Assessing the Potential for Civil-Military

Integration: Selected Case Studies

September 1995

OTA-BP-ISS-158

GPO stock #052-003-01430-1
Recommended Citation: U.S. Congress, Office of Technology Assessment, Assessing the

Potential for Civil-Military Integration: Selected Case Studies, OTA-BP-ISS-158

(Washington, DC: U.S. Government Printing Office, September 1995).
iii

oreword

he Office of Technology Assessment, at the request of the Congress, has conducted a series of assessments of the Nation’s ability

to provide for its future national security technology and industrial

needs. In the most recent report, Assessing the Potential for Civil–

Military Integration, OTA examined the potential for making greater use of

common technologies, processes, labor, equipment, material, and/or facilities to meet both defense and commercial needs. This effort, often termed

civil–military integration or CMI, is believed by many observers to be an

essential element of a successful U.S. national security strategy. OTA’s assessment found that greater CMI is possible, and confirmed the potential

for cost savings and increased technology transfer as the result of increased

integration. The assessment noted that CMI appears essential if defense is

to take advantage of many rapidly developing commercial technologies.

This background paper presents material from three of the case studies

undertaken during the assessment: flat panel displays, polymeric composites, and shipbuilding. The three cases illustrate both the opportunities and

the challenges facing those designing policies to increase the level of CMI.

While some military performance requirements create special technical demands, the cases reveal that both commercial and defense needs can often

be met with common technologies. Better planning during system design

can further reduce the need for different technical solutions to defense problems and reduce market differences between the commercial and defense

markets. Acquisition laws and regulations often remain the major inhibitor

to increased integration. Some of these laws and regulations have recently

been changed; however, as the main report points out, and as these cases

illustrate, more changes are needed.

In undertaking the assessment and these case studies, OTA sought information from a broad spectrum of knowledgeable individuals and organizations whose contributions are gratefully acknowledged. As with all

OTA studies, the content of this report is the sole responsibility of the Office

of Technology Assessment and does not necessarily represent the views of

our advisors and reviewers.

ROGER C. HERDMAN

Director
iv

dvisory Panel

Walter LaBerge, Chair

Consultant

Robert Calaway

President

Resource Management

International, Inc.

Gordon Corlew

Vice President, Engineering and

Production

AIL Systems, Inc.

S.P. Desjardins

President

Simula, Inc.

Roger Fountain

President & CEO

Great Lakes Composites Corp.

Jacques S. Gansler

Senior Vice President

The Analytic Sciences Corp.

Herbert Glazer

Professor of International

Business

Business Department

Kogod College of Business

Administration

The American University

General Alfred G. Hansen, USAF

(Retired)

Vice President, C-130 Programs

Lockheed

Joel W. Marsh

Director, Government Acquisition

Policy

United Technologies

Thomas L. McNaugher

Director, Strategy and Doctrine

Center

Arroyo Center

RAND

Christiane L. Midgley

Division Manager

RayChem Corp.

F. Whitten Peters

Partner

Williams and Connolly

Louis Rosen

Partner and National Director of

Government Contract Services

Ernst and Young

Martin Rowell

Director, Technology Planning

Allied Signal Automotives

Howard Samuel

Senior Fellow

Council on Competitiveness

Robert W. Selden

Los Alamos National Laboratory

Leonard Sullivan

Consultant

System Planning Corp.

James A. Tegnelia

Vice President, Business

Development

Martin Marietta Electronics &

Missile Group

Nicholas Torelli

Torelli Enterprises

Admiral Harry Train, USN

(Retired)

Division Manager

Strategic Research and

Management Services Division

Science Applications International

Corp.

Note: OTA appreciates and is grateful for the valuable assistance and thoughtful critiques provided by the advisory panel members.

The panel does not, however, necessarily approve, disapprove, or endorse this report. OTA assumes full responsibility for the report

and the accuracy of its contents.
v

roject Staff

Peter Blair

Assistant Director, OTA

Industry, Commerce, &

 International Security Division

Alan Shaw

Program Manager

International Security and

 Space Program

PRINCIPAL STAFF

Jack Nunn

Project Director

Michael Callaham

Senior Analyst

Dean Cheng

Analyst/Congressional Fellow

Christopher M. Waychoff

Senior Analyst

ADMINISTRATIVE STAFF

Jacqueline Robinson–Boykin

Office Administrator

Ellis Lewis

Administrative Secretary

Don Gallagher

Secretary

CONTRACTORS

Cindy Allen

Madeline N. Gross

Ivars Gutmanis

Joe F. Jones

Joe Raguso

Alfred Skolnick

Paul F. Stregevskyy
vii

Overview 1

Background 1

Observations 6

Case Study 1:

Flat Panel Displays: Assessing the

Potential for Civil-Military Integration 9

Technology and Use of FPDs 10

Civil-Military Integration 20

Case Study 2:

CMI in the Polymeric Composites

Industry 27

Technology and Use of Polymeric-Matrix

Composites 29

The Structure of the Polymeric Composites

Industry 36

Civil-Military Integration 41

Case Study 3:

Shipbuilding 51

Structure and Condition of U.S. Shipbuilding Base 52

Civil-Military Integration 59

Appendix A: Workshops 67

ontents
verview

n response to the changing global military situation, Congress requested the Office of Technology Assessment (OTA)

to conduct a number of assessments examining the health

and viability of the technology and industrial capabilities

that provide the United States with the goods and services necessary to meet its national security needs. OTA was asked to assess

trends in the technology and industrial base, future technology

and industrial base needs, and options for preserving a viable defense technology and industrial base (DTIB). OTA has produced

a series of reports on these issues.1 The latest report, Assessing the

Potential for Civil-Military Integration, examined the potential

for making greater use of commercial goods and services to meet

defense needs.

BACKGROUND

Assessing the Potential for Civil-Military Integration found

that a strategy aimed at making greater use of the commercial

technology and industrial base to help meet national security

needs—often termed civil-military integration (CMI is defined in

some detail in box 1.)—had the potential to produce substantial

future government savings and provide access to critical technology. OTA’s analysis, however, indicated that savings may be lower and take longer to be achieved than some advocates have

1 U.S. Congress, Office of Technology Assessment, Adjusting to a New Security Environment: The Defense Technology and Industrial Base Challenge, OTA-BP-ISC-79

(Washington, DC: U.S. Government Printing Office, February 1991); Redesigning Defense: Planning the Transition to the Future U.S. Defense Industrial Base, OTA-ISC-500

(Washington, DC: U.S. Government Printing Office, July 1991); American Military Power: Future Needs, Future Choices, OTA-BP-ISC-80 (Washington, DC: U.S. Government

Printing Office, October 1991); Lessons in Restructuring Defense Industry: The French

Experience, OTA-BP-ISC-96 (Washington, DC: U.S. Government Printing Office, June

1992); Building Future Security: Strategies for Restructuring the Defense Technology

and Industrial Base, OTA-ISC-530 (Washington, DC: U.S. Government Printing Office,

June 1992); Assessing the Potential for Civil-Military Integration: Technologies, Processes, and Practices, OTA-ISS-611 (Washington, DC: U.S. Government Printing Office,

September 1994); and Other Approaches to Civil-Military Integration: The Chinese and

Japanese Arms Industries, BP-ISS-143 (Washington, DC: U.S. Government Printing Office, March 1995).

| 1
2 Assessing the Potential for Civil-Military Integration: Selected Case Studies

OTA found no single definition of CMI. The term encompasses a number of different activities,

each of which is viewed as an element of integration. For example, those advocating the increased use

of nondevelopmental items, including commercial off-the-shelf items, consider such use to be CMI.

Analysts recommending changes in government acquisition laws to promote combined R&D, or production of civilian and defense products on a single assembly line, consider such changes to be CMI.

Others maintain that CMI involves increased cooperation between government research facilities and

the private sector in both R&D and manufacturing technologies. Still others claim that the rationalization

of private and public depot-level maintenance facilities (e. g., transferring jet aircraft engine maintenance and overhaul from military facilities to existing private sector facilities) is a component of CMI.

These definitions are not mutually exclusive. Accordingly, OTA has incorporated all these elements in its definition of CMI as:

The process of merging the Defense Technology and Industrial Base (DTIB) and the larger Commercial

Technology and Industrial Base (CTIB) into a unified National Technology and Industrial Base (NTIB). 1

More specifically, in an integrated base, common technologies, processes, labor, equipment, material, and/or facilities would be used to meet both defense and commercial needs. Decisions on how to

use Integrated resources would be based on the same technical, legal, and economic reasoning that

commercial firms use when servicing global markets.

1 The NTIB includes other noncommercial elements, such as public utilities and other non-DOD government procurements

The national base is also embedded in the larger Global Technology and Industrial Base

SOURCE Off Ice of Technology Assessment, 1995.

claimed. The findings of OTA’s CMI assessment ment of common products, it does not assure that

are summarized in box 2.

Integration is usually discussed as a function of

activities occurring at a firm or a specific facility.

However, OTA’s assessment revealed that integration actually occurs at various levels within the

base and should be analyzed at three separate levels—the technology or industrial sector level, the

firm level, and the facility level. Each level presents its own unique set of policy challenges.

Integration at the technology or industrial sector level is characterized by the DTIB and the

Commercial Technology and Industrial Base

(CTIB) sharing common technologies, processes,

and specialized assets (e.g., unique test stands,

wind tunnels, and industrial research centers). An

industrial sector can be said to be integrated if its

defense goods or services are drawn from the same

pool of technologies, specialized assets, and processes (and, by extension, standards) as are commercial goods or services. However, while

integration at the sector level aids the developdefense and commercial products will be the

same, that they will be produced in the same facilities, or that they will be less expensive than if they

were produced without such integration.

Integration at the firm level is characterized by

the sharing of corporate resources to meet both defense and commercial needs. These resources include management, workers, research centers,

equipment, stocks, and common facilities. A corporation that readily moves staff between defense

and commercial work and transfers manufacturing and product technologies back and forth can

be considered integrated at the firm level, even

though it may separate its operating divisions

along commercial and defense lines.

The third and deepest level of integration is at

the facility level. Integration at this level is characterized by the sharing of personnel, equipment,

and stocks within a single facility. In an integrated

facility, defense and commercial goods would be

manufactured side by side, with any differences in
Overview 3

Despite several previous initiatives to promote integration, much of the DTIB remains isolated. Still, significant CMI currently exists. OTA’s

estimate of current integration is shown in figure

1 .

1 Increased CMI is possible, but requires

changes in government acquisition policy, taking

advantage of technological developments, adapting technologies for both defense and commercial

use, and restructuring the DTIB. The growth of CMI

depends on the extent of policy change. OTA’s estimates of the potential for increased CMI, based

on significant acquisition reform and restructuring,

are shown in figure 2.

Some technologies, industrial sectors, and

product tiers are more amenable to integration

FIGURE 1: Current Facility-Level CMI

Division of the Private DTIB at All Tiers

Commercial buy

Current

than others. Prime contractors performing systems SOURCE: Industrial survey conducted by Office of Techintegration on complex defense systems may have nology Assessment, 1994.

a limited ability to integrate production. Lower tier

tier activities, such as production of components and subcomponents, appear far more amenable to

integration. Services appear particularly amenable to commercial purchases

FIGURE 2: Potential Facility-Level CMI

Division of the Private DTIB at All Tiers

Commercial buy

Segregated

processes

SOURCE: Industrial

nology Assessment,

Potential

survey conducted by Office of Tech1994.

Cost savings and increased technology

transfer are difficult to quantify. OTA’s analysis,

however, indicates that savings may be lower than

some advocates have claimed. Implementation

may be more difficult, and take longer to achieve,

than many anticipate because: 1) integration is already occurring in many of the tiers and technologies most amenable to CMI, 2) change is more difficult to implement than many have anticipated,

and 3) important portions of the base may not be

amenable to integration.

Still, after several years overall savings could

amount to several billion dollars per year. Possibly

more important than direct savings, however, is

that increased CMI can provide access to those

rapidly developing commercial technologies in

critical areas (e.g., electronics) that will be essential to defense in a more fiscally constrained environment.

1 Estimates for figures 1 and 2 are for the private sector DTIB only. They are based on a macroeconomic examination of the

DTIB and an industry survey of 16 randomly selected industrial sectors providing goods and services to national defense. Since the

estimates are based on a limited industrial sector survey, they should be considered suggestive rather than definitive. OTA also used

interviews, case studies, and analyses of selected industrial sectors to validate its estimates

(continued)
4 Assessing the Potential for Civil-Military Integration: Selected Case Studies

The assessment identified no “silver bullet” policies that might easily achieve CMI goals. The complexity of the DTIB demands a diverse set of CMI policies. Some policies can have broad effects, but in

most instances the barriers to CM I are sufficiently intertwined to demand a comprehensive (and complex) set of policies if projected benefits are to be achieved. Operations and Maintenance spending, for

example, may be influenced by policies directed at increased use of commercial items and greater use

of commercial practices. R&D, on the other hand, would be influenced by research goals that encompass both civilian and defense uses, and by modifying government requirements for rights in technical

data.

