Optics and photonics are the components and subsystems of the military's most advanced force-protection, guidance, and communication and visualization systems. The U.S. military is the largest consumer of these systems, and therefore, it's not unusual for companies that design, build, and sell these systems to base their business strategies in large part on the U.S. military mission.
Recent U.S. involvement in Afghanistan and Iraq, along with a shallow economic recession and uncertain rebound, has become a source of concern for optoelectronic companies that sell to the military market. The common worry is this: wars demand gas, boots, and bullets, usually at the expense of new technology and system development. In response, highly placed U.S. military officials point to increases in funding at the Defense Advanced Research Projects Agency (DARPA) as proof that these worries are unfounded. Meanwhile, industry analysts describe cyclical military R&D budgets, adding that military funding remains strong across the board despite federal budget concerns.
While the much-anticipated spend from the new U.S. Department of Homeland Security (DHS) has yet to materialize, analysts say U.S. military R&D and procurement are expected to remain steady. "[U.S. defense] budgets are solid," explains Richard Sterk, defense electronics group leader at analyst firm Forecast International Inc. (Newton, CT). "I don't see any massive or drastic cuts to anything that shouldn't have been cut."
While reiterating the common wisdom that the highly politicized DHS spend has funded local manpower, explosives detection and baggage screening systems at airports and ports, and little else, Sterk believes that electronics and optoelectronics are among the biggest technology winners in military budgets in the United States and around the world.
"Electronics will take the least amount of hits across the board because many of the [Department of Defense (DoD)] reductions are related to new platformsships, aircraft, tanksand that means the military has to support equipment longer," Stark says. "So we're seeing more upgrades than new platforms." Increases are likely for systems in production that have proven their worth to soldiers on the ground, such as night vision and related systems.
In a recent report on electro-optic (EO) military expenditures, Forecast International analyst Andrew Dardine predicts global expenditures on EO systems will total more than $9.5 billion by 2014. The four major night vision development programs in the United States are expected to total $674 million by the same year. Dardine also points to Canada's recent $19 million order for 5000 night vision units, and similar orders from Jordan and the United Arab Emirates, as evidence of healthy EO markets for military systems around the world. "It is those systems, that help military personnel conduct surveillance and targeting missions in otherwise blind sectors of the battlefield, that have been placed on a fast track for production and procurement," Dardine says.
Regarding R&D, Forecast International's Sterk points out that most DoD R&D programs last 10 years, so the DoD can borrow funding for more immediate needs in the early years and make up for it in later years, in some cases. "There may be some cuts, but delays are more likely in long-term R&D programs," he says. oe