borders there is significant infrastructure expansion in Eastern Europe and Russia in particular. Here advantage can be taken of established and proven technology to enable relatively swift roll out of services. However, elsewhere, the situation is different with around three quarters of Europeans owning mobile phones, so in Western Europe operators are searching for new revenue streams. To this end, there has been investment in platforms and infrastructure to support new services and applications and the adoption of global and regional purchasing plans. This means that common mobile data infrastructures can be shared, rather than be sourced on a country-by-country basis. Significantly, too, GPRS networks have recently been rolled out. To say it has been smooth would be an exaggeration but initial technical difficulties of capacity, data throughput and connection robustness have been addressed.
An emotive subject for many is 3G, with critics claiming that it has been a development driven by investment rather than technology, with the emphasis being on developing business plans rather than products. Priority from the outset was to get funding from the banks to buy the licenses. Around €100 B was spent and, not surprisingly, the pressure is on to see a return for that investment. However, a common view expressed by those surveyed for this report is that one lesson that should have be learnt from the recent depressed market is realism. There is the need to go back to basics and to continue to innovate but with realistic goals. And 3G is a prime example of where this should be practised.
There will be a demand for the multimedia services and data delivery that 3G has the potential to provide but it has to be developed at the right pace, with the right products for the end-user. There is a natural progression, first developing 3G-type services using existing 2.5G technology, then doing so with 3G components. It is often forgotten that GSM was over a decade in development. The big question is that with hefty licensing loans to be repaid, the restriction of stringent licensing regulations and the pressure of bringing in revenue, whether 3G will be given such time to develop and whether operators can afford to do so?
Semiconductors
Key to the development of mobile communications has been the contribution of semiconductor (particularly GaAs) technology, both for the infrastructure and handsets. Semiconductor technology has also impacted significantly on wireless LAN and optical communications networks, as well as GPS and Bluetooth devices.
Interestingly, of all the companies surveyed for this report it is the semiconductor foundries/manufacturers (Filtronic, Knowledge*On and WIN Semiconductors) that appear to have been least affected by the economic downturn and are showing optimism. They have met the demands of miniaturisation, advanced features and faster access by increasing levels of integration, improving performance and lowering costs. The trend also appears for GaAs to follow the silicon scenario and produce larger wafers to increase functionality and reduce costs.
Technologically, the mobile handset market has seen significant advances with the requirement for size reduction necessitating the development of front-end modules that combine the different components of switch, duplexer and SAW filter into one integrated module.
Also, as illustrated by WIN Semiconductors, psuedomorphic high electron mobility transistors (pHEMT) and monolithic microwave integrated circuits (MMIC) are being used in the design of switch filter modules for the next generation of handsets. This is important as such multi-mode/multi-band handsets require the good signal isolation and high linearity that these new technologies can provide, while also benefiting from the inherent low currents and low costs. Another technology that enables the effective integration of passive components is low temperature co-fired ceramic (LTCC) technology. The development of such processes is necessary to ensure smooth transition to the next generation systems.
Bluetooth
The development of short-range wireless data networking has emanated from the desire and expectation of individuals and companies to be able to access data and information anytime, anywhere, any place. Add to that the prospect of vast numbers of mobile phones becoming Internet enabled with users being able to link up to laptops, headsets, hands-free kits and LAN access points and it is not difficult to see why there would be enthusiasm for the concept.
However, enthusiasm became hype, then over-hype for Bluetooth. Having its origins firmly in Europe, with early research and development driven by European-based companies, Bluetooth may not have lived up to early and clearly unrealistic expectations but should not be written off either. Significant progress has been made, particularly with the ratification of the Bluetooth 1.1 specification in March 2001, which marked the end of many of the technical problems.
Concerns surround interoperability, interference and co-existence. On the first point, it is perhaps unrealistic to expect complete interoperability for Bluetooth because of the diverse range of applications being developed and the software protocol differences that support this diversity. The interference issue is with other radio technologies that utilise the 2.4 GHz radio band. Due to its frequency hopping modulation scheme Bluetooth is fairly robust, but problems do exist when it hops into channels where packets from other radio technologies exist. This is a particular problem for Wireless LANs that use a direct sequencing modulation scheme such as the 802.11b standard.
With regard to co-existence, the likelihood is that technologies will co-exist to a limited degree. Both Bluetooth and WLAN will suffer signal degradation due to packet collision, with the latter seeing the greatest degradation. Efforts are being made to eliminate, or at least limit these technical issues. On the production cost side, as was alluded to earlier, great strides have been taken by semiconductor manufacturers to create smaller, more powerful and therefore more cost effective chipsets.
