How Outsourcing Hurts North American Avionics and General Aviation

by Edward Prest (Sept 2010)

Airways Navigation History

Having been around aviation, electronics and software for a fairly long time, I want to comment on the general aviation (GA) avionics industry. A little history might be good to begin with.

In the beginning there was the radio beacon and the DF (manual loop direction finder) which became the Automatic DF. ...and it was good. Invented in 1921, the beacon and DF (ADF) has actually lasted an unbelievable 90 years! Now pretty much gone in the States but still used in Northern Canada, Africa - where ever a cheap ground based system is needed.

In the 1950's the VOR became the newest high technology navigator. (Conceptually, it's a continuous or variable course version of the older 4 course AN range). It was expensive to retrofit but most new light aircraft came with one or maybe two units. King, Collins and Narco having been around since this time produced good equipment all made in America. In the 1970's transistorized units became the norm and the reliability and form factor improved significantly. Between the VOR/ILS and ADF it was possible to go almost anywhere in the world and shoot approaches down to 200 feet. It still works. Usage information is delivered on inexpensive printed charts. This was all US or western based invention and technology.

The Good

In the late 1970's inexpensive boat LORAN navigation units started to be used in GA aircraft and the possibility of knowing where you are and direct flight became possible - at least under VFR rules. In 1982 II Morrow came out with their first true aircraft navigator, the 602 LORAN C receiver permitting point to point navigation. In 1983, Military GPS system ceased being solely a military system and was made available for public use in response to the Korean Airline flight 007 incident. As soon as GPS position hardware became economically available it quickly replaced the quirky LORAN engine. The next step was to add a significant data base of lat/logs for airports. Now going anywhere was getting really easy. Running on Moore's law, microelectronics got smaller, faster and cheaper. PC technology pushed a lot of this development. Certified GPS receivers became available in 1993 using the basic GPS system and full operational capacity for civilian GPS users was achieved in 1995. Another critical threshold seems to be passed in the mid 1990's - memory was becoming dense enough to start holding detailed map information inexpensively - not just simple lists of way-points. Gas discharge displays went graphic and LCD's were starting to come on board too. This allowed a moving position map and direct to navigation and the holy grail for pilots - situational awareness - was born. This was all a good thing.

The In-between Period

During this time, Narco dabbled with GPS but never put any serious investment into it. (Bendix, Sun Air, Lear, Foster stayed out or were into Omega or HF only). King made the KLN series which was reasonably successful - mostly relying on the King brand. There were really only two competitive general aviation GPS manufactures: II Morrow, started in 1982 and Garmin, started in 1990. Garmin (Swiss incorporation with 1/3 the corporate US tax rate) had access to Taiwanese investment bankers. Garmin was very successful selling consumer type GPS and grew rapidly. The FAA wrote TSO-C129a (Airborne Supplemental Navigation Equipment) around 1996 and the Garmin GNS430 came out in 1998. At that time the Garmin 430 was novel and filled a need. It was definitely game changing. II Morrow sold out to UPS in 1986 and then concentrated on UPS's delivery automation needs. UPS Aviation Technologies was then acquired by Garmin in 2003 just as WAAS was certified by the FAA for IFR precision approach use - maybe for GNS 480 WAAS technology. (The first FAA GPS precision approaches came out in in 1994). Like Microsoft's oft applied strategy, it's never a bad thing to eliminate any up and coming competition. The arguably better navigator product made by Apollo, the GNS480/CNX80, first with gamma 3 WAAS approaches and victor airways in 2003 was dropped in Jan 2008 by Garmin. Reportedly Garmins' sales force did not bother to learn the new unit and hence did not market it well and was dropped as a result of low sales. However, since then, other than WAAS, there has not been any significant development for certified GA avionics for 10 years.

There are about 370,000 light aircraft in the world, 230,000 in the US alone. This is a decent sized market for anyone. The first to market is often the trail blazer but rarely succeeds big time financially. The fact remains is that it's the company who has the best marketing and financing that will win over any technology every time. For example, Microsoft is a mediocre product technically but run by marketing geniuses and very successful.

