Cross-border A&D JVs continue to be an important vehicle for international expansion.
According to the analysis by Deloitte, Many nations are investing in science and technology and proudly tout their aerospace and defense progress. As a result, A&D companies focusing on international expansion are doing so through cross-border joint ventures (JVs) to create value.
With the US and European A&D sectors maturing, companies from these regions are increasing their focus on international growth opportunities in markets such as India, China, and the Middle East.
Over the last 10 years, commercial and military aerospace businesses in India remained the leading segments, within aerospace or defense, to establish cross-border JVs.
Similarly, China has seen cross-border JVs in the commercial aerospace segment, followed by commercial avionics.
The Middle East has experienced large numbers of JVs in commercial aerospace, as well as weapons-related JV formations. Going forward, India, China, and the Middle East will likely lead the way in attracting JV activity, with other geographical regions following (Eastern Europe, Southeast Asia, etc.).
With India relaxing its defense sub-sector foreign direct investment (FDI) rules, entering into its A&D market is now easier. This change in policy positions the world’s biggest defense importer to become a key aerospace and defense manufacturing hub.
In the Middle East, oil price volatility, regional tensions, and the recognition of the multiplier effect of an A&D sector base are collectively expected to drive JV formation activities. China continues to make impressive progress in building a formidable A&D industrial base.
However, A&D companies and their executives need to keep key issues in mind while entering into international JVs, including geopolitical alliances, end markets, supply chains, and regulatory compliance and structure.
Report highlights include:
Lists of cross-border joint ventures in aerospace and defense, by region
Public policy developments and emerging trends
Offset frameworks and intellectual property rights rules by market
India and China lead the pack, followed by the Middle East, in cross-border joint venture activity
Cross-border joint venture activity trends by A&D segment: Commercial and military aerospace remain focus areas
How can joint ventures plan for complexity and success?
Despite the widespread availability of advanced passive sensors, which do not emit electromagnetic signals detectable by the enemy, radar remains the main sensor of modern combat aircraft. Modern radar systems offer significant performance and their associated technologies are constantly evolving.
There are still some persistent unsatisfactory features, however, frequently stemming from trade-offs between design and cost, which are the objects of continuous investigation by designers, including:
Some radars emit identical signals;
Some transmit on only one frequency at a time;
Some see only a limited area at any one time; and
Many are still subject to distortion and other aspects of signal degradation.
For these and other reasons, including operational and practical considerations, the principal requirements for future radar are:
High flexibility in signal generation and processing;
New digital components for advanced processing;
Efficient time-frequency-space coverage;
Simultaneous air-to-air and air-to-surface operations;
Low sensitivity to electronic countermeasures (ECM) and new advanced (electronic counter counter measures) ECCM capabilities;
Advanced communications and data sharing capability;
Ability to provide tactical advantages in the future net-centric battlespace;
Small volume and light weight; and
It would appear that the limitations of current state-of-the-art radar systems are likely to be overcome in the next decade, thanks to advanced concepts which include: Intelligent signal coding, multiple Input Multiple Output (MIMO) technology, digital beamforming, array imaging, and RadCom (radar and communication) techniques.
RADAR SIGNAL CODING REQUIREMENTS
One of the most important requirements for future radar is for separate coding of each transmitted signal. This requires signal compression in both time and frequency: For military applications, the detectability of this kind of signal for localisation and use of countermeasures becomes very difficult, due to their similarity to certain communication signals. For small radars, as fitted, e.g. to UAVs, this solution also increases power efficiency. Generally, signal coding selection has to consider the following characteristics: Simplicity of signal generation, processing and compression; ability to transmit information; compatibility with MIMO operations; and simple hardware design.
Several different coding schemes exist, such as CDMA (Code Division Multiplex Access), DSSS (Direct Sequence Spread Spectrum), and OFDM (Orthogonal Frequency Division Multiplexing). OFDM coding features several of the necessary capabilities, such as good decorrelation, simple processing and ease of realisation.
A technology originally developed in communications science to improve fundamental capabilities such as coverage, data rate, and signal characteristics (which are the same enhancements that future radars require), MIMO technologies have been intensively researched in recent years. MIMO radars radiate uncorrelated signals simultaneously in multiple directions or in a single direction with orthogonal polarisation. This improves coverage and the quality of the signal return quality in ECM conditions. Decorrelation between the transmitted signals is achieved by OFDM, which negates degradation in radar range resolution. The decorrelation of each transmitted signal is essential, since small, remote targets might otherwise not show up on the radar image. MIMO radar employs spatial multiplexing to split the transmitted signal into multiple sub-signals, and transmits each of them, uncorrelated, in a different beam or via different sub-channels. MIMO is a system of multiple antennas, each radiating a signal independently of the others. Due to different waveforms, the echo signals can be re-assigned to the single transmitter, thus creating a virtual enlarged receive aperture. The transmit structure of MIMO radar is characterised by the following features: Spectrally interleaved multicarrier signals; relative orthogonal positioning at each transmitter; and bandwidth for each transmitter to maintain Doppler resolution and avoid range degradation.