Defence
The microwave industry has its roots firmly in the military sector but over time, its share of the market has declined as commercial applications have grown and political changes, particularly the end of the Cold War, led to a general reduction in defence spending. Also, a number of manufacturers with a history in military microwave took the decision to take advantage of the communications boom of the late '90s, sometimes to their cost.
Such realities, together with the threat of international terrorism and the recent Gulf War, have put the focus back on defence applications of microwave systems. Indeed, the majority of those surveyed for this article saw it as an area of growth and expansion. However, Michel Begue from Agilent comments, "There has been no major variation in the size of the defence market. It is just a question of its visibility in relation to communications. When the communications market is down it is visible and when it is up, like in 2000, it is not."
It is true that the defence market may not offer get rich quick opportunities but it is a stable business offering smooth, long and predictable operating cycles. And due to global events, initiatives such as the Home Land Security programme in the US are providing opportunities for the microwave industry, not only in the US but also in Europe. On both continents, the military is funding programs that include improved radar systems, electronic warfare, space communications and defence satellite programs. Also, military communications is becoming a significant area of activity by taking advantage of the newer technologies employed in the commercial sector to improve performance and reduce costs.
Business Practices
Since the turn of the century it has not just been the technology that has moved on but also, to a certain extent, how and where business is done. There has been consolidation of the market. Against a background of uncertainty, companies have undergone rationalisation, merged or made acquisitions. And in an effort to better utilise specific skills and expertise, partnering is becoming more common.
High volume, low cost manufacturing of chipsets and the like are being increasingly located away from Europe to Asia, to take advantage of high automation and low overheads. The result being that Europe is increasingly becoming a focus for R&D. Significant too, is that the value chain has changed with outsourcing becoming more common for almost all aspects of business.
Company Survey
To provide an insight into how market conditions and technological developments have impacted on the European microwave industry Microwave Journal asked a cross-section of manufacturers how their individual companies had performed recently, and to comment on their particular sector of the market. These sectors include components, design and test, wireless short-range RFICs, semiconductors and satellite communications to name just a few. The order is alphabetical and the format is generally a brief overview of the company's microwave activity, followed by comments on technological and market developments. The bulk of the companies featured are headquartered in Europe but to reflect the global nature of the market, manufacturers from the US and Asia, generating business in Europe, are also featured.
Europe
APLAC Solutions Corp.
Finland
Against a background of fierce competition and tight production deadlines, design engineers are putting design and simulation tool developers under pressure to produce faster, flexible, high performance products. Established in 1998, the company addresses these issues by offering powerful and versatile electronic design and analysis tools for RF and analogue electronics engineers. A milestone in the company's development came in 2001 with the release of the ASB concept, which connects the powerful APLAC simulator to major design frameworks.
Areas of current activity are RF/microwave and analogue circuit simulation and design tools for PCB and IC designers. The latter having gained in strength in recent years, prompting investment in the development of a simulation engine for IC design and connectivity to third party design frames. Geographically the breakdown of business is 50 percent Europe, 25 percent US, 20 percent Asia - where there has been a slight increase over the last year - and five percent for the rest of the world.
APLAC aims to help the development of the markets it serves by offering an alternative to built-in simulation tools through connectivity and, as a consequence, lower the barrier of entry for start-ups through reducing the cost of having the capability of powerful IC design.
The company considers that communication equipment for the consumer market will be one of the main driving forces in the microwave industry in the coming years and one that will perform well. As for the future, the belief is that there will be an increase in the level of integration, which will impact on the market.
Chipcon
Norway
A young company embracing new technology and burgeoning markets, Chipcon was established in 1996 by research scientists from SINTEF, the Norwegian Technical Applied Research Institute. The venture began as a specialised ASIC design centre with the emphasis on analogue and mixed signal design. In 1998, the decision was taken to become a fabless semiconductor company. At that stage, the strategic move was made to include application specific standard products (ASSP) for short-range wireless communication into the product portfolio, having identified it as a rapidly growing market with great potential.
The year 2000 was a milestone of growth, with sales revenue increasing by 135 percent, employment by 50 percent and development of the SmartRF®02 platform, a cost-effective CMOS technology, was completed. Based on this platform a number of significant products have been developed including the C1010, the industry's first integrated RF transceiver and microcontroller.
Main markets include the communication, instrumentation, automotive, consumer and industrial sectors, with current activity being most active in the short-range wireless applications of automatic meter reading, home/
building automation, game controlling, alarm and security systems, industrial sensor networking, tire pressure monitoring and remote keyless entry. Geographically, when the company began as an ASIC design centre, the main market was Scandinavia, although this has become global with sales more or less equally divided between Asia, Europe and the US.
