EIA: defense spending for electronics set to edge upward through 2008

Nov. 1, 1998
ARLINGTON, Va. - The electronics content of the Defense Department budget will creep up over the next 10 years, according to estimates from the Electronic Industries Association (EIA) in Arlington, Va.

By John Rhea

ARLINGTON, Va. - The electronics content of the Defense Department budget will creep up over the next 10 years, according to estimates from the Electronic Industries Association (EIA) in Arlington, Va.

Today 22 percent of the defense budget goes to electronics; by 2008 24 percent of the budget will go to electronics, EIA analysts say.

This projected increase in military electronics spending is despite the expected decline in overall defense spending during the next decade, says the annual EIA 10-year defense forecast, unveiled Oct. 29.

The forecast projects total defense spending to continue its post-Cold War decline from $261 billion in to $253 billion 2008. The figures are in constant 1999 dollars, which would amount to $310 billion in current dollars in 2008, based on the association`s estimation for inflation.

The electronics content over the same period would rise from $57.6 billion this year to $61.7 billion in 2008, again as expressed in constant 1999 dollars, which would amount to a 0.8 percent compound annual growth rate.

The growth in the electronics content of DOD`s operations and maintenance (O&M) and procurement accounts will more than compensate for a slight decline in projected spending for research, development, test and evaluation (RDT&E) electronics spending, says Richard Wieland, project manager at Raytheon Systems Co.

Spending for O&M electronics is due to rise from $19.1 billion to $21.1 billion over the 10-year period, says Wieland, who is with Raytheon`s Arlington, Va., office, and the lead analyst for the DOD portion of the EIA forecast.

Meanwhile, DOD spending for electronics procurement is expected to be up from $19.8 billion to $22 billion between 1999 and 2008, Wieland says. The decline in electronics for RDT&E is expected to be from $18.7 billion to $18.5 billion.

This is still a far cry from the massive DOD outlays in the Cold War decade of the 1980s, but Wieland says he sees pockets of growth in the modernization and digitization of existing weapons systems.

Wieland sees opportunities for the electronics industry in the U.S. Army`s digitization program and the upgrades to its United Defense LP M2A3 Bradley Fighting Vehicle and General Dynamics M1A2 Abrams main battle tank.

Other industry opportunities, Wieland says, involve such new programs as the Future Scout Cavalry System and the Crusader artillery system.

The U.S. Air Force should also be a good customer as its leaders wrap up their transport aircraft programs and switch to production of the F-22 fighter. The U.S. Navy is not expected to be as strong a factor as the other services, Wieland says. The Navy`s major new platforms of the period, aircraft carriers, will require larger expenditures for nuclear propulsion systems and steel hulls than for shipboard electronics.

One of the factors in the overall equation is commercial off-the-shelf (COTS) technologies, which are being employed in many of the new platforms and upgrades. "COTS does have a tendency to drive down expenditures," Wieland notes, adding, however, that COTS also makes some programs affordable.

He cites the growing complexity of weapons, which translates into an increase the electronics content, and such programs as the national and theater missile defense efforts, which require powerful computers and ground-based radars. These efforts also require sophisticated missiles with corresponding increases in electronics content.

Within the O&M category, Wieland says he sees a trend toward more electronics for test equipment to improve reliability and maintainability. He also sees increased emphasis on simulation and training, which he says are other prime candidates for COTS (see feature page 15).

In his analysis of platforms, Wieland says aircraft will have more electronics than ever before over the next 10 years. While today the costs of aircraft traditionally are 30 percent, that figure could grow to 40 percent by 2008.

Ships and ground vehicles continue at their historic level of about 25 percent electronics content while missiles (and particularly smart munitions) are increasing from 50 percent to nearly 60 percent.

The systems with the highest electronics content historically have been spacecraft (80 percent) and the "black," or special operations, programs (70 percent). These percentages are remaining consistent, Wieland says.

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