The assessment outlined three strategies for consideration: Readjustment, Reform, and Restructuring. Together they form a phased implementation of CMI. A Readjustment Strategy modestly increases CMI, but retains many of the current procedures for oversight of defense expenditures; thus

both the risks and the benefits are likely to be relatively small. A Reform Strategy builds on the foundation of a Readjustment Strategy and takes a more expansive approach to fostering CMI. It promises

more benefits, but with a corresponding increase in potential risks. Finally, a Restructuring Strategy

might gain the maximum potential CM I benefits, but would demand major changes in future military

acquisition policy, system design, and force structure, and could present greater risks.

SOURCE. Office of Technology Assessment, 1995

production processes and parts dictated solely by tors, OTA estimated that they account for less than

product function. Table 1 illustrates some of the

activities that comprise integration at the various

levels, the barriers to such integration, and the rationale for increased integration.

Early in the assessment, OTA found that almost

all of the previous studies of civil-military integration were based on case studies of specific products or firms.2 Although many of these studies

produced useful findings, there were concerns

about the ability to generalize the findings of individual case studies.

The previous case studies were, for example,

largely concentrated in areas of electronics and

aviation. While these are important defense sec30 percent of the value added to total defense

goods and services purchased from the private

sector.3 Further, these particular sectors appeared

to be somewhat more amenable to commercial use

than many other industrial sectors. The cases selected also largely excluded many other important

defense product sectors (e.g., conventional ammunition, ground vehicles, and shipbuilding). Finally, the previous case studies largely ignored

services—a category that accounts for roughly 20

percent of the spending for direct final purchases,

and about 40 percent of the spending for indirect

and lower tier defense purchases.4

2 A listing of many of these case studies is found in ibid., Assessing the Potential for Civil-Military Integration, Table 3-5, Selected Previous

Civil-Military Case Studies, pp. 53-54. An exception to the concentration on the case-study approach was one study then ongoing by The Analytic Sciences Corp. (TASC), The DoD Regulatory Cost Premium: A Quantitative Assessment, The Analytic Sciences Corp., Arlington, VA, December 1994. This study considered macro level data collected from the Census Bureau in an attempt to validate the findings of earlier case

studies.

3 Electronics and aviation may represent a greater percentage of direct sales, but OTA’s estimates were directed at value-added by particular

sectors---and thus attempted to disaggregate such things as distribution, transportation, and other embedded activities from the sales figures for

major categories of equipment.

4 Department of Defense, Projected Defense Purchases Detailed by Industry and State: Calendar years 1991-1997, p. 4.
Overview 5

Examples of

Level of What might be integration at this Examples of barriers Rationale for further

integration integrated level to further CMI CMI

Industrial sector All activities in an

industrial sector,

including companies,

industry groups,

standards bodies,

government labs,

defense acquisition

officials, and

academia.

Corporate

management,

divisions, branches,

and assets of an

individual company

or corporation,

Firm

Facility R&D, production,

maintenance and/or

administrative

processes within a

single facility.

Use of common

technologies,

processes, and

specialized assets

(e.g., unique test

stands, wind tunnels,

and industrial research

centers) within an

industrial sector,

Sharing of corporate

vision and resources,

including

management, workers,

research centers,

accounting and data

systems, equipment,

stocks, and facilities,

Sharing of personnel,

equipment, material,

and administration

within a single facility;

joint defense and

commercial activity on

a production line, in a

work group cell, or at

an R&D lab bench,

Differing commercial and

military product and

process requirements;

separate specification

and standard systems;

go-it-alone attitude in

businesses or the

DOD; classification.

Need to shield

commercial work from

DOD oversight and

added overhead costs;

different

accounting/data

systems; different

management and

marketing

environments;

classification.

Need to shield

commercial work from

DOD oversight and

added overhead costs;

different accounting,

data and supply

systems; military

uniqueness; use of

military specifications

and standards; limits

on uses of government

equipment;

classification.

Product and process

technology transfer;

reduced costs by

avoiding duplication;

increased

competitiveness;

leverage limited R&D

funds

Internal technology

transfer; preservation

of capabilities in

commercial or defense

downturns; economies

of scale, Increased

long-term stability due

to diversification;

capital availability

Source of cost savings;

economies of scale,

reduction of

redundancies; lower

capital investments

and over-head costs;

less worker retraining,

direct process

technology transfer;

job retention

SOURCE: Office of Technology Assessment, 1995.

As a result of these early findings, OTA decided

to base its assessment on a combined analysis of

macro level industrial base data with examinations of the findings of previous case studies and

some additional case studies undertaken specifically for the assessment. It was thought that the

combination of macro level data and individual

cases would provide better insights into trends in

the base and the implications of change than

would either case studies alone or simply examining macro level data.

Indeed, despite their short-comings, case studies have been, and continue to be, essential to the

study of CMI. Case studies can serve one or more

of three purposes:

1.

2.

3.

cases are useful as anecdotes, to illustrate degrees of varieties of CMI or barriers to CMI,

cases can provide essential information and insights on critical firms or sectors, and

randomly selected cases---combined with

proper statistical considerations--can be used

to represent the larger population of companies, contracts, or programs from which they

were drawn.

Previous case studies on CMI have served the

first two purposes noted above. Case studies,

however, are very time consuming, and many

must be done to provide good insight.
6 | Assessing the Potential for Civil-Military Integration: Selected Case Studies

Examination of available macroeconomic data

or larger surveys, on the other hand, can provide

additional useful CMI information. Such surveys

could address the critical barriers to integration

and assess why some commercial businesses

avoid defense work. While surveys have the benefit of reaching an under-studied population, they:

1) demand extensive private sector time, 2) provide far less detailed information than that obtained from case studies, and 3) are expensive to

conduct.

This background paper reports on three of the

case studies that were conducted during the assessment: flat panel displays (FPD), polymeric

composite materials, and shipbuilding. They illustrate varieties of CMI, barriers to CMI, and

provide insights useful for developing CMI

policy. Some of the general observations are briefly outlined below.

OBSERVATIONS

Many of the CMI issues discussed in Assessing

the Potential for Civil-Military Integration are illustrated in these three cases. These cases represent important industries and technologies with

both commercial and national security application. FPDs, for example, are being increasingly

used in a wide variety of commercial products.

Their size, weight, and ability to convey data

make them useful in many military applications.

But the future commercial market is expected to

far exceed the defense market. Integration in the

FPD sector is seen as a means to provide the DOD

with access to rapid technological developments

and lower DOD costs in meeting its needs.

The polymeric composites industry also provides important national security capabilities.

Like the FPD industry, these capabilities generally involve critical performance-enhancing components of military systems rather than end

products. There are important commercial as well

as defense uses for these materials. Aerospace applications are of particular interest. Like FPD, integration is seen as important for both providing

access to new technological developments, and

for lowering DOD’s product costs.

The shipbuilding industry differs from the other two industries in that the industry provides critical end products (aircraft carriers, submarines,

and frigates to name a few) directly to the military,

as well as providing components and subcomponents for these systems. Further, in contrast to the

other two cases, shipbuilding is a relatively mature industry with an extensive history in the

United States. But the commercial shipbuilding

business has been in long-term decline; during

much of the 1980s, few (in some years, zero) large

commercial ships were built in U.S. shipyards and

the industry became highly dependent on U.S.

Navy work for survival. Thus, the greatest challenge for creating the integrated shipbuilding

base, viewed as essential to preserve the nation’s

ability to provide affordable naval craft for national defense needs, is creating a viable, domestic

large-ship commercial shipbuilding base.

❚ Current Level of Civil-Military

Integration

As with the base as a whole, all three of these sectors already have some degree of integration. As

noted above, there is currently little integration at

U.S. shipyards, but some CMI exists in the development and production of components.

Polymeric composites have considerable integration at lower tiers and face their greatest CMI

challenge at the first tier where the specific military application (e.g., surface manufacturing to

obtain stealth characteristics) may have little or no

commercial counterpart.

A good deal of integration exists at the sector

level in the FPD industry, for example, where

many common technologies are pursued for both

commercial and defense application. At the firm

and facility levels, however, there is relatively

little integration in the United States, where only a

small domestic industry currently exists. If successful, the National Flat Panel Display Initiative,

combined with recent DOD changes in the use of

military specifications and standards, and continued acquisition reform, may increase both firmand facility-level integration in the United States.
Overview | 7

❚ Potential for Civil-Military Integration

OTA’s assessment of CMI indicated that integration is more likely at the lower industrial tiers than

at the level of the prime assembler where many

components are combined to fashion unique military products.5 These cases generally support

those findings. Both FPD and polymeric composites appear to be more amenable to integration

than does shipbuilding; however, component producers in the shipbuilding sector report an ability

to integrate, and where a commercial market exists, they are already producing in integrated facilities. The shipyards and design firms also report

that much greater integration is possible.

The polymeric composites industry reports the

potential for greater integration. Government procurement practices were identified during interviews for this assessment as a major inhibitor.

Composites firms were reportedly hopeful that

government changes in these practices would improve prospects for integration.

The potential for integration could probably be

enhanced in all three industries by concerted

efforts during the design phase of military equipment to make greater use of commercially available (or useful) technologies, and by making

greater use of common process technologies (design and manufacturing). In the past, however, the

introduction of more efficient commercial

manufacturing technologies into defense application has been inhibited by the inability to adequately recoup investment costs. This problem

must be addressed if greater use of common process technology is to become acceptable to industry.

❚ Factors that Inhibit CMI

The case studies revealed a number of factors that

inhibit CMI. There are sometimes technological

inhibitors to CMI. For example, the relatively

greater use of complex electronics and the need for

integrated weapons systems on warships make it

more difficult to use a common workforce to perform many production functions in shipyards

building or service both civilian and military

ships. Similarly, the need for great precision in the

fabrication of the surface shape of composites

used on stealthy aircraft does not exist in commercial aircraft and thus calls for different skills. This

increases the difficulty of integration. The need

for good, all-aspect viewing of cockpit displays in

bright sunlight places somewhat different technical demands on those displays used in defense

from those used in the commercial sector. Yet

none of these examples make increased integration impossible; rather, they challenge those who

wish to exploit the synergies of CMI to greater

thought in designing both the process and product

technologies involved.

Despite the recent changes in acquisition laws,

new implementing regulations, and the changes in

the use of military specifications and standards,

integration continues to be inhibited in the three

industries by current acquisition procedures. In

part, this is a function of the inherent time lag between change at the top of a large organization and

change at the bottom. Assessing the Potential for

Civil-Military Integration outlines some of the

reasons for this lag.6 But, recent DOD and congressional actions making changes in the use of

military specifications and standards and in acquisition reform (e.g., the Federal Acquisition Reform Act of 1994—FASA) appear likely to

positively affect the potential for successful CMI.

Still, further acquisition changes are essential if

firms that produce both militarily unique items as

well as commercial items are going to effectively

integrate at the facility level.

Finally, some market factors inhibit integration. For example, the high cost of some FPDs

needed for fighter aircraft cockpit applications

limit their use in commercial aircraft. Similar limitations exist in the application of composites.

5 OTA, Assessing the Potential for Civil-Military Integration, op. cit., footnote 1, pp. 9-10.

6 Ibid., pp. 29-42.
8 | Assessing the Potential for Civil-Military Integration: Selected Case Studies

Yet even where market factors inhibit some integration, there is potential for greater integration

in the design and production processes of many of

these products.

❚ Factors that Favor CMI

A number of factors, if exploited, appear to favor

increased CMI in these three cases. There are, for

example, clear indications in these three cases that

trends in technologies are blurring the differences

between commercial and defense technology. One

good example is that process technologies are

converging to make it easier to design and build

defense and commercial products in a more integrated fashion. Many design software packages

are applicable to both needs.

Product technologies—particularly at the lower tiers—also often overlap. The same composite

materials may be used in both commercial and defense aerospace products. Common components

can be used for many defense and commercial display applications. Commercial aerospace needs in

displays and materials often overlap with all but

the most demanding defense needs. Some pumps

and valves can be used on both commercial and

military ships.

The fact that many technologies are converging

is also having an impact on markets, where the

commercial markets are demanding products that

are lightweight, rugged, and reliable—attributes

long prized in the defense sector.