Current thinking is that by providing lower power consumption and low production costs there will be more applications for RFICs, and to this end the company is focusing on providing products for the 300 to 1000 MHz frequency range and for 2.4 GHz, including Zigbee compliant products.
Chipcon believes that applying submicron CMOS technology in combination with highly integrated solutions will be the key to minimising system costs as well as power consumption in a large number of wireless applications. CMOS makes it possible to embed an RF transceiver and large digital modules so that real system on chip (SoC) solutions can be implemented. The expectation is that SoCs with RF functionality will become the most cost-effective system solution for a large number of applications.
The company's take on the market is that because smaller companies tend to concentrate on one product niche and have the capability to move quickly towards providing leading technology solutions, that such small companies with a strong and clear product profile will be dominant in the short-range wireless industry. However, it also recognises the need to have some influence on the development of regulations and standards, and so is a member of the Zigbee Alliance and the Low Power Radio Association (LPRA).
As for the future, the company view is that CMOS will become the leading technology within the industry, with increased focus on low cost, low current consumption, and a higher level of integration. Possibly, there will be less RFIC suppliers as the ability to adopt new technologies becomes increasingly difficult. Another key factor will be the trend, in the short and medium range wireless communication market, to be increasingly regulated by specifications intended to establish open industry standards.
Computer Simulation Technology (CST)
Germany
"We provide design tools which let new technological ideas become reality and without new technologies our markets would simply stagnate," states Bernhard Wagner, MD, sales and marketing. To avoid such stagnation, the company operates in all markets that require 3D EM simulation in the development of its products, including the telecommunications, automotive, defence and electronics industries.
However, the emphasis within these sectors has changed recently, as Wagner explains, "Five years ago, the telecommunication market was undoubtedly CST's largest market and while this sector has become weaker over the last two or three years, others have discovered the benefits of full 3D simulation associated with virtual prototyping of designs. With the result that industries involved with EMC and signal integrity problems are now becoming key market sectors."
Generally, traditional design methods are proving to be insufficient for today's complex and compact designs, so taking 3D effects into consideration is becoming indispensable. Central to the company's open architecture policy is interoperability, which allows the tools to integrate or be integrated into other best in class solutions.
Explaining this approach Wagner comments, "Today, many applications have become standard. It is no longer a challenge to solve a patch antenna or a multipin connector, even with an unusual shape. Other structures, however, for example, a 96-pin IC package with thin bond wires or an 18-layer structure with hundreds of microstrips, are more demanding structures that need more attention and effort. For electronically large and complex structures it is not only a question of improving the 3D method but also of breaking them down into smaller pieces in order to avoid unnecessary calculation time. This requires the modern administration of various subcomponents, treatment of those pieces with various simulation methods and the combining of results. Ideally, this will include the automatic iteration of the different levels to come to an optimum design of the whole structure."
To this end, the company has invested in its Design Studio, in order to better support interoperability and to build a bridge to the circuit simulation market. The EM Studio has recently been added for the low frequency range but the flagship product is still the Microwave Studio.
Design tools are becoming increasingly important for engineers, as Wagner explains, "In the world of microwave and wireless design, the increasing need for maximum versatility and accuracy logically promotes the utilisation of best-in-class simulation tools. The combined expertise of individual vendors in their respective specialist area creates a pool of diversity in solution methods and approaches, from which the engineer may select the most appropriate one for his particular problem. The flexibility of choice guarantees a great technological advantage, but the easy exchange of data is a fundamental requirement to streamline the workflow. CST is taking on the challenge by creating a design environment, using modern communication mechanisms, which effectively reduces time-to-market."
The company serves a vast and varied cross-section of the microwave industry and therefore has a general overview of various sectors. Where it sees the major driving forces to be include the defence market due to the current global situation, the growing demand for wireless communication, the increased integration of components in the RF/IC market, the importance of EMC considerations and the recovery of the telecommunications market.
Wagner has identified the increasing need for data exchange, particularly in wireless applications and believes that seamless interaction between best in class design tools and methods will be of crucial importance to the market. That is his market view, but on a company level he says, "We think that we are on the right track collaborating with other design solution vendors, pooling our combined expertise rather than re-inventing the wheel."
e2v technologies
United Kingdom
Company changes have resulted in reassessment and refocusing of the business as chief engineer, Nigel Priestley, explains, "We came out of the Marconi empire as a result of a management buy out with funding from investment group 3i. This has made us more proactive in how we do business and although we are still heavily focussed in our traditional business sector we are more aggressively exploring new markets and opportunities now."
An illustration being the company's investment in the development of components and sub-components for automotive radar sensor applications. The belief being that the automotive industry does not fully understand RF technologies and is in need of technical support from their suppliers, and by doing so e2v technologies expects to be able to move up the supply food-chain. The company recognises the need for new technologies to help stimulate the market but Priestley cautions, "That they need to have 'real' applications, which consumers either need or would like to have."