The Bad

What happened to the innovation and competition that got us here? Don't the new glass panels count? Well, yes but mostly no. We are getting new equipment but lets face it, we had cockpit like displays since subLOGIC's FS-1 flight simulator was created to run on the Apple II (subsequently licensed to Microsoft in 1982). Thats the core graphic technology and it's been around for at least 25 years. It's the PC hardware family that makes it all run with high resolution on the latest LCD panel. The Apollo MX20 can actually get the dreaded 'blue screen of death' - just like Windows because it uses a Window system derivative. It's the cheap hardware and cheap PC software programmers driving the current glass products - certainly not innovation - but normal hardware evolution.

We all know what the lifespan of PC hardware is, don't we? Aspen (an Eclipse Aviation spin off founded in 2004) first shipped the AT300 Hazard Awareness unit in 2005 which no longer has database support. The Garmin GDL-49 fiasco also shows how quickly new equipment can expire. Some early Garmin 430/530 units are no longer supported. That should scare a lot of folks with a $30,000+ stack. Looks like a 5 to 10 year life is going to be the norm.

The Aspen PFD released in 2008 is currently a reasonable success in the GA market. At least it replaces mechanical HSI's with an electronic version that ought to be longer lasting. There is no GPS navigator in it - it's just a display with AHRS/MEMS technology borrowed from the high volume automobile industry. Ed King is likely rolling in his grave with the delays of the KFD 840 PFD and KSN 770 moving map program. It's not cheaper and no better than the Garmin G1000 family. It's not even made by King but by Crossbow Technology, who make AHRS sensors. Who would risk a Bendix/King large capital purchase? So we don't have any real competition but for little Aspen Avionics and the technology has stagnated. At least Aspen keeps Garmin honest. What gets produced actually has a fairly short life. Avionics development is controlled by the PC industry and the large foreign corporation that Garmin actually is.

The Future

Harrison Ford (a GA pilot) said recently "America (and Europe) has a great legacy of aviation. We've led the world in aviation for much of its hundred-year history". Absolutely right on. The Chinese and Taiwanese have no GA aviation experience. None. Zippo. Aviation there, until very recently, was subordinate to the Chinese military where they 'allowed' airliners to use their airspace. Lets face it, private aviation is a pretty foreign concept to any highly socialist country.

Dr. Andrew S. Grove, a towering leader at Intel for many years recently penned a fascinating commentary about the impact of outsourcing on American job creation (this from Businessweek), and the subsequent lack of ability to innovate in the sectors that have been outsourced. He challenges the belief that as long as knowledge work stays in the United States, it doesn't matter what happens to factory jobs. Grove believes that, "not only did we lose an untold number of jobs, we broke the chain of experience that is important for technological evolution." Grove makes a good argument that, over time, companies lose the ability to innovate in the sectors they outsource. I think one of the reasons this rings so true is that not only did we send the manufacturing overseas - we moved the management and research and development of it all as well. Thats the number one strategic mistake - we lost the control of it. (Supporting evidence? the apparel industry moved up the value added chain and is coming back in North America: because the innovation and creativity, branding and distribution functions never left North America - just the sewing moved).

America invented but is now outsourcing memory devices from hard drives to Flash, battery technologies, display and solar cell technologies and home entertainment of all types. America now has fewer computer manufacturing jobs than it had in the 1970's before the PC was invented by IBM. What's a real cost of outsourcing? Foxconn's Longhua factory campus in Shenzhen where they make Dell computers and iPads employs a veritable army of 300,000 employees at the one location - 800,000 in total. Foxconn will be the first million employee technology company in the world sometime by late 2011. (Indian Railways has 1.6 million employees and Wallmart has 1.4 million).