An even more important market factor clearly

evident in all three cases is the growing gap between worldwide levels of spending for commercial and defense purposes in industries such as

FPD. This trend makes it more difficult for defense to influence more than small portions of the

industries, and increases the importance of integration if DOD is going to have access to essential technology.

Finally, recent government policy initiatives

already mentioned (e.g., changes in the use of military specifications and standards, changes in acquisition practices, and initiatives aimed at

exploiting commercially available technologies)

all favor increased CMI.

❚ Implications of Increased CMI

Interviews and workshops resulted in an overall

consensus that both increased access and reduced

costs are likely—if greater CMI is achieved in

these three industries. Yet it is difficult to quantify

either the amount of DOD’s increased access to

newly developed commercial technology, or the

potential savings from increased integration.7

Assessing the Potential for Civil-Military Integration estimated some of the potential savings

based on survey interviews and estimates of the

potential for increased integration in 16 randomly

selected sectors supplying goods and services to

national defense.

Estimates of overall possible savings ranged

from a few percentage points off expected baseline expenditures to a high of 15 to 20 percent of

expected baseline expenditures. Analysis indicated that a range of 5 to 10 percent savings off expected baseline expenditures appeared most

probable. Interviews supported the conclusion

that many rapidly evolving technologies might

not be available to the defense effort in a timely

fashion without increased CMI. Considering the

relatively low risks and costs of pursuing a CMI

policy that were identified in Assessing the Potential for Civil-Military Integration, these potential

returns appear to favor pursuing policies that will

enhance CMI.8

7 Ibid., pp. 23-42. Assessing the Potential for Civil-Military Integration does make some estimates based on surveys and estimates on the

speed of likely introduction of CMI policies.

8 Ibid., p. 17.
Case Study 1:

Flat Panel Displays:

Assessing the Potential

for Civil-Military

Integration

lat Panel Displays (FPDs) are finding their way into increasing varieties of products, from laptop computers to individual airline movie displays. In some products, they are

replacing bulky cathode ray tubes (CRTs); in others, they

are making a new product possible. They are used in a wide variety of U.S. weapons systems. A recent Department of Defense

(DOD) report noted that: 

Demand for FPDs throughout the world will grow explosively

for the foreseeable future. The lowest credible estimate projects a

twofold growth in the $6.5 billion 1993 FPD market by the turn of

the century.1

More optimistic estimates are forecasting growth of three to six

times the 1993 market by the year 2000, reaching $20 billion to

$40 billion.

The DOD report noted that demand is overwhelmingly driven

by commercial products, but that FPDs are becoming increasingly important for meeting military requirements. The United

States’ FPD industry is small and largely research oriented. The

U.S. currently relies on foreign suppliers (principally the Japanese) for most of its commercial and defense needs. DOD has

stated that it:

. . . cannot currently rely on the overseas supply base to furnish

customized or specialized products or capabilities that will be required to support future DOD needs, or to provide leading edge

technology to DOD before it is in widespread commercial use.2

1 Flat Panel Display Task Force, Building U.S. Capabilities in Flat Panel Displays (Washington, DC: U.S. Department of Defense, October

1994), pp. I-2 to I-3.

2 Ibid, p. I-6.

| 9
10 | Assessing the Potential for Civil-Military Integration: Selected Case Studies

In April 1994, DOD announced a National Flat

Panel Display Initiative (NFPDI) aimed at providing early, assured access to FPDs for DOD. The

initiative envisions an integrated domestic FPD

production base capable of servicing both commercial and military markets, almost interchangeably.

This case study briefly describes FPD technology, the structure of the FPD industry, current

trends in the industrial base, and the factors favoring and constraining civil-military integration in

the FPD industry.

TECHNOLOGY AND USE OF FPDS

❚ Varieties of FPDs

There are many different, competing FPD

technologies. The Department of Commerce has

grouped current FPD technologies into four broad

categories: liquid-crystal displays (LCDs), electroluminescent displays (ELDs), plasma-display

panels (PDPs), and field-emission displays

(FEDs). Table 2 outlines the technologies, their

strengths and weaknesses, and the state of the supporting industrial base. Since then, the extent of

the growing Korean capability has become more

evident. These technologies, and the Korean capabilities, are discussed in more detail in a forthcoming OTA report on the FPD industry.3

Another technology, the digital micromirror

device (DMD), is of interest and discussed in this

paper because it has the potential to provide large

displays and is also receiving heavy investment in

the United States from Texas Instruments.

Liquid-Crystal Displays

LCDs are by far the most common class of FPD.

Liquid crystals are organic molecules that have

crystal-like properties but are liquid at normal

temperatures. The molecules can be realigned by

weak electromagnetic fields.

An LCD consists of a layer of liquid-crystal

material, measuring a mere 1.5 to 6 microns thick,

sandwiched between two substrates made of a

high-purity glass or a transparent polymer. The inside surface of the glass—that is, the surface in

contact with the liquid crystal material—is a thin

layer of an alignment material, typically a polymer. The liquid crystal material is said to have a

preferred orientation when it touches this layer.

Etched onto the substrate’s outer face is a grid of

electrodes. Through various addressing schemes,

voltages are applied to this grid, turning local

areas of liquid-crystal material ON or OFF. The

entire sandwich—liquid crystal material, glass

substrates, etched electrical grid, and color filters—is in turn flanked by a pair of polarizing filters that selectively absorb visible light. When an

electrical field is applied in quick succession to

different areas of material, the display produces

the illuminated dots known as pixels.

The least expensive LCDs reflect ambient light

that strikes the front surface, hits the display’s

coated rear surface, and is reflected back. More

expensive LCDs are artificially illuminated from

behind, typically by a diffuse fluorescent bulb. In

such backlit LCDs, the screen remains readable

when available light is low or glare is high.

LCDs can also be differentiated by the way the

liquid-crystal area is electrically addressed (passive vs. active). Passive-matrix liquid crystal displays (PMLCD) are currently the most common.

In the liquid-crystal molecules used in passivematrix LCDs, the switching of the polarization of

the light is accomplished by passing the light

through crystals that may be aligned in twisted

(90°) or supertwisted (270°) configurations when

no voltage is applied. When voltage is applied, the

liquid crystals align to the electric field creating

the display. In a passive-matrix LCD, multiple

display points (pixels) are turned on, and like a

CRT, it essentially “paints” the display in swift

horizontal strokes. In early versions of passivematrix LCDs, as the number of lines increased,

contrast—the difference in brightness between lit

and unlit pixels—became increasingly weak. This

3 U.S. Congress, Office of Technology Assessment, Flat Panel Displays, forthcoming, September 1995.
Maximum Manufacturing

Technology Companies Type/status size (brand) status Strengths Weaknesses

Liquid-Crystal

Display (LCD)

a-Si TFT LCD

p-Si TFT LCD

x-Si TFT LCD

“FLC” ferro-electric

LCD

TN LCD

Active-addressing

(AA) STN

STN LCD, including

FSTN, TSTN, others

Metal-insulator-metal

(MIM)

Electro-luminescent

Display (ELD)

~ 15 Japan,

3 U.S. (OIS,

Xerox, IBM)

1 Japan

(Seiko-Epson)

2 U.S. (Xerox,

DSRC)

1 U.S. (Kopin)

1 Japan (Canon)

1 Europe (EMI)

~20 Japan,

~6 U. S.,

Many Asian

1 U.S. (Motif)

~20 Japan,

~6 U. S.,

~15 Asian

2 Japan

(Seiko-Epson,

Stanley)

1 Japan (Sharp)

1 U.S. (Planar

Active/manufacturing

Active/developing

Active/developing

Passive/developing

Passive/

manufacturing

Passive/

manufacturing

Passive/

manufacturing

Passive/

manufacturing

ELD/manufacturing

71” (Sharp)

13” (Xerox)

1.5” (Kopin)

15” (Canon)

1 0.5”

6“

11 “

10” (S-E)

19” (Planar)

Infrastructure in place;

difficult to

manufacture; yields

of 30-60 ’%0

Planned for 1995,

possible successor

to a-Si

Uses proprietary

manufacturing

process

Canon started

manufacturing in

1993

Several large facilities

for small sizes

Ramping up as of

January 1994

Many large facilities

For computers,

videophones

Three volume facilities

Excellent color,

resolution; market

penetration

High resolution,

saturated color

Great electron

mobility; easily

integrated drivers

Scalable to large

sizes; good

viewing angle

Low-cost, easily

manufactured

High resolution,

video rate; wide

viewing angle

Excellent

$/performance

ratio

$/performance ratio

Bright, low power,

easy

Expensive, power-hungry

backlight; not scalable

over 17“

New technology;

expensive substrate

Expensive

Expensive; limited

gray-scale

Limited viewing angle,

slow; not scalable

Not scalable, new tech;

complex drivers

Slow; dull colors, limited

viewing angle; backlight

Slow; cross-talk; flicker

Not fully saturated colors

(continued)
Maximum Manufacturing

Technology Companies Type/status size (brand) status Strengths Weaknesses

Plasma-Display

Panels (PDPs)

PDPs for computers ~5 Japan, PDP/manufacturing 19” Several large facilities Bright; multi- High voltage; limited gray

3 Us. (Plasma-co) colored; scalable scale

PDPs for televisions ‘6 Japan, PDP/manufacturing 45” (NHK) No proven process Scalable Power hungry; high

2 U.S. voltage

Field-Emission ~4 U.S., FED/prototype 9“ (CNET) Planned for late 1994 Believed to be New technology

Display (FED) ~6 non-U.S. scalable

assessment by Department of Commerce based on review of literature and industry discussions. Does not include all FPD technologies, particularly those in R&D stage or just moving into

product development, a-Si = amorphous silicon; TFT = thin-film transistor; p-Si = polysilicon; x-Si = single crystal silicon; FLC-ferro-electric crystal; TN = twisted nematic crystals; STN =

supertwisted nematic crystal; FSTN = film-compensated STN.

SOURCE: U.S. Department of Defense, Building Capabilities in Flat Panel Displays, table 2-1,
Case Study 1: Flat Panel Displays: Assessing the Potential for CMI | 13

problem was largely eliminated in the early 1980s

with the invention of the supertwisted nematic

(STN) LCD, which provide greater contrast.

The passive-matrix LCDs (PMLCDs) main

rival is the active-matrix LCD (AMLCD).

PMLCDs consume less power and are less costly

and therefore continue to dominate the flat panel

display business in low-information-content displays—particularly those in watches, instrument

readouts, and other devices that must be on continuously. But in many applications, PMLCDs are

increasingly losing ground to AMLCDs as the latter’s costs decline.4

Active-matrix displays do not need to be multiplexed, but are individually activated in one of a

number of ways.5 The result is a colorful, highcontrast image. AMLCDs are used where the desire for high intrinsic brightness, ghost-free

moving images, or a rich color palette6 justifies

the price.

The predominant AMLCD technology is the

amorphous-silicon thin-film transistor (TFT).7 It

offers good gray shades and color, fast response,

and a wide viewing angle. Furthermore,

AMLCDs can be made to remain readable when

bathed in sunlight and can display information in

full color. Compared with current cockpit displays

(typically CRTs), AMLCDs are shallower, weigh

less, consume less power, are more reliable, and

are believed to be easier to maintain.

In several key respects, TFT substrates are processed like integrated circuits (ICs). Both products are made by photolithography, a process that

requires a large capital-equipment investment.

Both products use thin-film processing and face

manufacturing economies that are closely tied to

yields. But there are also differences. AMLCDs

are larger than typical silicon wafers for integrated

circuits. Furthermore, the entire display screen

must be free of defects, while the die in defective

areas of a silicon wafer used in integrated circuits

can be discarded. Finally, the AMLCD manufacturing process generates particulate contamination that necessitates frequent cleaning. AMLCD

have thus been more difficult and costly to produce, so their use has been reserved for display

types where a passive LCD would be too dim or

too low in contrast. Nevertheless, Japanese and

Korean firms have made major commitments to

improvements and production. Yields are improving steadily and prices are expected to fall as processes improve and supply increases.

The major companies currently producing

AMLCDs are Japanese. The market leader in

1993 was Sharp Corp., with 55 percent of the market. The next two largest producers, Nippon Electronic Corp. (NEC) and Display Technologies Inc.