That's not to say that the company isn't also concentrating on its main business as a specialist supplier of RF, microwave and sensing component and subsystems. Products produced range from the Stellar, high power satellite uplink amplifiers and the compact modulator for driving magnetrons in a range of linear accelerator applications to Gunn diodes, the signal source for adaptive cruise control systems.
Operating from two manufacturing sites in the UK, it has direct sales offices in the UK, US, France and Germany, strengthened by an extensive network of distributors, giving coverage in over 100 countries. It is not surprising then that around 70 percent of products are exported, mainly to the US.
The main markets operated in are defence (26 percent), industrial (19 percent), communications (17 percent), therapy (17 percent), imaging (13 percent), dental imaging (five percent) and fire (three percent), with the first three encompassing microwave products. Historically, the company has a strong presence in defence and against the background of increased activity in recent times. This is an area of significant activity.
With regards to the current driving forces in the microwave industry Priestley says, "The defence industry is in a resurgent mode as a result of terrorist activities and the resulting Home Land Security programme in the US. Investment in this sector is expected to be the backbone of the microwave industry for the short-term, while the space and communications industries will also have some influence but more likely in the long-term."
Commenting on the matter of consolidation in the industry he believes, "There is potential for consolidation, especially in the automotive sector where tier one suppliers are developing their technologies without a great deal of knowledge. Whereas in the defence and communications industry only the 'best of breed' are likely to be affected in this way."
Elektrobit Group
Finland
A product of the evolution of the telecommunications industry that began in the mid-80s, the Group was created when two expert organisations - Elektrobit, a specialist in wireless telecommunications and JOT Automation, a production automation specialist - merged in June 2002. Both companies originate from the high technology cluster in the Oulu region of Finland.
The main markets the company operates in are telecommunications, industrial electronics, consumer electronics, defence, industrial automation and automotive electronics. The first two being where current efforts are being targeted.
With business on three continents - Europe 70 percent, Americas 20 percent and Asia 10 percent - the main focus has been and will remain on telecommunication, but new areas such as automotive and consumer electronics have begun to grow. The product areas that are being invested in are test and measurement tools, such as the Propsim radio-channel simulator tool, and test systems for research and development and production.
Elektrobit sees the telecommunications market consolidating and as an R&D service provider, it envisages that new technologies will provide the opportunity to offer state-of-the-art solutions to customers. As for the future of the microwave industry, the trends that are envisaged are consolidation, continued price erosion, higher levels of integration and a move towards higher frequencies.
Filtronic
United Kingdom
The world's leading independent supplier worldwide for mobile communications base station transmit/receive modules, and a leading supplier of handset antenna, Filtronic is comprised of five divisions. These address wireless infrastructure, cellular handset products, compound semiconductors, defence and broadband communications.
Technologically, the main markets for the company are mobile communications - namely, the infrastructure and handsets - compound semiconductors and defence.
In recent years, the focus has been on mobile communications and leveraging semiconductors, with increased levels of integration and performance driving the semiconductor activity. This has meant that even during the downturn the company has managed to increase market share and volume in base station modules and handset antennas.
Filtronic is looking towards semiconductors to provide lower cost, more integrated, high performance solutions, for example, the manufacture of point-to-point transceivers that link the base stations (millimetre-wave radios). Until recently, these would have been made up of a large number of individual transistor chips put together in hybrid circuits to make the transceivers.
Chris Snowden, chief executive officer, Filtronic Compound Semiconductors, explains, "Now, like many companies we have moved to ICs but have taken it one stage further by introducing large scale (for the GaAs world at least) integration, producing quite large chips but with only two or three of them in the entire radio. This approach echoes the silicon industry, where more integration was necessary to increase functionality and reduce the cost."
The two main technology drivers for the company are currently compound semiconductors and microwave power amplifiers. The cost effectiveness and profitability of six-inch wafers is seen as the way forward, with Snowden commenting, "Again we are mimicking the silicon world, where they are now producing 12-inch wafers, having moved from eight-inch and six-inch diameter wafer production."
With respect to power amplifiers, a much higher efficiency amplifier design has been introduced, which is typically two to three times more efficient and more reliable than traditional designs for 3G and EDGE applications. Snowden believes that Filtronic will benefit significantly from this initiative.
The main driving forces for development of the microwave industry, in the future, have been identified as being mobile communications and defence/security. In particular, there is the move from 2G to 3G and potentially to 4G, in order to provide more capacity and increased capability.
