NF: How has the test and measurement industry changed over the last 30 years?
JR: When Giga-tronics was founded, the microwave test industry was much less mature than it is today. The microwave field was evolving rapidly with product advancements occurring on a regular basis. In 1980, a few milliwatts of power at 20 GHz were difficult to achieve and the best synthesizers could fetch up to $70,000 apieceplenty of margin to support multiple participants and healthy profits. Newly designed equipment was just beginning to take advantage of the microprocessor to enhance calibration accuracy and allow for automated control, which opened many military and commercial applications.
Today, the industry is characterized by a few major players who together own somewhere between 70 to 75 percent of the microwave test equipment market. Capitalization requirements to enter and obtain a leadership position in this business are much higher today due to product complexity and existing entrenched competitors. A 20-GHz synthesizer has gone from "black art" to "commodity" (with vastly superior capability selling for less than half the 1980 price without adjusting for inflation) since Giga-tronics first entered the market.
NF: Let's talk about the company. After restructuring in 2006, you have co-located everything but the component business, correct?
JR: That's right. When I became CEO, Giga-tronics was conducting business as three separate companieseach with its own product line. This isn't necessarily a bad approach until you find yourself without sufficient volume to sustain the extra infrastructure, which is exactly where the company was in 2006. Besides collocating as much as we could, we built a single leadership team. Now we are able to select the best investments looking across all our markets and apply our resources to match the real opportunities available. The facility that builds our components operates strictly as a manufacturing organization with most of the support functions, such as sales and marketing, order entry, purchasing, etc., coming out of our main location in San Ramon, CA.
NF: As a result, did your employees gain knowledge about the various product lines?
JR: Absolutely. Besides the efficiencies gained by cross-training our direct employees on all the different products, our management team gained an appreciation of the unique value proposition offered by each of the businesses. We found out there were a lot of synergies we had been missing and we've taken steps to offer our customers more complete solutions rather than just separate pieces.
NF: Giga-tronics is uniquely positioned because of its goal of offering customized products and its status as a switch and instrument provider. What customer solutions has that enabled you to provide?
JR: At the most basic level, we tailor our general-purpose test equipment at the request of our customers. For example, we are often asked to emulate obsolete equipment or add special features so that an upgrade can be made without affecting a test system's software. In one case, we were able to replace three obsolete instruments with a single Giga-tronics microwave generator. At the more complex level, we custom design many of the switching solutions we deliver because the customer's DUT is always unique. We are in the process of delivering a switch design that helps a semiconductor test provider deliver a solution for testing high-speed data storage components. Also, I can't tell you how many times we've encountered a customer who purchased a very high-performance instrument, only to destroy the benefits by connecting it to the DUT through an inferior switch. We have been able to bring our measurement knowledge to customers needing RF interface units to help them produce test systems with good signal integrity and high measurement accuracy. We don't stop with the customer requirement, but sit with them and explain any issues we see as RF and microwave engineers.
NF: In the defense arena in particular, what opportunities do you see in aircraft upgrades, such as the F-18?
JR: Although the F-18 is an older design, the RADAR and airframe upgrades it has received have made it a very capable and cost-effective multi-mission fighter jet. Giga-tronics supplies a unique, fasttuning, multi-sphere YIG filter that solves a difficult interference problem between the newly installed RADAR and the existing electronics on the plane. A number of additional airplanesincluding the F-15 and the B-52are slated to receive new RADARs as well.
NF: How exactly does the filter solve interference problems between the major airplane subsystems?
JR: The new RADARs all use phased-arrayantenna technology. They are capable of operating at much higher power levels than the RADARs being replaced. When these new RADARs fire, energy from the pulse can "leak" through a number of paths into the aircraft's self-protection electronics, inadvertently triggering a threat reaction. Our YIG filter stops the RF leakage into the self-protection electronics at the moment the RADAR fires. It then rapidly tunes clear so the protection system can function normally.
NF: What other emerging applications are you seeingdefense or otherwise?
JR: On the commercial side, the push for "always on" fast Internet connections accessed via the new crop of handhelds being produced is driving infrastructure upgrades as well as a new generation of semiconductor devices to support the many wireless interfaces in use today, such as Wi-Fi, Bluetooth, GPS, and 3G/4G cellular formats. In addition, the trend toward "software as a service" and "cloud computing" is driving the need for fast, high-density hard disk drives.
In defense, the emerging applications are in support of intelligencegathering activities for combating the global threat of terrorism and in highspeed secure wireless data communications. There are numerous programs for new surveillance electronics aboard UAVs and for wideband radios capable of delivering voice and video to frontline personnel. There is also a need for more portable test systems to keep all these things working while deployed. For example, personnel in forward positions want to carry only that test capability needed to support the assets they've taken with them. Yet full test capability is required when they return. Support systems based upon synthetic instrument principles will be key to delivering this type of scalability.
NF: Please provide your definition of a synthetic instrument and how it will impact given applications.
JR: In my view, a synthetic instrument refers to the aggregation of several different measurement assets into a common view through the use of external software. The software coordinates the behavior of those assets to produce the desired measurement function. ATE systems have followed this model for a long time. For ATE integrators, however, it's not always so easy to coordinate the behavior of various test assets into a coherent functionespecially given that today's instrumentation is typically very complicated and capable of making multiple measurements by itself.
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The synthetic concept of breaking down traditional measurement instruments into simpler blocks and then coordinating their behavior with external software is an idea aimed at designing instruments that will produce better ATE systems. Systems designed using a synthetic-instrument approach will support easier mixing and matching of capability to customer requirements. The resulting solutions will be lower in size, weight, and power consumptiongood in any situation, but essential for portable applications. And while I believe that a synthetic approach to building test equipment doesn't require any specific form factor, card-based formats for the individual test assets are an ideal approach for addressing multi-channel applications, such as electronic surveillance and RADAR target simulation. Finally, simpler test assets can be replaced without affecting the TPS more easily than when replacing a complex instrument, which helps enable the 25-year support now required by our military.
NF: What will be the direction of future development at Giga-tronics?
JR: Right now, our instrumentation and switching products use different platforms and form factors, making it more cumbersome to integrate these resources tightly together. Giga-tronics is embarking on the development of a nextgeneration platform that will support a range of test capability and connectivity to permit building high-density, scalable test systems with superior signal integrity and accuracy.
NF: What are the pluses and minuses to being a publicly traded company?
JR: Being a publicly traded company carries additional reporting requirements aimed at enhancing transparency to give investors the ability to make informed decisions. Fulfilling these requirements requires additional legal and accounting infrastructure as well as public-relations efforts because we compete for shareholders. It's best if this additional infrastructure can be spread over as large a base as possible. On the positive side, having publicly traded stock gives the company additional avenues to raise capital or grow through acquisitions. Also, being public forces you to continually evaluate what's best for the businesssomething I think isn't always done in the case of a privately held company.
To learn more about Giga-tronics, go to www.mwrf.com and check out the video interview we conducted with them before they rang the NASDAQ bell.