(DTI), a joint production venture between IBM

and Toshiba, shared about 35 percent of the market.8

Electroluminescent Displays (ELDs)

Electroluminescent displays (ELDs) are touted

for their ability to be driven at high refresh rates

so that high-resolution images can appear flickerfree. Visually, they are highly readable and bright,

4 New developments in scanning techniques have, however, reportedly brought some renewed interest in PMLCDs.

5 The terms multiplexed and active refer to the alternative ways in which individual display points, or pixels, are turned on. In multiplexing,

multiple pixels are stimulated by a voltage supplied by a row and a column driver. In an active-matrix color display, there are individual switches

and storage devices—thin-film transistors (TFTs), or diodes—attached to each pixel. In a full color AMLCD, each pixel has three subpixels

(representing red, green, and blue), each of which can be driven independently.

6 In theory, AMLCDs have long been able to display thousands of colors. In practice, however, consumers could not buy an active-matrix

notebook computer that showed more than 256 colors until late 1993. In October of that year, Apple introduced a color notebook that could

display 32,768 colors. The display was made in Japan. Displays with 16.7 million shades of color are available in 1995.

7 AMLCD made of polysilicon TFT LCDs are being developed. The polysilicon promises to allow circuitry to be integrated directly onto the

substrate, potentially greatly reducing manufacturing costs. D. Lieberman, “Hughes Lands Poly LCD,” Electronic Engineering Times, May 25,

1992 (Issue 694, p. 14).

8 Flat Panel Display Task Force, op. cit., footnote 1, p. IV-1.
14 | Assessing the Potential for Civil-Military Integration: Selected Case Studies

with wide viewing angles and fast response;

physically, they are reliable, long-lived, and extremely thin. In producing ELDs, layers of thin

phosphor films are deposited onto a sheet of glass,

then covered with another sheet. One of the films

is luminescent, emitting light when struck by

high-voltage electrons. 

The use of ELDs has been constrained, however, by difficulties in identifying phosphors with

high brightness and the need for costly highvoltage drivers. ELDs are currently used by the

military in tanks and command centers and commercially in financial and ATM machines, but

there is little current use of ELDs in computers and

consumer electronics.

Plasma Displays

Plasma-display panels (PDPs) are composed of

front and back substrates with phosphors deposited on the inside of the front plates. An inert gas

placed between the glass plates of each cell generates light, with the color depending on the phosphors used. PDPs are rugged, high in contrast, and

have a wide viewing angle. Currently, plasma displays are used in submarines and command centers, in engineering workstations, and in portable

medical equipment. Their use is limited by their

production, relatively high power consumption,

and low color brightness.

Field-Emission Displays

The traditional CRT with its deep neck and boxy

appearance can make delivery and placement difficult. U.S. researchers are pursuing a radically

new breed of CRT. Known as a field-emission display (FED), it may make even large-screen CRT

displays thinner than a cigar box. A conventional

CRT illuminates all pixels with one or three electron guns. An FED uses a separate tiny electron

gun for each pixel. Each electron source contains

a large number of very fine microtips; electrons released from the tips are accelerated onto the phosphor, generating light. A conventional CRT must

scan each row, illuminating each pixel only for a

moment; an FED illuminates each pixel continuously. Proponents argue that FED will bring high

resolution to portable, low-power devices.

Digital Micromirror Device (DMD) Displays

Digital Micromirror Device Displays are being

developed by Texas Instruments (TI) Inc. The

DMD covers each memory cell of a CMOS static

RAM with a movable micromirror. Electrostatic

forces based on the data in the cell tilt the mirror

either +10 degrees (on) or -10 degrees (off), modulating the light incident on its surface. Light reflected from on-mirrors passes through a

projection lens and creates images on a screen.

Light from the off-mirrors is reflected away from

the projection lens and trapped. Shades of gray are

determined by the on-state of the mirror. Color can

be added.

The Advanced Research Projects Agency

(ARPA) has been involved in the development of

DMD, but TI is making significant investments in

the technology on its own. Large systems (diagonals of 16 ft.) have been demonstrated. Although

there are concerns about the durability of the mirror hinges, the company claims that the DMD

should meet the temperature and environmental

requirements for both commercial and military

application. TI also touts the commonality of production with conventional memory chips.

But there are also several challenges to be addressed. One of the biggest is actually developing

the lithography to fabricate the chip.

Other Kinds of Flat Panel Displays

The aforementioned varieties of FPD are geared

toward products requiring high information content, multiple colors, or both, in their displays.

That class of display is the focus of this study, but

other FPD technologies will probably have a place

in the future. Light-emitting diodes (LEDs), for

example, appeared in the 1960s as an extension of

the semiconductor revolution. The first digital

watches used LEDs to display the time. By selectively doping crystal materials, engineers can obtain a wide range of visible colors. Two factors

have hindered the progress toward using LEDs,
Case Study 1: Flat Panel Displays: Assessing the Potential for CMl 15

however. First, blue LEDs were dimmer than the

other two colors of the color triad. This is reportedly no longer true, with CaN LEDs produced by

Nichia Chemical of Japan now very bright. Second, all LEDs would have to be processed on a

single gallium-arsenide wafer; so far, attempts to

do this have failed. As a result, many companies

have shelved the idea.

In the United States, the main producer of

LEDs is Hewlett-Packard (HP). Together with

Los Alamos National Laboratory, HP is exploring

new materials—such as polymers instead of inorganic materials—to make more efficient, longer

lived LEDs.9

From the standpoint of civil-military integration in FPD, DOD faces two broad problems. One

is the perceived need for a domestic industry. The

other is selecting technologies for military application that both meet military performance

needs and will be commercial winners. In the

world of competing FPD technologies, this will

certainly be difficult.

The projected global use of various FPD

technologies is shown in figure 3.

❚ The Flat Panel Display Market

Defense Applications

The military relies on a broad range of devices that

use high-resolution FPDs. The Department of Defense has estimated that DOD will need a total of

approximately 75,000 units by the end of the decade, 1

0 with annual DOD demand expected to average 25,000 between 2000-2009 and 90,000

between 2010-2019. These figures pale beside the

civilian market, but FPDs are increasingly important to the U.S. defense effort. Military flat panel

displays are found in surface warships, submarines, fixed-wing aircraft, helicopters, and ground

fighting vehicles, as well as in airborne warning

ELD

2%

Other

5 %

PIasma

4%

LCD-other

2%

AMLCD

SOURCE: U.S. Department of Defense, Building U.S. Capabilities in

Flat Panel Displays, based on data from Stanford Resources, Inc.,1994

and control systems (AWACS) aircraft and in

many garrison situations, and are expected to find

their way into soldiers’ helmets. According

DOD’s 1992 Key Technologies Plan:

Particularly needed are high-informationcontent displays that range from miniature, helmet-mounted devices, through portable and

vehicular systems, and up to large screen displays for command post, shipboard, and command centers. Sought are flat-panel displays

that offer megapixel resolution, consume low

power, and provide virtual reality to the “man in

the loop.”l1

Generally speaking, military FPDs are aimed

to

at

the five applications shown in table 3.

FPDs are expected to replace CRTs and mechanical displays in virtually all new DOD aircraft, and will be retrofitted into existing cockpits

to help give new life to aging aircraft. The prototypes of Lockheed’s YF-22 Advanced Tactical

9 M. Ryan, “Government Labs Go Commercial, “ Electronic Engineering Times, Nov. 8, 1993 (Issue 769, p. 49).

10 Flat Panel Display Task Force, op. cit., footnote 1, p. III-14.

11 Director of Defense Research and Engineering, DOD Key Technologies Plan, July 1992, p. 5-7.
16 Assessing the Potential for Civil-Military Integration: Selected Case Studies

. Primary military cockpit and flight instruments

. Militarized computers

. Military ground vehicles

. Military helmet-mounted systems

. Military command-and-control-center systems

SOURCE. Office of Technology Assessment, 1995

Fighter (ATF) and those of Northrop’s YF-23, for

example, each used six active-matrix LCDs. All

the displays were built by General Electric

(GE). 12

The production-version F-22 cockpit will require seven AMLCDs At the end of 1994, some

422 F-22s were slated to be built, requiring some

3,000 AMLCDs including spares. However, like

all major weapon systems, the F-22 faces an uncertain procurement cycle and final numbers are

uncertain. These displays are currently to be built

by Optical Imaging Systems, Inc. (01 S), in Troy,

Michigan.

In the first decade of the 21st century, some

1,034 AH-64 Apache helicopters are eligible to be

re-instrumented or at least to have their cockpits

retrofitted with AMLCD displays as part of an

Army program to lengthen the service life of

deployed Apaches. DOD will also need other

large flight instruments and displays, such as

those needed on the AWACS aircraft. These must

deliver high resolution over screens measuring 20

inches or more in diagonal.

The ground soldiers fighting the Persian Gulf

War owed part of their victory to the ease with

which they were able to receive character-based

and graphical data in the field. Lap-top computers

became the information lifeline to the commandand-control structure. As DOD analyzes the

strengths and weaknesses of these machines, a

new generation, sporting higher color resolutions

and high-speed wireless data links, will almost

certainly be developed.

Flat panel displays are being planned for future

tanks as well as for several tank, armored personnel carrier (APC), and mobile command-and-control station upgrade programs. CRTs take up too

much space in a tank’s cramped interior. For such

punishing applications, it is thought that the more

rugged plasma and electroluminescent displays

may be used.

The Army has been developing the Soldier’s

Integrated Protective Ensemble (SIPE) and a follow-on production program. The goal is to equip

each soldier’s helmet with a flat panel display of

tremendous information density. Such a development would greatly increase the number of displays required.

Command-and-control FPDs are needed in all

environments (i.e., air, land, and sea). Large-area

FPD screens are needed for AWACS and airborne

command posts such as Looking Glass and JSTARS as well as for ground and sea control stations and command centers. These operations

centers must monitor huge amounts of information over hundreds of cubic miles of space, air,

sea, and vast stretches of land. Such applications

have driven ARPA to fund a wide range of ideas

for large, high-resolution displays.

Command and control, however, is not the only

reason that DOD needs large, flat screens. A concomitant need is to accurately simulate operations

or the performance of a new weapon system in the

heat of battle. Simulation might dramatically

speed the development process by creating a prototype of a weapon system on-screen. Simulated

battlefield scenarios might allow a mission to be

rehearsed just hours before it begins. The trend is

to replace electromechanical simulators with panoramic displays that tie together warfare environ12 Subsequently, GE sold its AMLCD production facility to the French company Sextant through Thomson CSF, and the plant is now in

France.
Case Study 1: Flat Panel Displays: Assessing the Potential for CMl 17

ments seamlessly in a virtual reality.13 Under

current planning, by the end of the decade a new

concept, Distributed Interactive Simulation

(DIS), would be used in performing extensive

joint-service training and readiness exercises.14

Such simulations could radically compress development and training cycles while saving dollars

and lives.

Commercial Applications

As noted earlier, commercial flat panel display

sales are expected to more than double in 10 years

from their 1993 level of $6.5 billion, with more

optimistic estimates reaching $20 to $40 billion.

The current demand for AMLCDs is intense. The

broad demand categories estimated for the year

2000 are shown in figure 4.

Computers are expected to continue to comprise the greatest market share. Indeed, displays

(whose production is dominated by the Japanese)

represent the largest single portion of manufacturing value added in portable computers. In 1993,

portable computers became the fastest-growing

niche in personal computers. Industry analysts say

the market for portables is growing nearly four

times as fast as that for desktop computers.15

Lap-top, notebook, and subnotebook computers all use flat panel displays. The changing nature

of the market is illustrated by what has been happening in subnotebooks. These computers weigh

less than 5 pounds. Because of their small battery

supplies, the displays of subnotebooks were initially dull and monochromatic. But these too now

have active-matrix color screens. AMLCDs are

widespread on all portable computers, and the

number of color portables sold is expected to incommercial

SOURCE: U.S. Department of Defense, Building U.S. Capabilities in

Flat Panel Displays, based on data from Stanford Resources, Inc. ,1995

crease from about 4 million units in 1993 to 15

million by the year 2000.

FPDs may also eventually displace color CRTs

in desktop computers, but cost is currently an inhibitor. Most CRT monitors sell for between $350

and $1,000. Initial FPDs would be much more expensive, but the prices would surely fall with increased production volume. 16

Consumer applications of FPDs include televisions, games, personal assistants, videocassette

recorders, and camcorders. Video communications might be an area of explosive growth. Projection TVs based on CRTs currently dominate

applications for large screens, but DMD and some

of the other FPD technologies are aiming at this

market. Indeed, when consumers think of flatpanel displays, many imagine the wall-hung tele13 See U.S. Congress, Office of Technology Assessment, Virtual Reality and Technologies for Combat Simulation--Background paper,

OTA-BP-ISS-136 (Washington, DC: U.S. Government Printing Office, September 1994), for a discussion of developments.