The company's defence sector is expanding, notably in electronic warfare systems and the development of phased array radar modules. The approach is to lever some of the newer technologies employed in the commercial area into the defence sector, which is an expanding area due to global events over recent years. Market growth is not only notable in the US but also in Europe.
Huber + Suhner
Switzerland
In what the company refers to as the 'telecom hype' of the late 1990s, it took a step back from telecommunications and looked towards the defence and industrial markets, where there is steady and continued activity. A move afforded by Huber + Suhner's diversity of product, supplying components and subsystems for cellular/mobile communication as well as Internet/broadband systems with RF, wireless and fibreoptic applications for automotive, railways, building and civil engineering systems, together with polymer technology and cabling applications.
The company's main markets remain radio base stations, test and measurement, instrumentation, lightning protection and components and systems for defence applications, with the former being the biggest and where the company is most active.
A key area of activity is the design and manufacture of passive RF components for fixed wireless access equipment: point-to-point, point-to- multipoint, LMDS, MMDS WLL, and in particular coaxial, filter and antenna products. On the mobile communication side, there is a large product range for GSM, GPRS, UMTS, GSM-R, etc.
The main area of product development is in broadband wireless access, with the knock on effect of stimulating the associated markets for test and measurement products, antennas, interconnection components and electronics.
As for the future, Huber + Suhner sees the strongest performance in the microwave sector being for front-ends for broadband wireless and automotive applications.
Radiall
France
The view of RFI marketing manager, Christophe Masnou, is that, "Products are being standardised, resulting in a price war and market price erosion, whereby innovation becomes difficult to sell to telecom customers, with engineering efforts being biased towards cost reduction instead of new product design. Shipments to CEMs have dramatically increased in comparison to OEMs and the agility to track business movement from one sector to another is key to survival."
To address these issues the company's strategy has been to invest significantly in product innovation and over the past two years it has been prolific in connector series development with the launch of the QMA, QN, MMBX, SMP, SSMP, UMP, IMP, FAKRA and USCAR17 products. Antennas have been a focus of research and design engineers and microwave products such as lightning protectors have also received a fair share of the development budget.
As a global manufacturer of interconnect products and components the company is currently active in a diversity of sectors including terminals and PC LANs, telematics, cars, industrial electronics, commercial data communications and transportation. The reasons being a mix of long-term growth, profitability, attempts at diversification, etc.
Also, the way that new connectors impact on the markets they are utilised in is not only in lowering the installation time and cost, but also the time required by the users to upgrade or replace their equipment. As Masnou explains, "In cars, we see the increased use of RF, triggering a broader product offer in DAB radio, GPS systems, etc. However, the uncertainty remains in the terminals market where our efforts towards connector miniaturisation for PCBs may not pay off if Asian CEMs still prefer to solder a wire between two boards."
As far as Radiall is concerned, new technologies help reduce the size of the equipment (board-to-board spacing), the alignment tolerances in the back panel and improve the aesthetics of antennas in cars or WiFi applications.
Masnou believes that public communications will remain the major source of revenue despite its shaky situation at present, with the turnover generated by it still being superior to that offered by defence. For example, within the telecom market, there are some growing niches, which can compensate for those in decline.
As for the future, the expectation is for less connectors, less cable, more integration and adding functions to RF modules. In Europe, environmental, health and aesthetic issues could lead to the redesign of BTSs and associated antennas. Whereas, active antennas look promising for the air/defence industry. Also, Masnou comments, "I think it is time to move forward and propose integrated RF solutions and if differentiation cannot be achieved at the connector level, then we need to go up a level."
Rohde & Schwarz
Germany
An internationally active company in the fields of test and measurement, information technology and radiocommunications, R & S has been developing, producing and marketing a wide range of electronic products for nearly 70 years. Headquartered in Munich, with subsidiaries and representatives in over 70 countries, it is export-oriented - more than 70 percent of the total turnover is achieved outside Germany - and Europe as a whole is particularly strong.
In the microwave field, test and measurement and wireless communication are the main markets covered, with highly technical resources enabling the company to be very active in research and development. Current activities include the development of spectrum analysers, network analysers, mobile radio test equipment, signal generators and power meters, emphasising its broad product offering.
True to its slogan of pushing limits, the company uses new technology to build in functionality for users. Sometimes this may not even be used to its full potential until a later date.
As far as markets are concerned, the company view is that there is expenditure in the defence and communication sectors, with the latter being on the rise. The drivers for this being the need for increased bandwidth, while the downside is reduced margins due to the demand for increasingly lower costs. It also sees future trends to be the move to higher frequencies and communication in the microwave bands.
Temex
France
Since its foundation in 1958, Temex (part of the Tekelec group) has based its success on providing international markets with innovative technologies and products. It designs, manufactures and markets a whole range of microwave components and subassemblies and time-frequency products for a wide variety of applications, including telecommunications, defence, scientific and aerospace.