Bandwidth and range resolution are not affected, but require time and frequency synchronisation of transmitters. MIMO optimises wave propagation and signal processing in both communications and radar and offers multiple functionality, including multiple targets, 3D, interference reduction, and multi-path and signal-to-noise ratio (SNR) optimisation. The parallel mode sub-channels have to be highly de-correlated in time, frequency, or code-multiplexing. MIMO radars are characterised by improved spatial resolution and can also provide improved immunity to interference, clutter and jamming, while an increase in SNR increases target detection probability of detection of the targets. These systems can classify a very high number of targets by irradiating them with multiple individual waveforms. MIMO architecture provides a set of transmit and receive antennae that can view the target from different angles. The current challenge is the search for orthogonal waveforms, so as to remove interference problems between the antennae during both the transmission and pulse compression phases.
New operational scenarios demand greater flexibility and higher capacity detection for radar systems. In this context, Noise Radar Technology (NRT) allows the radar to transmit signals originating in a noisy generation process. Their nature gives these signals statistical characteristics always known in advance. The current challenge in this field is to design an architecture that can generate, with maximum reliability, specific waveforms with special properties for the use in radar detection, orthogonal to each other and in very high numbers. Combining MIMO radar requirements and NRT technology would mean being able to generate a large number of complex waveforms whose functions of auto-correlation and cross-correlation present the lowest possible lobes, with specific attention paid to a possible reduction in signal power due to the transmitter not transmitting at peak efficiency in specific conditions.
Conventional methodologies limit the effectiveness of radar scanning. One solution is DBF (Digital Beamforming), in which multiple independent beams are formed by an array of antennae, with the advantage that beam coverage can be simultaneously processed. Beamforming is the combination of radio signals from a set of small non-directional antennae to simulate a large directional antenna. This can be pointed electronically, although the antenna does not physically move. In radar applications, beamforming can be used to steer an antenna to determine the direction of the target. In digital beamforming, phase shifting and amplitude scaling for each antenna element are made digitally and the received results fused. This digital processing requires that the signal from each antenna’s element is digitized by an A/D (Analog-to-Digital) converter. The ability to measure the angle of the return signal with higher resolution, which requires accurate measurement of signal phases, from which the angle of arrival is calculated, is termed ‘super-resolution’.
The concept of combining radar and communication systems on a single platform is not new, but because of the significant differences between the two systems, has not yet been fully developed. The major obstacle was that radar and communication systems use very different frequency ranges; thanks to modern digital processing, however, the gap between hardware requirements for radar and communications systems has narrowed, and synergy between the requirements can be achieved. Integrated RADCOM systems share hardware resources and the full spectrum to fulfil both functions simultaneously. An integrated RADCOM system not only alleviates the problem of available electromagnetic spectrum, but also reduces weight and volume of the relative avionics by reusing the hardware. Today OFDM can be applied to MIMO radars to achieve both capabilities. The choice of OFDM for common RADCOM signals offers interesting advantages such as resistance to specific signal distortion (multipath fading) and a simpler approach to synchronisation. This solution provides:
Simultaneity due to OFDM-based transmit signals;
Multi-user capability without interference;
Reduced number of components required;
Higher spectral efficiency;
Higher power efficiency; and
Capacity for advanced on-board data fusion.
FURTHER TECHNOLOGY DEVELOPMENTS
A prototype of a quantum radar has been developed by the University of York. This technology has the potential to detect objects invisible to conventional radar systems, thanks to hybrid technology that uses quantum correlation between microwave and optical beams to detect objects with low reflectivity, such as stealth aircraft. The system operates at much lower energies than conventional radar, and is characterized by a special converter able to couple the microwave beam to an optical beam using a nanomechanical oscillator. This device can generate microwave-optical signals during emission, or convert a microwave into an optical beam during acquisition of the reflection signal from the target. A conventional radar antenna emits a microwave to scan a region of space. Theoretically, any target would reflect the signal to the source, but objects characterised by low reflectivity in a specific region, with high background noise and/or high levels of ECM, are notoriously difficult to detect using a traditional system. Quantum radar operates more effectively and exploits quantum signals to enhance sensitivity and detect small return signals from a very noisy environment. Further studies are being directed towards a new technology known as passive radar, considered one of the emerging technologies in military radar applications. While traditional radar emits electromagnetic signal in operation, passive radar is able to use existing electromagnetic signals from the atmosphere to support imaging and tracking capabilities. This kind of radar is also less expensive and the market is expected to be worth some US$10 billion in annual spending by 2023.