14 M. Tapscott, “Paradigm Changing from Simulators to S i “ Defense Electronics, September 1993, p. 36.

15 K. Pope, "Changing Work Habits Fuel Popularity of Notebooks,” Wall Street Journal, Nov. 11, 1993, p. B-1. New reports estimate these

shipments even higher and note that the rapid improvement in color flat panel display quality is helping to fuel user demand.

16 Some manufacturers are already introducing FPDs as desktop monitors. In 1993, IBM introduced a premium-priced desktop PC that in--

cluded a flat-panel color display. That fall, CTX International, Inc., introduced a 9.4-inch VGA desktop color monitor, featuring a color AMLCD,

with a list price of $3,395. Key advantages are said to be portability and lower power consumption.
18 | Assessing the Potential for Civil-Military Integration: Selected Case Studies

vision that has been the subject of Popular

Science cover stories for many years. Such displays might promote the spread of high-definition

television (HDTV). According to James E.

Carnes, president and CEO of the David Sarnoff

Research Center:

The success of HDTV is dependent on displays. HDTV will become a very popular medium if we have a flat-panel display that

provides bright pictures, with a screen size

greater than 70 inches, that fits inside the door,

for $2,000. The problem is that we don’t know

how and when it’s coming.17

Again, no single technology holds an undisputed lead in this application area. The DMD appears promising. Other firms tout plasma

displays. In the United States, Photonics Imaging

has been working on the problem and has developed a 30-inch high resolution full color, video

rate plasma display with ARPA support. In Japan,

some 50 companies have allied to form the Japanese Plasma Display Technical Forum. As its organizer explains, “The display industry has

already accepted the idea that the plasma display

is the way to go for over 20-inch flat-panel displays.”18 Fujitsu has announced an $800 million

investment in a plasma plant. Plasma-display

makers believe they can bypass the dismal yields

that have long plagued the AMLCD makers, but

they have not yet demonstrated a high volume capability to do so.

Automobiles offer additional commercial opportunities for the use of FPD. The Nippon Electric Corp. (NEC), for example, has estimated that

by 1996, automotive display panels and videophones will fuel a rise in demand for commercial

AMLCDs.19 Car-based displays share with military displays the need to operate in temperature

extremes.20

Manufacturers are also developing flat-panel

touch-screen displays that will be used in the interactive information kiosks found in airports,

museums, and stores, where space can be costly.

The displays would be built into walls or counters,

freeing up floorspace for merchandise. Such displays are used in automatic teller machines; they

are also likely to find a home on the control

consoles of machine tools and in crowded financial trading centers, where (as a manager at Sharp

Corp. explained) “traders have no time for keyboards and no space for a CRT, but they do want

a bright, colorful, high-resolution display.”21

Industry Structure and Leadership

The DOD Flat Panel Display Task Force reported

that while there are over 50 firms worldwide producing flat-panel displays, Japanese firms dominate the market.22 The U.S. FDP industry remains

quite small.

The global FPD industry, by most definitions,

exhibits a good deal of civil-military integration

because so many of the component parts of military FPDs come from Japanese commercial firms.

Although more than a half-dozen domestic

manufacturers offer military specification (MilSpec) AMLCDs with diagonal sizes as high as

10.4 inches, the display itself is usually made in

Japan. LCDs (PMLCDs and AMLCDs) accounted for about 87 percent of global FPD shipments in 1993. One company, Sharp Corp.,

17 D. Lieberman and J. Yoshida, “Flat Panels Jockey for HDTV Position,” Electronic Engineering Times, May 24, 1993 (Issue 747), p. 1.

18 Ibid., p. 62.

19 D. Lammers, “No Letup in Japan’s LCD Investments,” Electronic Engineering Times, p. 20, Mar. 15, 1993 (Issue 737).

20 According to the Armor All Products Corp., when a car is parked in direct sunlight on a 105 °F (41 °C) day, the interior temperature can soar

to 240 °F (116 °C) on the dashboard. Sharp reports that an LCD screen will be permanently damaged through irreversible chemical changes

when it approaches 212 °F (100 °C). For this reason, Sharp and other LCD makers are developing temperature-resistant displays for car dashboards. C. Lu, “Taking Care of Your PowerBook,” MACWORLD, January 1994, pp. 178, 180.

21 D. Lieberman, “Color Flat Panels Make Comdex Scene,” Electronic Engineering Times, Nov. 15, 1993 (Issue 772), p. 52.

22 Flat Panel Display Task Force, op. cit., footnote 1, p. IV-1-IV-2.
Case Study 1: Flat Panel Displays: Assessing the Potential for CMI | 19

claimed 55 percent of the world AMLCD market.

Japanese dominance of the AMLCD market is reportedly the result of very large capital outlays, estimated to be $3 billion for manufacturing

facilities.23 Such outlays demand long-term corporate commitments since FPD production-line

investments are large and cannot be recouped over

short periods.

While research and development in high-information-content flat panel displays is accelerating in the United States, there is still only a small

production capability. A major reason for this is

said to be a lack of American investment capital.

IBM, for example, reportedly established its

AMLCD joint-production venture with Toshiba

(DTI) in Japan partly because of the low capital

costs then available in Japan and the access to Japanese capital markets.24

U.S. production of FPDs is currently concentrated in “niche products” largely designed and

manufactured for DOD procurement. U.S. defense contractors point to the Japanese technological lead and lower prices as the reasons for why

they have turned to Japan when choosing an

AMLCD source.

Between 1987 and 1994, much of the domestic

AMLCD production base disappeared or became

internationalized. When Thomson purchased

GE’s consumer electronics operations in 1987, it

also acquired the process that GE developed for

making amorphous-silicon AMLCDs. Thomson

moved the plant to France. And in another move,

Litton purchased PanelVision and moved it from

Pittsburgh to Canada. In each case, when the U.S.

company’s management was faced with deciding

between selling the pilot plant and spending up to

a hundred million dollars to ramp up from pilot to

volume production, they opted to sell the pilot

plant. IBM, as noted above, decided to work jointly with Toshiba in Japan.

U.S. production of AMLCD (low volume), is

largely concentrated at OIS, Image Quest, Xerox,

and Litton (Canada).25 OIS has been making all

its displays essentially by hand with a capacity of

about 3,000 AMLCDs per year.26 It has a new

$100 million ($50 million from ARPA) automated facility in Wayne County, Michigan, coming on line in mid-1995. Its 40,000 units per year

capacity is still only a fraction of the Japanese capability.

A partnership between AT&T, Xerox, and

Standish also plans a domestic AMLCD production testbed. Raytheon reportedly plans to produce FEDs at its Quincy, Massachusetts plant. TI

is making investments in FED, as well as in DMD.

The flat panel display industry in Europe is

highly fragmented. Its capabilities thus far are predominantly in research, not production. Despite

an established presence in video consumer electronics, the major European electronics firms are

far behind the Japanese in the development of advanced displays.27 Companies involved in the

field include AEG (Germany), which is working

on AMLCDs; Philips (The Netherlands), which is

working on AMLCDs for a range of products, including televisions, with Sharp (Japan); Olivetti

& Co. (Italy), which is working with Seiko (Japan); and Thomson S.A. (France). A consortium

of four firms (Philips, CNET-SAGEM,28 Merck,

and Thomson) has invested a reported $70 million

23 The DOD FPD Task Force and others have estimated that Japanese production investments will increase dramatically in the future.

24 Flat Panel Display Task Force, op. cit., footnote 1, pp. VI-7 and -8.

25 “How to Build AMLCD at Home,” The Clock, vol. 3, No. 2 (Santa Monica, CA, May 1995), pp. 16-19.

26 B. Robinson, “U.S. Flat Panels Could Take Off with AF,” Electronic Engineering Times, Mar. 2, 1993 (Issue 682), p. 20.

27 M. Borrus and J.A. Hart, “Display’s the Thing: The Real Stakes in the Conflict over High-Resolution Displays,” Working Paper 52, Berkeley Roundtable on the International Economy, Berkeley, CA, March 1992, p. 29.

28 Centre National d’Etudes des Telecommunications is the research arm of France Telecom; SAGEM is Societé d’Applications Generales

d’Electricité et de Mechanique.
20 | Assessing the Potential for Civil-Military Integration: Selected Case Studies

in an AMLCD plant in Eindhoven, The Netherlands.

A number of Korean and Taiwanese firms are

also entering the market. Samsung and Goldstar

(Korea) are said to be well into production.

Industry Trends

American firms have been very active in flatpanel-display R&D. U.S. AMLCD research and

development has been directed toward a broad

spectrum of activities. R&D has received a further

boost as a result of the National Flat Panel Display

Initiative. The NFPDI promises to provide, on a

competitive basis, 50 percent of the R&D costs for

next generation process and manufacturing procedures for firms that will build high volume current

generation manufacturing factories now.29

The outlook for increased domestic production

is improving with the OIS production, the pilot facilities, and the interest by large firms like TI. But

the big production investments appear to be occurring in the Far East—Japan and Korea. No U.S.

firm has yet made a large production commitment

of the size occurring in those two countries.

There are clearly trends toward cooperation

among firms, both domestically and internationally. The IBM/Toshiba joint production at DTI in

Japan is one example.30 Hughes Aircraft has

launched a manufacturing and marketing agreement with Japan Victor Co. (JVC) to develop,

manufacture, and market liquid-crystal lightvalve (LCLV) projectors, also known as hybrid

image-light amplifiers (ILAs).31 The Advanced

Display Manufacturing Partnership (ADMP) involving AT&T, Xerox, and Standish is another example. Several consortia, such as the U.S. Display

Consortium, are aimed at establishing the industrial infrastructure of fundamental knowledge,

process technology, and mass-production techniques that are needed for U.S. firms to become

globally competitive.

U.S. companies are also licensing technology

from several foreign firms. TI, for example,

gained access to a 25-inch color plasma display

developed by Oki Electric Industry Co. and NHK

in 1992 under an agreement with NHK, Japan’s

national broadcasting company.32 TI and Raytheon have also licensed FED technology developed by France’s Laboratory de Technologie et d’

Instrumetation from Pixel International.33

CIVIL-MILITARY INTEGRATION

As noted earlier, the civil and military components of the global FPD base are considerably integrated. There is, however, little integration in

the United States base at the production level,

since almost no U.S. FPD production base exists.

The DOD is interested in developing an integrated U.S. base because, the Department argues:

DOD cannot currently rely on the existing

overseas supply base to furnish customized or

specialized products or capabilities that will be

required to support future DOD needs, or to provide leading edge technology to DOD before it

is in widespread commercial use.34

Even in the United States, however, there is some

level of integration. OIS’s AMLCDs, for example, are not exclusively for the military. Commer

29 “Into the Wild Blue Yonder,” The Clock 2(3):1 (Santa Monica, CA: September 1994).

30 IBM reported that when the decision was made in 1989, Japan was the only place to locate that made business sense. Flat Panel Display

Task Force, op. cit., footnote 1, pp. VI-7 and -8.

31 In the LCLV system, a CRT photoelectrically transfers an image onto the liquid-crystal layer of a light valve. The image then travels

through a polarized-beam splitter. After being amplified with the light from a xenon arc lamp, the image is fed through a projection lens and onto

a screen.

32 J. Yoshida and D. Lieberman, “At SID: Color Plasma Takes on LCD Panels,” Electronic Engineering Times, May 18, 1992 (Issue 693),

p. 1.

33 Flat Panel Display Task Force, op. cit., footnote 1, p. VI-10.

34 Ibid., p. I-6.
Case Study 1: Flat Panel Displays: Assessing the Potential for CMI | 21

cial airlines have shown interest in the company’s

cockpit displays. Indeed, only about half of the 14

displays that OIS was developing in early 1993

were designed for the military market.35 OIS displays are also used in Boeing’s 777 aircraft.

❚ Factors Favoring Integration

Certain technical, market, and policy factors favor

integration.

Technical Factors

The current Japanese ability to produce many of

the components used in both American military

and civilian FPD applications in the same facility

makes it clear that technical barriers to such integration are not a major problem. Because many

technologies have both defense and commercial

uses, there are few technical reasons for separating

the R&D functions. Indeed, U.S. firms often currently combine the research on their defense and

commercial displays at one facility, but because of

acquisition rules, often separate defense and civilian production.

Trends in design and manufacturing, such as

the use of computer-aided design (CAD) and computer-aided engineering (CAE) systems, allow

firms to design and develop flat-panel displays in

alternative (e.g., military and civilian) versions

quickly.

