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A Distributor’s Perspective On Our Industry

A Distributor’s Perspective On Our Industry
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RFMW, like all electronics distributors, has a unique perspective on the markets we serve because a wide range of product offerings spans many industries and applications and because we interact with manufacturers and often their customers. From this perspective, the RF and microwave industry has been on a roller coaster ride since the beginning of the pandemic, and what it wrought continues to create ripples throughout the industry.

But despite what’s been hammered home by the media, the supply chain has yet to fall apart, and there are good reasons to believe 2023 will be a decent year for most manufacturers. I say this because I’ve spent the better part of this year on the road, speaking with the companies we represent and the consumers they serve, and the prospects are good in many sectors. So, let’s take a look.

The Defense Sector

In the defense market, a manufacturer’s perspective depends on the programs it’s involved in and how the Department of Defense, Homeland Security, and law enforcement fund them. It’s been this way throughout my years in the microwave industry:

At the moment, the defense industry is booming, partly because of Russia’s ongoing assault on Ukraine but also because this war lit a fire in the minds of America, Europe, and allies in Asia about how well they’ve prepared for such an eventuality. The answer, even in the U.S., is not very well, and in others, not at all.

As Warren Buffet famously stated, “Only when the tide goes out do you discover who’s been swimming naked.” We’re seeing that now as DoD finds itself with a shortage of the hardware required to fight a war being waged in a way most defense agencies considered a relic. As a result, it’s scrambling to keep up, which certainly bodes well for the products manufactured by the microwave industry, as nearly every air, sea, or ground platform uses the electromagnetic spectrum.

Making this horrific war appear as a benefit for industry is by no means my intention, but if anything at all positive can be gleaned from this disaster, it’s that the West has been awakened to its shortcomings, the remedies for which hopefully will save lives in future conflicts.

Space Race 2.0

The space market presents an entirely different scenario. Until NASA handed over the bulk of the work to private industry, governments dominated and funded this market. Today, the so-called “commercialization of space” has created vast opportunities for our industry as Starlink and other companies create another race in space, this time with small satellites in vast numbers designed to deliver broadband to virtually everyone anywhere on Earth.

There’s even a market for commercial SIGINT services that track everything from pirates to illegal fishing, mysterious shipments of oil, and poachers. This vast and rapidly growing market allows companies without enormous resources to build, program, and launch satellites that cost a tiny fraction of their larger geosynchronous counterparts. Another space application to watch out for is the collaboration between satellite services and terrestrial wireless carriers to allow space-to-ground service in geographical areas now covered by the wireless carriers’ cellular networks.

SpaceX and T-Mobile spearheaded this effort, but if approved by the FCC, it could expand to other carriers as well. In addition to bridging another area of the “digital divide,” it would allow first responders to locate and respond to calls from people far from any cellular infrastructure. All these applications should positively impact our industry as they all need RF and microwave hardware.

The Volatile Consumer Markets

The commercial and consumer markets are volatile by nature, a fact amply demonstrated by the transformation of IoT from simply an acronym to a massive market whose customers span applications from home automation to industrial production and agriculture. It also includes the auto industry, currently undergoing its most significant transformation since Henry Ford’s creation of mass production.

RF and microwave technology is essential to the auto industry’s success in the coming years because both the vehicles themselves and how they interact with their surroundings rely heavily on wireless transceivers and their constituent components. Consequently, as connectivity is the core element of IoT, we see the need for RF and microwave components increasing yearly in this sector, albeit with some hiccups from changing standards and competition between solutions dedicated to short-range and long-range connectivity.

The Millimeter-wave Conundrum

When the 3GPP included the millimeter-wave spectrum in 5G, it did so with full knowledge that the road to deployment would be fraught with technological obstacles because, except for some defense and scientific applications, frequencies above about 30 GHz have been mostly vacant. That said, I’m not surprised it’s taking so long for millimeter-wave infrastructure to be deployed; it’s incredibly difficult.

But to fulfill the promise of 5G and 6G, these frequencies will be essential. The good news is that in just a few years, advances unimaginable a decade ago have been realized, such as complete transceivers–including active phased array antennas–have been designed and fabricated. Multiple companies are now making RF front-end modules for the frequencies, and techniques such as repeaters are reducing the number of small cells required to cover a given area.

Yes, Cable

You don’t have to be an avid news reader to know that cable TV, as we’ve known it, is about to disappear because the value to providers is inversely proportional to the number of subscribers, who are increasingly “cutting the cord.” The result is that a growing list of major cable companies have dumped their channel line-ups and replaced them with streaming content aggregators such as YouTube TV.

But keep in mind that while content delivery is changing, the way it gets to consumers isn’t because you still need broadband delivered either by hybrid fiber coax or fiber to the home. This means that coax and fiber will remain the de facto solution until (or if) this content is delivered exclusively by wireless technology. It’s good news for the microwave and optics industries, whose components will continue to be needed for decades.

In short, I’m optimistic, and while you may disagree with some of the points I’ve made here, it’s hard to disagree that there’s good news ahead for our industry, because while the markets I’ve covered are likely the most substantial, there are many more as well, each one producing revenue that collectively adds up to hundreds of millions of dollars.

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