Metamaterials (advanced materials with properties that not found in nature) may be the next improvement in radar technology. Research and development using enhanced materials can drastically reduce size, weight and price of radar devices. With these physical, operational and cost shifts, metamaterials-based radar systems could be applied to mini-UAVs. The technology promises significant cost savings for these kinds of sensors, allowing very advanced radars to be produced for a few thousand dollars once the technology has been matured.
Improvements in radar systems are not only taking place on the hardware-digital side. The enhanced transmit/receive and computer-processing technologies of modern radar system are also giving rise to imaging radar system that produce high-resolution pictures from return signals. Signal-processing designers are working on an advanced technology known as ‘circular synthetic aperture radar’ (also known as circular SAR and video SAR). This technology allows for a 3D image based on successive layers of radar data. Although radar imaging is not a new technology, it is now possible to obtain high-quality images in real time, since processing time is less than aperture time and image generation is very close to real time.
The next decade will be a very important period in radar computing and for avionics in general. For radar systems increasing demands will continue for processing power in the following fields: wideband operation, sensor fusion, cognitive sensing, platform networking, autonomy, passive capabilities, artificial intelligence. Wideband multifunction operations in particular will maximize some fundamental functions relative to digital beamforming for multi-sensor applications. This also imposes a further need for wideband frequency agility and offers an opportunity for much greater integration between radar, ECM/ECCM, and signal intelligence.
Both quantitative and qualitative aspects of sensor fusion will also change significantly in the future. This is due both to improvements in radar characteristics and relative processing power, and to the increase in data volumes emanating from networked platforms, as well as advanced requirements to provide data to systems operating as expert or artificial intelligence systems, such as the Artificial Neural Network (ANN).
In conclusion, future radar will: Be completely digital; transmit/receive coded signals; operate in an MIMO mode; have wider simultaneous coverage; have a virtually increased array size; work with an unlimited numbers of targets; be mono-, bi- or multi-static; be achieved with metamaterials; transmit information and communications; be more energy efficient; and be cheaper and smart.
Why do so many aerospace and defense (A&D) companies “stay the course”?
Why do so many aerospace and defense (A&D) companies “stay the course” when faced with disruption, sticking with strategies and business models designed for a different era? New Deloitte research found that A&D companies that adapted their strategies and business models significantly outperformed those that didn’t.
Shifts in demand trigger new eras
Why should A&D company executives who have traditionally “stayed the course” consider changing strategies and business models now? Because today’s convergence of disruptive factors will fundamentally change the way the A&D industry is structured, operates, and performs. Sticking with the status quo—or just making small adjustments—won’t be enough to maintain market leadership in the next era of A&D.
To outperform the industry, A&D company executives should take bold steps. In our experience, many companies hesitate to launch new strategies because they lack a systematic set of defined alternatives. This report outlines alternatives to consider, ranging from the most passive (e.g., stay the course) to the more active (e.g., restructure portfolio). Our findings suggest that companies choose a strategy that actively creates value.
Time to outperform the industry
The bottom line is that the inevitable march of commoditization has finally arrived on portions of the A&D market’s doorstep. It’s changing the fundamental basis of competition in the industry and shaking the foundation on which many companies have based their strategies. Staying the course isn’t an option.
Companies that embrace the fundamental disruption in the market have an opportunity to gain market leadership. By rethinking their strategies and business models, they can improve financial performance and outperform the A&D industry over the next decade.
The 2017 Global aerospace and defense outlook by reviews the industry’s financial performance in 2016 and expectations for 2017
The analysis by Deloitte outlines a long-term forecast for aircraft production, as well as an analysis of global defense spending. It also provides perspectives on defense contractor expectations, growth in travel demand driven by wealth creation in Asia and the Middle East, and observations on what travel demand means for the commercial aerospace sub-sector.
This year’s outlook finds global aerospace and defense industry revenues expected to resume growth, driven by higher defense spending.
Trends forecast a return to growth
The global aerospace and defense industry is likely to experience stronger growth in 2017. Following multiple years of positive but a subdued rate of growth, the report forecasts the sector revenues will likely grow by about 2.0 percent in 2017.