Acceptance of common standards by suppliers

and flat-panel manufacturers alike would also aid

integration. For example, if equipment manufacturers standardize substrate sizes, products such as

chemical-vapor-deposition machinery, inspection

stations, and material-handling lines will be able

to work with a greater range of ancillary equipment. Standardized pinouts will reduce the variety

of connections, bringing economies of scale. The

Air Force Cockpit Office is working on an

AMLCD standard. In a 1992 survey exploring

where FPD standards would be most useful, Japanese LCD manufacturers cited channel number,

pin arrangement (number and pitch), methods for

evaluating reliability, and methods for packaging.36

The Semiconductor Equipment and Materials

International (SEMI) North American Flat-Panel

Display Division was created to serve as the

equipment and materials liaison body to the U.S.

Display Consortium (USDC). In close cooperation with the USDC, SEMI is leading a domestic

initiative to create physical and process standards

for FPD equipment, materials, and components.

Standardization can catalyze product development and—by allowing the economies that come

from large-volume component production—and

expand market opportunities. By helping to make

equipment and processes interoperable, SEMI

and USDC hope to help the U.S. FPD industrial

base capture economies of scale.

Market Factors Favoring Integration

Military displays are typically tailored for specific

applications. They are often square, a shape suited

for all-aspect radar tracking. As commercial applications for flat displays expand beyond lap-top

computers, square displays will become more

common. Automated teller machines, for example, use square displays. Because such machines

are often difficult to shield from the sun, they may

also need bright displays such as those used in

cockpits.

Civil-military integration market opportunities

also appear possible for large displays in the

emerging sector of simulation. Civilian demand

for large, flat displays may be driven by HDTV.

Military demand is likely to be driven by the

growing need to simulate the complex environments of the battlefield. Large flat displays have

been sought by the Director of Defense Research

35 Robinson, op. cit., footnote 34.

36 R. Kawano and K. Fujita, “TFT Driver Standardization Urgently Needed,” NIKKEI MICRODEVICES, Dec. 10, 1992, pp. 183-185; reprinted in English in Science & Technology, Japan, Flat Panel Display 1993, JPRS Report, Foreign Broadcast Information Service, Nov. 16,

1993, JPRS-JST-93-093-L, pp. 50-52.
22 | Assessing the Potential for Civil-Military Integration: Selected Case Studies

and Engineering (DDR&E) for several years. The

defense rationale was explained in DDR&E’s

1992 Defense, Science, and Technology Strategy:

A new generation of distributed, seamless

simulations can create realistic, “synthetic”

battlefields to better understand the complexities of future power projection roles and missions. They then can communicate these needs

in an operational context more clearly to the development community, which is also on the

“net.” As candidate solutions are proposed

across the community, they can be tried out synthetically and shown to all concerned.37

Similarly, large displays are needed by industry

to simulate factory floor operations before building new products and facilities. Other areas of the

common civil and military interest have been suggested by Brian Kushner, Vice President of MCC:

Many other partnership priorities could help

smooth the integration of commercial and defense industrial sectors and create an effective

network of public-private coordination. For example, the DOD’s recently published Defense,

Science, and Technology Strategy emphasizes

the creation of “synthetic environments”

through simulation technology as a means of

“involving the war fighters” in the development

and implementation of technology. There is a

substantial overlap with commercial requirements for improved graphical interfaces and artificial environments that can support a wide

range of business and consumer transactions.

Cooperative efforts here could result in substantial leverage for both sectors.38

Market demand for high-resolution color

images in small head-mounted or helmetmounted flat-panel displays is also developing in

both the defense and commercial sectors. The

emerging civilian market for “virtual reality” is

fueling a quest for head-mounted displays. Such

displays would be used in recreational activities,

such as computer games. Real-estate agents, architects, and builders also seek to use small helmet-mounted FPDs to help clients more

accurately determine their wants and needs by

“walking through” a building even before the first

cornerstone is laid.

The military market, meanwhile, is driven by

the need for soldiers to be able to view maps, targets, and alphanumeric characters in great detail

on displays no larger than 2 inches diagonally.

Technologies allowing circuitry to be integrated

directly on the glass may possess great promise

here.

Policy Initiatives

One of the objectives of the National Flat Panel

Display Initiative is an integrated “domestic”

FPD base. But the DOD is also interested in global

acquisition—if it provides early, assured access to

techgnology. Even before this latest initiative, the

U.S. government pursued an international integration strategy that sought access to Japan’s essentially commercial FPD technology.

In October 1993,39 for example, a DOD team,

led by the Department’s Undersecretary for Acquisition and Technology, visited Japan to examine the potential for exchanging U.S. military

technologies, including sensors and smart weapons, for Japanese expertise in mass-production

technologies, including flat-panel displays. Such

ideas have met with some Japanese resistance because they match commercially useful technology

developed by Japanese firms—with their own

money—with technology developed with U.S.

government money. Still, officials express some

optimism about increased cooperation. Developments in Korea may offer other opportunities for

cooperation and assured access to technology.

Government funding of R&D efforts that might

affect civil-military integration in the FPD industry includes the Defense Advanced Research Projects Agency (DARPA, now ARPA) support for

37 Director of Defense Research and Engineering, Defense Science and Technology Strategy, July 1992, p. I-12.

38 B.G. Kushner, “Dual-Use Concept Gains Respect,” Electronic Engineering Times, Nov. 9, 1992 (Issue 720), p. 54.

39 G. Leopold and M. Ryan, “Exports Enter Eastern Endgame,” Electronic Engineering Times, Nov. 8, 1993 (Issue 769), p. 50.
Case Study 1: Flat Panel Displays: Assessing the Potential for CMI | 23

research and development related to high-definition displays involving work in display technology, multimedia computer systems, video-signal

compression, high-resolution graphics, and corollary fields going back more than two decades.

Many believe that without government support,

the U.S. flat-panel display industry would have

ceased to exist or would have been bought out by

Japanese or Korean companies.

In recent years, the government has spent about

$100 million annually on FPD R&D. The National Flat Panel Display Initiative builds on this experience. It uses focused government R&D

investments to encourage private investment in

FPD production, because government decisionmakers believe:

U.S. companies are at the leading edge in understanding the functioning and design of FPDs

of all types and technologies, (but) U.S. industry

lags considerably behind the leading edge in its

understanding of the manufacturing processes

and controls necessary to produce FPDs in high

volumes at sustainable yield rates.40

In 1992, DARPA began Phase 2 of its threephase High-Definition Systems (HDS) program,

designed to help U.S. FPD manufacturers to develop the capability to produce such displays on

assembly lines. In February 1993, ARPA awarded

$10 million to each of four universities to establish Phosphor Technology Centers of Excellence,

with additional funding coming from the participating universities. In December 1993, under its

Technology Reinvestment Project, ARPA

awarded funding to the University of Central Florida (Orlando) to launch a National Alliance for

Photonics Education.

At the same time, ARPA committed $20 million to the U.S. Display Consortium. The consortium’s interim chief executive officer called the

investment “a great example of ARPA leading the

way in the development of dual-use technology.

The importance of display technology in both

commercial and military applications makes absolutely critical the funding of a U.S.-based infrastructure to serve domestic manufacturers.”41

ARPA is scheduled to fund a decreasing share of

USDC’s operating expenses, and the consortium

is expected to be self-supporting by 2003.

Under the Bush Administration, officials in

DARPA’s HDS program were careful not to tout

commercial applications as a goal of their funding.42 All that changed under the Clinton Administration, which has made it clear that it views

FPDs as a strategic technology.

The National Flat Panel Display Initiative

includes efforts that will establish an infrastructure of basic technology, equipment, low-cost

manufacturing processes, standards, and qualityassurance techniques that will allow U.S. manufacturers, should they choose, to produce

flat-panel displays domestically in high volume.

❚ Factors Inhibiting Integration

The greatest single inhibitor to the civil-military

integration of a U.S. FPD industry is the lack of

a commercially viable domestic industry. Domestic CMI in this industry, as in shipbuilding, requires the development of a commercially viable

component. However, in contrast to the shipbuilding industry in the United States, where few large

commercial ships have been produced even with

40 Flat Panel Display Task Force, op. cit., footnote 1, p. I-8.

41 B. Robinson and D. Lieberman, “Consortium Wins DARPA Flat-Panel Award,” Electronic Engineering Times, Feb. 8, 1993 (Issue 732),

p. 10.

42 Explaining the reasoning behind the Phosphor Centers of Excellence, Lance Glasser, director of the Agency’s Electronic Systems

Technology Office, explained, “It’s more to provide the capability than anything else. We want to be in the position a few years from now for U.S.

manufacturers to be able to decide whether they want to manufacture in the U.S. themselves or not.” B. Robinson, “DARPA in Flat-Out Panel

Push, Electronic Engineering Times, Aug. 3, 1992 (Issue 704), p. 60.
24 | Assessing the Potential for Civil-Military Integration: Selected Case Studies

foreign components, there is a developing indigenous FPD industry here.

Technical Factors

Although technical factors do not appear to be a

major inhibition to integration, there are some

technical factors that constrain the degree of integration. For example, although a military flatpanel display may not look much different from

its commercial counterpart, the users of military

displays seldom enjoy ordinary viewing conditions or benign environments. Thus, although by

many performance yardsticks commercial electronics have overtaken their military counterparts,

that is not true of flat-panel displays. Military

FPDs must satisfy performance demands that

commercial products do not need to meet. Nevertheless, some of the gap can be bridged by repackaging, possibly as a separate activity so it does not

add to commercial costs.

Difficult lighting conditions

Military displays must be able to be read when

bathed in midday sunlight. This requirement calls

for brightness levels as high as 10,000 foot-lamberts—some 200 times the brightness of commercial displays. Because color is used to represent

threats and conditions, the display’s colors must

remain stable when exposed over long periods to

ultraviolet light. If the display is backlit (as most

AMLCDs are), there must be a fail-safe backup so

that the pilot can always read the display in the

blinding sun.

Superior viewing

In battle, seconds count; pilots and soldiers must

be able to pick information off their displays

instantly and from oblique angles. Backgrounds

must be jet black to absorb stray light. The backlight must be adjustable to provide satisfactory

viewing over a wide combination of available

light and available power. Commercial resolution

(typically 80 to 96 pixels per inch) is too coarse to

render finely detailed maps. Military displays

need as many as 128 color pixels per inch.

Extreme environmental conditions

To ensure that they will operate reliably in temperatures ranging from Arctic winters to Sahara summers, military flat-panel displays are typically

equipped with built-in heaters for the panel itself;

backlit displays include a second heater to keep

the backlight from failing. They must also withstand the shock and vibration of daily life in aircraft and armored vehicles. Displays used on

Navy airplanes, aboard ships, and in submarines

must withstand humid, salt-spray conditions that

would quickly corrode commercial displays.

Low power

Many military displays draw their power from

small, soldier-carried battery packs. Commercial

displays may draw too much power to serve in the

field. Accordingly, soldier-carried military displays must have extremely efficient backlights

and glass that transmits unusually high amounts

of light.

Voltage differences

Many DOD communication systems are designed

to draw current at 12 or 24 volts. These levels differ starkly from the consumer sector, where the

standard device voltage long ago migrated from

12 to 5 volts. By 1995, led by the demand for longlived portable computers, 3.3-volt systems will

begin to outsell 5-volt systems. With consumers

demanding ever-longer battery life, the industry is

heading toward 2.2 volts. In the face of these

changes, the military may adopt lower voltage

sources. There are several technical hurdles to

overcome in this area.

Interconnections

Many weapon systems use the MIL-1553D data

bus. Military flat-panel displays must possess the

necessary connectors to receive data from this

bus, and the bus connectors, as well as the power

connectors, must be rugged and highly reliable.

These connectors are seldom used in commercial

flat panel displays.

Market Factors

Much of the FPD used by consumers are likely to

remain extremely price-sensitive. However, there
Case Study 1: Flat Panel Displays: Assessing the Potential for CMI | 25

is little chance that the price pressures on military

cockpit displays will ever come close to the commodity pricing that these devices call for. On the

other hand, there may be a great deal of overlap between defense and commercial aircraft FPD

needs. In this case, the need is to examine markets

that are driven by similar performance need.

Policy Factors

Acquisition law and regulations still inhibit the

purchase of many commercial items. While the

Federal Acquisition Streamlining Act of 1994

(FASA) will eliminate many of the barriers to integration relating to commercial products (e.g., it

will drop requirements for cost and pricing data),

FASA does not address many of the constraints

that exist with militarily unique items. Thus, acquisition procedures such as government cost-accounting rules and in-plant oversight will still

have an impact on the level of integration within

firms and facilities.

DOD’s changes in the use of military specifications and standards may greatly reduce the barriers to CMI. This, however, remains to be seen and

will depend on how changes are implemented.