Significantly, 2002 saw Temex and Thales finalize an agreement concerning their businesses related to the design and production of radio frequency components for mobile telephones and telecom infrastructure networks. The result being the acquisition of Thales Microsonics, one of the world's major manufacturers of surface acoustic wave (SAW) components and high frequency voltage-controlled oscillators/phase-locked loop (VCO/PLL) modules.
The company operates in the telecommunications, consumer, medical, military and space, home convenience, home automation, remote control, automotive, telemetry and instrumentation areas. Historically, the telecommunications and the military and space sectors have been strong and continue to be so, but in recent years medical, ISM applications, automotive, alarm, home convenience and home automation have taken on greater importance.
Active in every industrial country and with sites in Europe, the US and Asia, the company's products are available in more than 70 countries. The current breakdown being: Europe 42 percent, Asia (without Korea) 20 percent, Korea 17 percent, North America 19 percent and the rest of the world two percent.
Following the philosophy that new technologies can stimulate the market by reducing costs and improving performance, current investment is targeted towards ISM. The company envisages consolidation in the next few years and the main driving forces for the microwave industry in the future to be in the defence and telecom markets. The drivers for defence being safety and security and for telecommunications, the emergence of new services such as data and video.
Thales Electron Devices
France
The company's core business is related to high power microwave and RF amplifiers, and in recent years the general trend has been to move away from single component to complete functionality in all applications. This fits in with Thales ED's customer strategy to buy more added value equipment. By following this path over the last five to ten years the manufacturer has improved its position in electronic warfare, has consolidated its leading position in space products and drastically contributed to major progress observed in high frequency/high power applications such as plasma heating for fusion.
Thales ED operates worldwide in microwave and RF applications as a provider of amplification sources - electron tubes, amplifiers and associated devices - which are integrated into a large range of transmitters that are designed and manufactured by OEMs and system manufacturers. To service these markets the company is investing in improving performance or offering new products in the high power/high frequency range for all applications, with this being extended to the amplifier level in some dedicated sectors.
The rational behind this being to make significant progress in various market sectors. As an example, Thales ED products recently contributed to a world record in plasma heating in fusion equipment; providing a high level of quality in satellite digital audio broadcasting services thanks to very high power space products, (XM radio); extending the operational use of an electronic warfare subsystem in extremely harsh environmental conditions; and developing a new telecom equipment design with multifunction products.
Defence and communications expenditure are seen as being key driving forces in the microwave industry with scientific, medical and industrial sectors considered to be potential areas of growth. In the electron tube and devices field, the market has been consolidated compared to other microwave components and technologies, with competition being limited to a relatively small number of players in Europe, the US and Japan.
As for the future, Thales ED believes that the consolidation of the European defence sector would certainly influence the microwave industry in Europe. Also, the end of the telecom crisis and the development of new satellite navigation-positioning constellations (Galileo, GPS 3) would have a positive impact on the industry as a whole.
On a business level, the strategy is to keep close contact with customers and/or users and to maintain its development capabilities in order to support them in the evolution of more added value products and services. In addition, it hopes to benefit from the diversity of its technology and wide customer base to diversify its offering with ion thrusters being just an example.
US/International
Agilent
Spun off from Hewlett Packard in 1999, the company delivers innovative technologies, solutions and services to a wide range of customers in communications, electronics, life sciences and chemical analysis. For this article, the focus is on the test and measurement activity and particularly the wireless business unit group, which is divided into four product areas. Mobile Communications covers cellular - namely 2G and 3G - while Emerging Communications encompasses WLAN and in some ways 4G, and triband. Defence electronics includes a fair amount of microwave, particularly for communications, and then there is general purpose RF testing.
The test and measurement market has suffered particularly in the downturn, and as Michel Begue, Wireless market segment manager, European Marketing Organisation, comments, "It is back below the level of business of '93/'94. There was huge growth from '97 to 2000, which was all lost in a year and a half, to return to '93 levels. The growth was driven by wireless applications, which has fallen off, and optical applications, which are now almost non-existent."
He continues, "Manufacturing in RF, microwave and wireless is moving to Asia, where there is volume sales. There has been a complete change in the value chain since 2000, which is why we have refocused on R&D but it has to be remembered that manufacturing is volume sales while R&D is not. The demand is to develop cheaper products, which is a real challenge in T&M manufacturers and the concern is to be able to evolve products with the same quality and performance while keeping costs low."
The company strategy is to have basic platforms for basic functions in microwave and RF for network analysers, spectrum analysers, sources and RF communications testers. The aim being to limit the number of platforms, while covering the complete T&M market. In each product focus the intention is to have two platforms, one at entry level, the other high performance.