The global A&D sector revenue rebound is attributed to a number of factors in both the commercial aerospace sub-sector and the defense sub-sector. Key findings are as follows:
Commercial aerospace sub-sector analysis
Stable global gross domestic product (GDP) growth, relatively lower commodity prices including crude oil, and strong passenger travel demand, especially in the Middle East and Asia Pacific regions, will likely drive the commercial aerospace sub-sector growth.
Despite an expected increase of 96 additional large commercial aircraft being produced in 2017, continued pricing pressure and product mix changes by airline operators will likely result in only a marginal increase of 0.3 percent in commercial aerospace sub-sector revenues.
Defense sub-sector analysis
Defense sub-sector revenues are likely to grow at a much faster 3.2 percent in 2017 as defense spending in the US has returned to growth after multi-year declines in defense budgets, and future growth many be driven by the new US administration’s increased focus on strengthening the US military.
Rising global tensions have led to increasing demand for defense and military products in the Middle East, Eastern Europe, North Korea, and the East and South China Seas. This is in turn resulting in increased defense spending globally, especially in the United Arab Emirates (UAE), Saudi Arabia, South Korea, Japan, India, China, Russia.
US aerospace and defense export growth faces global competition
US aerospace and defense industry export and labor market study by Deloitte
The US aerospace and defense (A&D) industry has been a significant contributor to America’s net exports, a top employer, taxpayer, and major contributor to the nation’s gross domestic product. However, recently we are seeing a slowdown in the industry.
A strong US dollar, increasing global competition, and decreasing export financing are causing US aerospace and defense (A&D) industry export growth to decline. At the same time, employment in the US aerospace and defense sector has declined significantly over the last five years, much of it due to budget sequestration. What can the industry do to change course?
Our latest aerospace and defense industry study includes developments and trends from two important focus areas in the US aerospace and defense industry: employment and exports.
Last year, we developed two separate reports that highlighted industry trends in both of these areas. This year, readers who download the report will experience the same beneficial information tied together in one comprehensive report.
Report findings include:
Export growth slowed at 1.7 percent in 2016
Exports directly supported 1.42 million jobs in 2016
Net commercial exports rose sharply in 2016 by $9 billion or 12 percent
US Foreign Military Sales declined by $13 billion or 28 percent in 2016
Total employment in the US A&D sector decreased in 2016 by 0.3 percent
Direct and indirect jobs lost in the defense subsector between 2011 and 2016 totaled 165,044
According to the study by Deloitte ,in the aerospace and defense industry, mergers and acquisitions (M&A) as we know them have recently changed. Instead of megamergers for the purpose of cost savings and synergies, current aerospace and defense M&A activity focuses on acquisitions that deliver new products and offer expansion into markets such as Asia, the Middle East, and beyond.
Near-term aerospace and defense M&A is likely to focus on growth.
Megamergers are likely to decrease in frequency while acquisitions of smaller targets could increase.
Acquisitions will be used to gain new capabilities, access emerging technologies, and geographic expansion.
Joint ventures and partnerships could replace outright mergers and acquisitions in some instances.
Defense subsector expands, while Commercial Aerospace growth slows down
According to Deloitte Aerospace & Defense Financial performance study:
Global aerospace and defense (A&D) sector revenues grew by 2.4 percent to US$674.4 billion in 2016, slightly above the estimated global domestic product (GDP) growth of 2.3 percent.
The top 100 companies analyzed added US$15.7 billion in revenues, with growth primarily driven by the European commercial and US defense subsectors. In terms of incremental revenue growth by segment, the original equipment manufacturers (OEMs) and electronics segments were the top contributors, adding US$3.4 billion and US$3.7 billion respectively.
Here below you can find key insights
Global aerospace and defense sector revenue growth is slowing, marginally outpacing global GDP growth
European A&D sector revenue growth continues to outperform the US sector
The global defense subsector continued to recover as global defense spending increased, especially in the United States
Global commercial aerospace revenue growth slowed from 6.3 percent in 2015 to 2.7 percent in 2016
The OEMs and electronics segment experienced incremental revenue growths
Global defense operating margin growth strengthens as the commercial aerospace margins tighten
Propulsion segment was the leader in operating margins. However, Tier two suppliers now rank second
Sector productivity experienced a moderate improvement in 2016, led by strong growth in Europe
Debt levels continue to rise as companies increase leverage to finance acquisitions, share buybacks, and develop new and innovative products
US and European A&D stocks outperformed their respective market indices