While 2009 was disastrous for companies selling commodity board products to the telecom and industrial markets, the members of the VMEbus International Trade Association (VITA) had an excellent year selling VME, VXS, and VPX products to the military and aerospace segments.
About $500 million in VME, about $20 million in VXS, and about $80 million in VPX can be expected to ship in 2009. The VME products are mostly VME64-based.The VXS products are VME boards with serial fabric protocols on a P0 connector. And, the VPX products are the latest pure serial fabric-based architectures for very high-performance systems.
Most of the VME64 shipments in 2009 were upgrades and refreshes to existing military systems. In 2010, these up-grades and refreshes will continue, possibly led by the KC-X tanker upgrades (all VME). A few VXS-based design wins could go forward in 2010, but they are smaller programs.
The bulk of new design wins in 2009, primarily in the military and aerospace environment, have been with VPX. VITA members have rolled out many new products based on VPX technologies in the past several months, and the technology is being widely embraced in military and aerospace applications.
One major setback in 2009 significantly affected VPX sales, though. The Department of Defense (DoD) pulled the funding for the Future Combat Systems Ground Vehicle Program (FCS/GVP), primarily because the contracts with the lead system integrators (LSIs) did not give Secretary of Defense Robert M. Gates the control he wanted.
That would have been more than 80,000 VPX boards deployed in one program. The FCS/GVP missions and technology are now being re-evaluated and will probably come back online sometime in the 2011-2012 timeframe. Meanwhile, we see design-ins and great opportunities for VPX in unmanned aerial vehicles (UAVs), signal intelligence (SIGINT), radar, sonar, and high-performance communication systems.
Two major shifts are impacting our industry. First, the new administration in the White House prefers diplomacy over military action. Second, a change in DoD budgeting from weapon systems to intelligence systems is causing a resulting shift in where design wins are occurring.
The emphasis on intelligence systems in the 2010 DoD budget means a few new weapons systems programs that would have used VPX in 2010 will be delayed and programs with existing VME-based systems will be upgraded as needed instead. The shift from weapons to intelligence should be easy for our members because VITA’s standards efforts and focus on new technologies like VPX prepare us for the computing demand of these critical systems.
Commodity telecom-oriented board companies will try to position themselves in military and aerospace. Yet these companies are grossly underestimating the time it takes to establish a beachhead and do not fully understand or have the expertise and resources to serve the demanding military and aerospace market. I expect them to surrender in 2010 and leave in disgrace and poverty.
Total sales of VME and VPX will stay about the same or increase slightly in 2010, with VME at just over $500 million and VPX growing to about $120 million or more in the military and aerospace segment. If we have further unrest in the Middle East and increased threats from terrorists, those numbers could increase by 20% to 25% in 2010 (see the figure).
If the DoD budget direction and amount stay near the same in 2011 and 2012, VPX sales will climb to 50% of our product revenue, with VME making up the remaining 50%. This is a favorable scenario versus the telecom board sales decline by over 70% and industrial board sales decline by over 35% in 2009.