Begue believes that for the high-end applications, the baseband is key as RF and microwave tools cannot be addressed without considering the baseband software associated with them. Indeed, he sees technology development being in software and firmware. He explains, "It is a lot easier for people to envisage technology with a chip rather than software and firmware. However, we need to take a look at the development of software defined radio and develop 'software defined instruments.' For instance, if you take our radio communications tester it can be used for any cellular market - 2G, 2.5G, 3G, CDMA, TDMA and GSM, just by switching the software. What is needed are instruments that have platforms with architecture that can transfer the function definition in the software domain."
In the defence market, the important developments are seen to be in communication, which is being influenced by commercial technology, with its relatively low costs. On the product development front, with validity for both the communications and defence market (whether radar or defence communications), signal bandwidth is considered to be a critical consideration. Begue explains, "This is where we have been focussing the development of our high end products to have more and more bandwidth capability. We have a microwave source with very high bandwidth modulation capability and a spectrum analyser. However, at the low end the strategy is simply low prices."
As far as the future is concerned he comments, "I feel 3G has a future once the marketing has built the right penetration, with a good deal of development effort needed to be spent on the content of the services. There needs to be a critical mass of services, then attitudes will change. As soon as images are included, then you need high data rates and this is coming.
"Also, as a test and measurement company we do not drive the end user market and must follow customer applications. Therefore, we need to be able to design products with the best technology at the minimum cost, to meet customer requirements."
Crane Aerospace & Electronics
Formed in 1999, the company, part of the Crane Co. Group, combined the experience of seven long-time industry leaders: Eldec, Hydro-aire, Lear Romec and Resistoflex from the aerospace sector, and General Technology, Interpoint and Signal Technology from the electronics sector. At present business comprises 75 percent domestic and 25 percent international but with increasing international activity.
Its main markets are in defence, namely electronic warfare (EW), radar and communications. EW has always been strong historically, added to by upgrade activity. Radar, missile applications and communications in secured terminal applications are all growth segments. However, the emphasis over the last few years has shifted from sophisticated EW suites to data links and unmanned vehicles.
Asked to identify areas of product investment, the answer was major subassemblies - receivers, LRUs, etc. - and data link converters, which represent new product sets consistent with current market demand. As far as stimulating the market is concerned, what is deemed necessary is the development of chip integration technologies to drive size, weight and costs, and low cost packaging.
Crane envisages the strong performers in the microwave sector to be smart weapons and data links but warns that the fiscal drain resulting from the [Gulf] war effort will challenge system companies and their supply base to meet government targets to field affordable weapon systems. Long-range radar (ground and sea based) is seen as a weak area of the market.
As for the future, lower costs and higher integration are identified as trends that will influence the industry and when asked to choose a technology strategy that the company would adopt in the future the answer was shifting higher frequencies to SMT- based products.
Asia/International
Anritsu Corp.
Japan
In operation for more than a century, the product offering is extremely broad and provides solutions for many different applications in five core market sectors - the RF/microwave, commercial wireless/cellular, optical, defence and aerospace markets. This spread and diversity is seen as a means of providing stability and although active in all target markets, the majority of the company's new introductions have been geared towards the high frequency market, such as applications above 65 GHz and high bandwidth optical applications.
For example, there is the Integrated V connector and VPTM connectors. Both of these connectors are used as RF input connectors in 40 Gbps optical modulators as well as traditional microwave applications where high performance at frequencies up to 65 GHz is needed. Also, newly launched is the W1 connector family, which is a complete coaxial interface system that produces good RF performance up to 110 GHz. The range has been developed for high frequency applications ranging from components to systems and instrumentation.
Considering how new technologies can stimulate the market Frank Tiernan, general manager and senior VP for the Microwave Measurements Division, comments, "We believe that the technology is already in place, especially in the commercial market and it is simply a matter of making it more affordable and more appealing for the end user. There are indications that the consumer market is gaining momentum so it appears that we may be close to the price and/or performance that will spur activity.
"In the microwave/RF and military markets, technologies continue to drive the market. And their utilisation in applications ranging from medical and automotive to homeland security systems is creating opportunities for us. Also, new technologies will improve component performance, which, in turn, will lead to system performance improvements."
Anritsu believes that price has never been more of an issue than it is at present but can be counterbalanced by offering distinct performance advantages. On the strengths and weaknesses of the market, the opinion is that subsystem development probably offers the best opportunity, particularly high power components and frequency translation devices. The weakest will be discrete components that can be replaced by integrated circuits. Also, Tiernan believes, "The area that will remain weak will most likely be the test market. The dual factors of the capital expenditure required for many test solutions and the continued availability of low cost test instruments through auctions will result in the test area remaining stagnant. Test providers must develop unique application-specific solutions or truly innovative products to survive this period."
