by Richard Gibbs. CEO, Filtronic
MPD: How is your company addressing the many constraints that the pandemic has placed on business operations?
Our primary concern is always for the health, safety and well-being of our staff, therefore from an operational perspective we have tackled the new constraints as systematically as possible. We adjusted to the “new normal” by quickly modifying our rules, processes, site layout and our housekeeping regimens. Our people have responded to the situation superbly well. Within our operations team we were unable to work from home and throughout lockdown they demonstrated their courage, support and loyalty, allowing us to continue to operate a 24/7 facility. Their dedication ensured minimal disruption to our customers and we have met all contractual deliveries, including key engineering dates for development projects. We have also used this time creatively, so for example, we took the opportunity to commission new capital investment and building infrastructure projects. Our rapid and successful adaptation has reassured me, and given our customers a high level of confidence in our ability to perform under the existing and potentially any new COVID rules.
Developing new business opportunities has been challenging during the pandemic. A slowdown over the fourth quarter of our financial year (March-May 2020) due to Covid-19 related constraints meant that we entered the new financial year with a slightly reduced order book compared with the prior year. There is understandably a higher level of uncertainty within some of our end-user market segments. This is pushing programs out, and some of our existing customers are not firming up their requirements as confidently as they would otherwise have done. Notwithstanding these uncertainties, we are in some robust end markets and we remain confident that the measures we have taken position the business to allow us to respond to new business opportunities as they arise.
MPD: The adoption of open architectures is accelerating in many markets, from wireless to defense. Do you feel your company and the RF and microwave industry as a whole benefit from this initiative?
The introduction of open architectures like OpenRAN into 5G networks has been accompanied by disaggregation of the base station elements into separate units—the radio unit (RU), distributed unit (DU), and control unit (CU). This adds flexibility in the ability to scale networks, and the implementation of open interfaces brings the possibility of mixing units from different vendors. This commoditization is an opportunity for smaller vendors to gain a share of the market that had previously been dominated by the major OEMs, although the greater level of competition will squeeze profit margins. For Filtronic, the greatest benefit will be the increasing demand for E-band mmWave links to connect between the units, which will now include front-haul (between RU and DU) and midhaul (between DU and CU) as well as conventional backhaul to the core and last-mile connections to small cells. Collectively these applications are known as XHaul. From representing around 7% of the wireless link market in 2018, E-band is now rapidly increasing its market share, with Dell’Oro Group forecasting year-on-year growth rates of around 36%.
We also welcome the adoption of open standards in defense systems, as they create opportunities for dual sourcing of subsystems such as transmit/receive modules (TRM) for phased array radar systems. This flexibility in the supply chain benefits both main defense contractors and their suppliers, who have more opportunity to compete in the market. With a recent investment of over $1.3 million in new assembly and test equipment accompanied by an expansion of its workforce, Filtronic has been able to significantly increase the capacity of its manufacturing facility.
MPD: Technologies such as direct RF sampling are reducing the number of analog components in receivers and, increasingly, transmitters as well. Do you feel that the “digitalization of RF” will have an impact on your business?
Although direct RF sampling is gradually creeping upwards in frequency, it will be some time before it can be used at mmWave frequencies, which is where our core transceiver business is focused. All our E-band products use direct conversion, which is the simplest wideband option and provides the most efficient use of the data converter bandwidth. At lower frequencies, direct RF sampling is a technique that could readily be incorporated into our module and radio designs and is therefore unlikely to negatively impact our business. In the case of our precision hybrid microelectronics assembly services, we are equally capable of assembling modules based on direct RF sampling techniques as those using traditional super heterodyne architectures.