Few of the current military specifications would

be of value to most consumers. Hence, it may be

difficult for a display that met these specifications

to find a broad commercial acceptance. Nevertheless, much of the ruggedness that certain MilSpecs require can be, and indeed is, provided by

careful packaging (e.g., hermetic seals and durable housing). Thus, there is no reason that ruggedization requirements, by themselves, must

preclude commercial FPDs from showing up in

cockpits and on the battlefield.

❚ Implications of Enhanced Integration

The relatively small military market, representing, by some estimates as little as 1 percent of the

total market for flat-panel displays, makes some

integration with the commercial market imperative—if the military is going to have early access

to new technology. Because of the military’s special performance needs, the commercial base

might also benefit from selected developments—

even if the overall military effort remains quite

small.

Whether the integration needs to occur in a domestically based industry or an internationally

based industry is a question that continues to be

debated. Many argue that there are strategic reasons for ensuring a healthy, integrated domestic

production base. There is concern among U.S. observers that loss of the AMLCD market by U.S.

firms may also result in a significant loss of the

U.S. IC industry as more functions (such as logic,

display driving, and diagnostic testing) are embodied within the AMLCD structure in lieu of being

manufactured as separate elements. The observers

also fear that a lack of manufacturing experience

may lead to a situation where the military will not

have access to the best technology. Others argue

that a globally robust and dispersed FPD industry

can provide the Nation with its military needs.

What is needed, according to these observers, is

the capability to maintain access to global

technology developments and the design talent to

incorporate these developments into military systems. Whichever argument is correct, it is clear

that some level of integration is preferred.
Case Study 2:

CMI in the

Polymeric

Composites

Industry

omposite materials are quite common today and are used

in nearly every segment of civilian and military industry.

Composite materials consist of two or more identifiable

constituents that together exhibit properties that are generally superior to the properties of the individual constituents.

These materials are certainly not new; the early inhabitants of

Egypt, for example, used composite bricks of mud and straw to

construct many dwellings. Reinforced concrete, the carbonepoxy used in some fishing rods and tennis rackets, the lightweight composite used in some armor, and the fiberglass-epoxy

used in fishing and racing boats are all examples of various types

of composite materials. A 1993 study by the Strategic Analysis

Division of the Department of Commerce found that the value of

the U.S. market for polymeric-matrix, metal matrix and carbon/

carbon composites in 1991 was $2.6 billion, and the worldwide

total value was $4.7 billion.1 (See box 3.) 

A wide variety of fiber-resin combinations is in use today, and

the market for polymeric-matrix composites—especially for

aerospace and military-related products—is large. Until recently,

the military applications of polymeric composites were driven

mostly by performance advantages. However, over the past few

years, cost has become an increasingly important factor in mili1 U.S. Department of Commerce, Critical Technology Assessment of the U.S. Advanced Composites Industry (Washington, DC: U.S. Government Printing Office), December 1993.

| 27
28 Assessing the Potential for Civil-Military Integration: Selected Case Studies

Ceramic-Matrix Composites

Ceramic-matrix composites are composed of reinforcing ceramics embedded in a ceramic-matrix. For example, the reinforcements can be long, continuous fibers; short fibers; small, discontinuous

whiskers; particulate; or platelets, Typical reinforcements include alumina, cordierite, mullite, silicon

carbide, silicon nitride, zirconia, titanium diboride, fused silica, and graphite, Common matrix materials

include alumina, cordierite, mullite, silicon carbide, silicon nitride, zirconia, and titanium diboride,

Ceramic-matrix composites have excellent corrosion resistance, excellent high-temperature resistance, high levels of hardness, relatively high elastic moduli, and low relative weight, They can be classified into three general categories: monolithic or single-phase ceramics (those with no discrete reinforcements); discontinuous fiber-, whisker-, or platelet-reinforced ceramics; and long, continuous-fiberreinforced ceramics, Unlike polymeric-matrix composites, which need reinforcements primarily to enhance structural properties, ceramic-matrix composites use the reinforcements to improve fracture

toughness, reliability, and durability, as well as to enhance structural properties,

Metal-Matrix Composites

Metal-matrix composites (MMC) consist of matrix materials, such as lightweight alloys of aluminum, magnesium, or titanium, reinforced with ceramic particulate, whiskers, or fibers. As is the case

with ceramic-matrix composites, reinforcements can be continuous or discontinuous, Carbon fibers and

ceramic fibers are used as continuous reinforcements in metal-matrix composites, Typical ceramic fibers used as continuous reinforcements are alumina, silica, boron, alumina-silica, zirconia, magnesia,

mullite, boron nitride, silicon nitride, and titanium diboride. Typical discontinuous reinforcements include

particulate and whiskers, The most common types of particulate are alumina, titanium carbide, silicon

carbide, boron carbide, and tungsten carbide, The most common types of whiskers are silicon carbide,

silicon nitride, and alumina,

Carbon-Carbon Composites

Carbon-carbon composites consist of carbon fibers as the reinforcing fiber and a carbonaceous

material as a matrix material, Carbon-carbon composites are usually classified into two types: structural

and nonstructural, The reinforcing fibers can have many forms: chopped, continuous, two-dimensional

woven, and three-dimensional woven, The choice of reinforcement depends on the application,

The process of depositing carbon into a carbon-fiber preform to act as a matrix material is called

densification. The carbonaceous matrix material is deposited in the carbon fiber preform in two general

ways, The most common method is chemical-vapor deposition (CVD), also known as chemical-vapor

infiltration (CVI). In this method, the pyrolitic carbon is deposited by the chemical cracking of natural

gas at very high temperatures and very low pressures. The second method is referred to as liquid impregnation, In this method, a relatively high-char-yield liquid resin is impregnated into the carbon preform and then carbonized at high temperatures to form the carbon matrix. Both processes must be

repeated many times to achieve usual levels of densification, making carbon-carbon composites rather

expensive.

The microstructure of the carbonaceous matrix material has an important effect on the properties

of the final composite. Microstructure range from small, randomly oriented crystallite known as isotropic crystals to larger, highly oriented Iamellar crystallite structures, A significant amount of research

work is under way to develop quantitative correlations between microstructure and mechanical and

thermal properties of carbon-carbon composites.

SOURCE: U.S. Congress, Office of Technology Assessment, 1995,
Case Study 2: CMI in the Polymeric Composites Industry 29

Specific tensile

Density Tensile strength Tensile modulus strength

Material (lbs./in.3

) (KSI) (MSI) x105

[lbs/in2/lbs/in3]

S-Glass 0.09 665 12,4 73.8

Carbon (T-300) 0.06 450 34 75

Carbon (T650-42) 0.06 730 42 121

Aramid (K-49) 0.052 550 18 105

Boron 0.09 510 58 56.7

Silicon carbide 0.086 400 28 46.5

Aluminum (7075-T6) 0.101 81 10,4 8.1

SOURCE: M.Y.C. Niu, “Composite Airframe Structures” (Hong Kong Conmilit Press, 1992)

tary acquisition. In some instances, cost is now

more important than incremental improvements

in performance. As competitive pressures increase, cost will play a greater role in the civilian

and military markets.

In the commercial sector, cost, coupled with

unique function, has long been the major force behind the use of polymeric-matrix composites. For

example, fiberglass boats are not only superior to

wooden boats in many measures of performance,

they are also less expensive to purchase and maintain than wooden boats. Enclosures for electronic

devices manufactured from injection-molded

composites can also be significantly less expensive than their machined metal counterparts.

The focus of this study is polymeric-matrixcomposite materials made by combining short or

long fibers or particulate and an organically

based matrix material, which binds the fibers or

particulate together. Normally, the reinforcements (i.e., the fibers or particulate) are used to

carry structural loads, and the matrix material, or

resin, is used to hold the fibers together, to protect

the fibers, and to transmit structural loads between

the reinforcing fibers. This study briefly examines

the potential for civil-military integration in the

polymeric composites industry. It considers the

technology and discusses the current structure and

trends of the industry. Finally, it considers factors

that enhance or detract from the potential for integration.

TECHNOLOGY AND USE OF

POLYMERIC-MATRIX COMPOSITES

❚ Fiber Technology

The typical fibers used in today’s polymeric-matrix composites are carbon, aramid fibers, and

glass. Fibers come in many forms, such as particulates and short and long fibers. They are primarily

responsible for the structural properties of the

composite, such as strength and stiffness. The fiber form is usually selected to meet the particular

structural requirements of the item being

manufactured.

The specific tensile strength (defined as tensile

strength divided by density) of composites

compared to aluminum is shown in table 4. The

higher the specific tensile strength, the lighter the

material and the better the structural application

for a particular load carrying capability.

❚ Resin Technology

The organic matrices, or resins, most often used in

composites can be divided into two major classes:

thermoses and thermoplastics. The choice of resin is largely based on ultimate-use temperature,

toughness, environmental resistance, and ease of

manufacture. (See table 5.)
30 Assessing the Potential for Civil-Military Integration: Selected Case Studies

Process Process Service Solvent

Resin type temperature time temperature resistance Toughness

Thermoset Low High High High Low

Thermoplastic High Low Low Low High

SOURCE U S Congress, Office of Technology Assessment, New Structural Materials Technologies, OTA-TM-E-32 (Washington, DC U S Government Printing Office), September 1986.

Mechanical Upper use

Material type properties temperature Processibility cost

Epoxy Excellent 200-250 “F Good Low-medium

Polyester Fair 180 OF Good Low-medium

Phenolic Fair 350 OF Fair Low-medium

Polyimide Good 500-600 ‘F Fair-difficult High

Bismaleimide Good 350 OF Good Low-medium

SOURCE: M.Y.C. Niu, ’’Composite Airframe Structures” (Hong Kong: Conmilit Press), 1992.

Thermoset resins change their chemical composition when they are heated (called curing) to

form high-strength, high-stiffness, rather brittle

cross-linked networks. This process is irreversible. Thermoset resins have been used for many

structural applications. The most commonly used

thermoset resins are epoxies, polyesters, phenolics, and polyamides, which includes bismaleimides. (See table 6.) Polyamides can also exhibit

some thermoplastic behavior at high temperatures. (See box 4.)

Thermoplastic resins differ significantly from

thermoset resins and are gaining in popularity.

They are expected to be used in the Air Force’s

Advanced Tactical Fighter. Thermoplastic resins

are usually rather high-molecular-weight materials that, rather than being cured to shape, are

heated and then formed into shape. No (or very

little) chemical reaction takes place in the

manufacturing process. The manufacturing process is reversible to some extent, and thermoplastics can be reused and reformed into other shapes.

Thermoplastics fall into four general subclasses:

amorphous, crystalline, liquid crystal, and

pseudothermoplastic.

❚ Polymeric Composites as

Structural Material

The enormous number of available fibers, fiber

forms, and matrix resins allows nearly unlimited

freedom and creativity in engineering an optimum

material for any given application. While this variety provides a tremendous opportunity for creative problem solving, it challenges traditional

thinking about structural design and certification.

Once the fiber is combined with the resin matrix to form a structure, the interphase is created.

The interactions of the fiber and the resin, which

result in the interphase, range from very weak, in

the case of electrostatic forces, to very strong, in

the case of actual chemical bonding. The nature of

the interphase profoundly affects the resultant

properties of the composite, and plays a key role

in properties such as compressive strength, resistance to fatigue, solvents, heat, and moisture.

The advantages of composites as structural material can be better understood by examining some

typical properties of these materials and comparing them with those of conventional materials.

(See table 7.) For example, a comparison of spe-
Case Study 2: CMI in the Polymeric Composites Industry 31

Thermoset Resins

Epoxy resins are widely used in composite applications. Epoxies in generaI use are reactive polymers that begin as low-molecular-weight materials and progress to highly cross-linked dimensionally

stable materials as they are cured. They generally provide very good resistance to chemicals and solvents, but the mechanical properties are adversely affected by moisture. Epoxies adhere well to most

commonly used fibers and exhibit low shrinkage, but they are brittle and subject to impact damage that

is not always observable to the naked eye.

Polyesters are formed from the polymerization of a diacid and a diol, which react together to form

many ester linkages. Curing agents are then added to the basic formula to provide a rigid cross-linked

polymer. Polyesters are relatively inexpensive compared with standard epoxies. They can be cured at

low temperatures to provide good mechanical and electrical properties. Like the epoxies, however, they

tend to absorb water, which can adversely affect mechanical performance, especially at elevated temperatures. Polyesters possess exceptionally good resistance to acids. They are used in the manufacture of radomes, bowdomes, and other submarine structures, as well as in hulls and masts.