Anritsu is a global company with offices in 18 countries and a geographical balance of business. Presently, the Americas have the largest percentage, followed by Europe, Japan and Asia, which is currently the fastest growing market. Generally, the company expects to increase its market share in the emerging high bandwidth/frequency applications market.
In order to reduce costs and expedite the time to market the company sees partnering as being a viable option, with companies working together to develop solutions. Its philosophy is also to concentrate on developing products and technologies with distinct appeal that will have specific advantages to the customer.
Knowledge*On
Korea
Founded in 1988 the company offers GaAs foundry services for the wireless industry, namely mobile communications, wireless local area networks and optical communications, etc. As a foundry company, its main markets are in high frequency RFICs (up to 20-30 GHz) with applications in the mobile set and wireless LAN, where high volume production is required. Such demand has meant that the main applications of compound semiconductors (GaAs) have moved from the military to the commercial but there is still some demand from the military.
Knowledge*On has customers in Europe and Asia, particularly Korea, but its major customers are in Japan and the US, with Japan having overtaken the US in recent years. Wherever it is required, the company provides a GaAs InGaP HBT foundry service, with current investment being to develop better processes.
The company believes that the introduction of such processes will change the market share of compound semiconductors with some products being replaced by cheaper ones, exhibiting the same or a better performance. Also, new technologies will accelerate the reduction of production costs so communication devices for high frequencies will be popular.
Mobile communications is seen as being the driving force in the microwave industry in the future with a move away from the person-to-person communication service of today, towards device-to-device, or system-to-system communication. Also, Knowledge*On's view is that, over the next few years, changes in the materials used for microwave devices will have a significant effect on the industry.
WIN Semiconductors
Taiwan
With the explosive growth in broadband applications and the increasing demand in the wireless communications field (including cellular/PCS handsets and systems), the company offers GaAs process technology for the production of high frequency, high power and low noise products for these applications. It is developing microwave device technologies that cover the frequency spectrum from 50 MHz to 100 GHz.
These HBT and pHEMT devices can serve many popular and rapidly growing markets. For example, Ka-band pHEMT technology is suitable for the LMDS market, while switch pHEMT technology is suitable for handset and WLAN switch markets. Both HBT and pHEMT technologies are widely used for fibre optic applications, whereas L-band HBT technology is used in high end PCS and cellular phones, low frequency wireless products and WLAN products.
Geographically, the breakdown of the company's business is: North America 70 percent, Europe 10 percent, Japan 10 percent and the rest of Asia 10 percent. However, technologically the main markets of operation are handset (PA and switch), WLAN (PA and switch), automotive, broadband wireless and satellite communications. The first two being where there is currently most activity, due to their being high volumes and high growth. And although handsets have been the growing area for GaAs technologies the company has evidenced WLAN to be picking up fast.
An area where the company is investing in development is in e-mode pHEMT and mHEMT processes, with the e-mode process enabling higher levels of integration for handset chipsets. The mHEMT process provides a cost-effective solution for OC768 and automotive applications due to it being on six-inch wafers.
The LMDS market is considered to be weak due to the growth of WLAN and WLAN+cellular, whereas satellite communications (Ka-band) has been identified as being strong, brought about by the demand for higher data rates. So too is automotive radar, where the cost of MMICs is dropping and making them more cost-effective. This reduction in the price of MMICs can be achieved due to the capability of WIN's foundry, with the potential for satisfying applications that have not been possible in the past. With this in mind, the future strategy that the company would like to adopt is the integration of MMICs with optical devices.
Conclusion
This report is not intended to be a definitive guide to all activity in the European microwave market, which is vast and diverse, but to provide an overview of the areas where there has been development in recent years and to identify future trends.
What is evident is that the general turndown in the market has brought a degree of realism to business, which was lost during the telecommunications boom. The talk is of back to basics and the development of technology to meet actual and achievable end-user needs, with the focus being on increased levels of integration and low costs.
As far as predictions are concerned, the 1996 report did not foresee the events of the turn of the century, so any crystal ball gazing is dangerous. However, in another seven years 3G and Bluetooth will have been afforded the time that it took for GSM to develop and could be contributing significantly to communications activity. The semiconductor industry will continue to move apace with the GaAs foundries moving towards larger wafers. The defence industry too will develop steadily and on the military communications side will continue to benefit from the application of commercial developments.
Acknowledgments
The author would like to thank all of those who volunteered information on their companies and the industry as a whole. Their contribution has given a rare insight into individual company strategies, their particular sector of the market and the industry as a whole.