Guess whats going next? Aircraft and avionics. China already makes major aircraft sub assemblies and the little Cessna 162 airframe. All they are missing is engine technologies and we are starting to loose that with the foreign purchase of Superior Air Parts and Continental Motors. Cirrus Aircraft is shopping for foreign investment. Every Apple product and home electronic device is made somewhere in South Asia. So is anything made by Garmin and Bendix/King and it's been that way for many years now. It's never coming back.

As the real purchasing power drops on average across America by the loss of industrial jobs and the government printing fiat money, everything but consumer electronics becomes more expensive. Private pilot training starts are dropping off. It's becoming that only successful entrepreneurs and working commercial pilots will be flying in the future - those who can easily afford it or where someone else pays. The average Joe who could sacrifice a bit to fly himself will have no chance whatsoever to fly in the future. Sport aviation does not produce practical traveling aircraft. Homebuilt aircraft can produce 'fantastic plastic' but requires unusual skill sets and is certainly not for everyone.

Airframes Too

The cost of new GA aircraft relative to average income after inflation has been factored out has about doubled in the last 30 years. (A $25K 1975 Cessna 172M represented about twice the median household income ($11,800) in 75. A new $270K Skyhawk represents 5.4 times the 2009 median household income ($49,777). Surprisingly avgas has done better. Since 1980, avgas prices have increased 26 percent over inflation, while mogas prices have actually declined 3 percent). The aircraft market is loaded with older but still good single engine aircraft from the late 1970's heyday of production. When they are retired there wont be much supply of used aircraft to fill the void as there wasn't much production starting in the mid 1980's. The drop in used aircraft availability will be much more than the drop in pilot starts making aircraft more expensive still by the simple rules of supply and demand. The driver of the cost of new light aircraft are basic physics, small hand built production runs and being that it's economically non-essential in nature. Avionics demand will have to follow airframe supply.

It used to be that many light aircraft were purchased new and put on a leaseback at a school. Some were purchased for private or specific use. School use is now down a lot in the US. The few newcomers to aviation are buying G1000 glass equipped aircraft and are prepared for the high maintenance, depreciation and overhead costs associated with glass (like any SR-22's thats off warranty). Or they buy an airframe just a few years old but without the glass at a significant discount to glass.

The Fix's

Aviation is special, especially in North America. It's one thing to make high volume cell phones and iPads in Asia because thats where the largest growth actually is but quite another thing for key high technology like avionics and airframes.

Unless something drastic happens - like maybe decisive action from the highest levels of government and industry - we can say goodbye to the 'golden mountain' of aviation and avionics forever in North America. Anybody willing to predict when Boeing's demise will happen?

Notes and Updates

Nov 2010: Aviation Industry Corp. of China's (AVIC) 166-seat Comac C919 is ready to challenge Boeing Co. and Airbus SAS in the $70 billion-a-year global aircraft market. It is due to make its maiden flight in 2014 for deliveries in 2016. It will be using CFM LEAP-XC1 engines which are built by CFM, a long standing partnership between Snecma engines of France and GE of the U.S. AVIC is a Chinese government-owned holding company with diverse business interests in the aerospace sector.

Dec 2010: Teledyne Continental Motors was sold to Technify Motors, a subsidiary of AVIC International for $186 million. Terms of the sale include a commitment to remain in Mobile Alabama for an undetermined period.

February 28, 2011: Cirrus Aircraft has been sold to China Aviation Industry General Aircraft Co.(CAIGA) of Zuhai. This transaction might result in the immediate restoration of the Vision jet program.

March 2, 2011: Repairs for MX20 units with display-related faults will be available on an exceptionally limited basis. Repairs will be provided on a first come, first serve basis for all versions of the MX20 and the L-3 Avionics Systems i-linc.

April 1, 2011: Added ref to apparel industry.

Nov 1, 2011: Garmin stops production the GNS530W and when parts run out - the 430W as well. Can I now consider any 430/530 equipped plane as having outdated avionics?


Links:
The BusinessWeek article quoting Andy Grove.
A site with avionics history.