Phenolics are one of the oldest commercially used resins. These very complex materials are

formed from the reaction of phenol and formaldehyde. If the reaction is run with excess formaldehyde

under basic conditions, the product is called a resole. If the reaction is run with excess phenol under

acidic conditions, the product is called a novolac. A resole can be converted to a phenolic with heat

only, whereas converting a novolac to a phenolic requires the addition of an amine hardener (or catalyst) and heat. Phenolics are used for aircraft-interior applications and rocket-motor exit nozzles

Polyamides tolerate higher use temperatures than do standard epoxies and polyesters. These materials are used for applications in the 400 to 500 ‘F range and are quite difficult to process. However,

they exhibit fair damage tolerance, good temperature resistance, and good mechanical properties.

Polyamides are used in the manufacture of missile fins, the Global Positioning Satellite, and printed circuit boards.

Bismaleimides are a subclass of polyamides. They are more easily processed than are the conventional polyamides because they can be processed at lower temperatures. However, to develop their

mechanical properties to the fullest extent, they must be subjected to an additional heating cycle (a

postcure) of approximately 475 F. Bismaleimides are used for aircraft body skins on the AV8-B Harrier

and the Advanced Cruise Missile and for the structure of the Advanced Tactical Fighter.

Damage tolerance has become more important with the ever-increasing use of composites. Producers have made significant improvements in damage tolerance. “Toughened” systems have been

developed, and some of the newer systems approach the damage-tolerance capability of thermoplastics.

(continued on next page)

cific tensile strengths and specific shear moduli tion—for example, for cables to support a bridge

helps explain the structural advantages of com- deck structure—the most efficient material for

posites. 2

that application would have the highest specific

Differences in specific properties provide de- tensile strength, which results in the lightestsigners with a range of choices. For instance, if weight product. In table 7, that material is the unitensile strength is critical to a particular applica- directional carbon-epoxy composite. If shear

2 Specific properties, such as specific tensile strength, are calculated by dividing the property, by the material’s density. For example, aluminum’s specific tensile strength is calculated by dividing its tensile strength by its density.
32 Assessing the Potential for Civil-Military Integration: Selected Case Studies

Thermoplastic Resins

Amorphous thermoplastics have no regular order in their molecular structure, have no definite

melting point, and are not normally affected by moisture pickup, but they can be affected by solvents,

Although they do not possess rigid three-dimensional chemical links, as do thermoses, they typically

have long, loosely intertwined molecular chains that serve to enhance their mechanical properties, They

exhibit good damage-tolerance properties,

Crystalline thermoplastics have crystalline regions that exhibit some amount of definite order, as

well as an amorphous structure overall. These materials possess a definite melting-point range and can

have better mechanical properties than do purely amorphous thermoplastics. They exhibit good resistance to solvents, low moisture pickup, and excellent damage tolerance, The materials, however, often

show some variability in terms of mechanical properties because the amount of crystallinity present in

the end product (which affects mechanical characteristics) is a function of processing and can be difficult to control, They are used in the rudder assemblies of the F117-A (Stealth) fighter.

Liquid-crystalline thermoplastics possess a molecular structure that is often highly anisotropic

and aligned in one particular direction. This alignment has profound effects on the mechanical properties of these materials, Typically, the mechanical properties are quite outstanding along the axis of

alignment and not as good along the off-axis, Liquid-crystalline thermoplastics are in the early stages of

development but hold great promise for tailoring the properties of a composite at the molecular level,

They will probably be used in injection molding to create such products as electronic enclosures.

Pseudothermoplastics exhibit some characteristics of both thermoses and amorphous thermoplastics, These materials are often condensation polymers formed by a chemical reaction during the

curing or forming process, However, the degree of cross-linking is very low, enabling these materials to

be reformed and reused, Many psuedothermoplastics are in the very early stages of development.

SOURCE: U.S. Congress, Office of Technology Assessment, 1995,

strength is critical—for example, the rib webs in ness equipment; construction; consumer

an aircraft wing structure-the most efficient material would be the quasi-isotropic carbon-epoxy

composite. Real-world structures are usually subjected to rather complex loading schemes, and the

best choice of a material for a given application is

often determined by a combination of properties.

❚ The Polymeric Composites Market

According to the Composites Institute, a division

of the Society of Plastics Industry, Inc., the composites market in the United States produced 2.68

billion lbs. in 1993, an increase of 5.2 percent

from 1992. The data are compiled from over 410

firms, including raw materials and equipment

suppliers and producers of composite products,

and are segregated into nine market segments: aircraft, aerospace, and military; appliance and busiproducts; corrosion-resistant equipment; electrical and electronic; marine; transportation; and

other. (See figure 5.) In the aircraft, aerospace, and

military segment, by far the most important single

market, shipments in 1993 were 19.5 percent less

than those in 1992. (See figure 6.)

The use of composites is driven by requirements falling into three broad categories: performance and function, quality and reliability, and

cost. Some examples of unique performance and

function requirements in defense systems include

reduced weight, transparency to electromagnetic

radiation (stealth), dimensional stability, and resistance to ballistic penetration.

Weight reduction in aircraft systems, for example, can result in increased maneuverability, increased range, increased payload, increased speed
Case Study 2: CMI in the Polymeric Composites Industry 33

Tensile Shear Specific Specific shear

strength modulus Density tensile strength modulus

Material (KSI) (MSI) (lbs./in3

) x103[lbs/in2/lbs/in3] x106[lbs/in2/lbs/in3]

Aluminum (6061) 42 3.8 0.098 428.57 38.78

Steel (4340) 260 11 0.284 915.49 38.73

Cast iron 44 7 0.26 169.23 26.92

Unidirectional EGlass epoxy 150 0.8 0.075 2000 10.67

Unidirectional boron-epoxy 180 0.7 0.073 2465.75 9.59

Unidirectional aramid-epoxy 180 0.3 0.05 3600 6.0

Unidirectional carbon-epoxy 200 0.7 0.055 3636.36 12.73

Quasi-isotropic carbon/epoxy 80 2.8 0.055 1454.66 5091

SOURCE “Design Guide for Advanced Composites Application,” Advanced Composites Magazine, 1993

(for a given thrust capability), and decreased fuel

consumption, and it has led to the use of polymeric composites that are stiffer and stronger than

metals at equivalent weights. The increased fatigue resistance of composites also leads to longer

service life.

Many polymeric composite structures have

been more expensive than their metal counterparts, especially in terms of acquisition costs.

However, recent advances in design practices and

composites manufacturing technologies have reduced this cost differential. In some cases, especially where several smaller-parts can be

combined into one larger composite part because

of a particular property advantage or better

manufacturing technology, the composite part is

now less expensive than the metal part.

Commercial uses of polymeric-matrix composites are very diverse. Some specific examples

include weight in the transportation industry; xray transparency and biocompatability in the medical industry; corrosion resistance in the

automotive, chemical, and oil industries; tailorable mechanical properties in the sporting goods

industry; and electrical resistance and electromagnetic shielding in the electronics industry. In many

cases, the materials used for defense applications

are identical to those used for commercial applications. The quality specifications for commercial

applications are, however, often less strict than

those for military applications.

Defense Applications

Polymeric composites are used in a wide variety

of defense applications and are found in almost

every major weapon system produced. In many

cases, weapons systems could not perform their

missions without polymeric composite materials.

(See table 8.)

The Army uses composites in its helicopters,

land vehicles, missiles, munitions, and support

equipment. The excellent fatigue and damping

characteristics of composites make them ideal for

helicopters. Carbon-epoxy materials, for example, are used in the construction of helicopter airframes, refueling booms, skin panels of various

types, lightweight bridging, antenna masts, and

munitions. Aramid (Kevlar) epoxy is used in helicopter rotor blades, span liners (to protect personnel from shrapnel), launch tubes, helmets, and

tactical shelters. Glass-epoxy (both S-Glass and

E-Glass) is used in items such as fuel tanks, span

liners, rotor blades, launch tubes, motor cases, and

bore evacuators. Composites have extended the

service life of helicopter rotor blades by a factor

of 2 to 3 and have enabled designers to improve

the design of the blade. Finally, the airframes of

the new generation of helicopters will be largely

made of polymeric composites.

The Navy uses polymeric composites in its

fixed-wing aircraft, rotary aircraft, ships and submarines, missiles, and satellites. Carbon-epoxy is
34 Assessing the Potential for Civil-Military Integration: Selected Case Studies

800

700

600-

 500-

 400-

 3oo200 “

Aero Appl Const Consumer Corr Elec

- r

Marine

- r

Trans

i

Other

n

SOURCE: Society of Plastics Industry, Inc. , Composites Institute Semi-Annual Report, New York, NY, August 1993

used for wing skins and doors, stabilizer skins,

leading and trailing edges, basic airframe structures, refueling booms, and skin panels. The upper

wing skin of the Marine Corps AV-8B, for example, is one of the largest one-piece carbon-epoxy

aircraft structures made. Over twenty-six percent

of the AV-8B’s structural weight is polymeric

composite material. The Navy also used polymeric-matrix composites to rewing A-6 aircraft. Carbon-epoxy is used in the fabrication of the aircraft

ribs, spars, and skins. Aramid (Kevlar) epoxy is

used for fairing, spoilers, rotor blades, and launch

tubes. Glass-epoxy is used in fairings, spoilers, radomes, rotor blades, fuel tanks, sonar domes, ship

hulls, launch tubes, and electromagnetic windows. The V-22 Osprey tilt-rotor craft will use a

significant amount of carbon-epoxy composite as

primary structural material: approximately 50

percent (by weight) of the fuselage structure, the

wing leading and trailing edges, the wing itself,

and the empennage. Composites are used in many

marine applications because of their acoustical

properties.

The Navy has the largest and heaviest (65,000

lbs.) single-piece composite structure of any of the

U.S. armed Services: the glass-toughened epoxy

bowdome used in the SSN-21 Seawolf submarine.

The MHC-51 coastal mine hunter has an all-composite hull.

The Air Force uses composites in a wide variety of aircraft, missiles, launch vehicles, and satellites. Carbon-epoxy structures include wing

skins, access doors, stabilizer skins, leading and

trailing edges, motor cases, storage spheres,

457 I

I I

0 I I I I I I I

1985 1986 1987 1988 1989 1990 1991 1992 1993

SOURCE: Society of Plastics Industry, Inc., Composites Institute SemiAnnual Report, New York, NY, August 1993,
Case Study 2: CMI in the Polymeric Composites Industry 35

Rotary-wing aircraft OH-58, OH-6A, UH-60A, CH-46, CH-47D, AH-IS,

MH-60, RAH-66, AH-64A

Fixed-wing aircraft B-2, B-52, B-1 , AC-130U, C-135, C-26A, C-135, C-26,

A-10, TR-1 , F-15, F-1 17A, F-16, F-22, F-111, C-17,

C-58, KC-10, V-22, AV-8B, F/A-18, F-14, A-6

Missiles LGM-118A, AGM-129A, AGM-131, MGM-134A, Hellfire,

AMRAAM, Patriot, AGM-65, MLRS, HARM, AT-4, TOW-2,

AAWS-M, Stinger, D-5, Tomahawk

Satellites MILSTAR, Defense System Communication Satellite II,

Defense Support Program, Global Positioning System

SOURCE: Office of Technology Assessment, 1995, based on information from H. Reinert and P Hauwiller, Horizontal Assessment of the Organic

Composites Industrial Base, WL TR 928044 (Beavercreek, OH: Universal Technology Corp. , July 19, 1992), and other sources

adapter skirts, longerons, struts, and trusses. Aramid (Kevlar) epoxy is used in fairings, spoilers,

ducting, leading and trailing edges, motor cases,

rings, insulation, face sheets, and antennas. Glassepoxy is used in fairings, spoilers, wing tips, radomes, electromagnetic windows, antennas, and

struts. About 40 percent, by basic structural

weight, of the airframe of the F-22 tactical fighter

will be composite materials.

Commercial Applications

Polymeric-matrix composites have both aerospace and nonaerospace commercial applications.

As in the military, strength and light weight enhance aerospace applications.

Aerospace use

Polymeric composite structures have a wide variety of applications on large civilian-transport aircraft. For example, the Boeing 747 uses a

6-ft.-high winglet, carbon-epoxy front- and rearwing spars, and spar covers made from a carbonepoxy honeycomb-sandwich structure. The

inboard and outboard spoilers, aileron, rudder,

elevator, and inboard trailing-edge flap of the

B757 are all made from carbon-epoxy composites. The B767 uses carbon-epoxy in the inboard

and outboard ailerons, the rudder, the vertical fin

tip, and the inboard and outboard spoilers. Carbon

and Kevlar-epoxy are used in the trailing-edgeflap track-support fairings, the fixed trailing-edge

panels, the vertical-fin fixed trailing-edge panel,

the horizontal stabilizer tip, the outboard-flap

trailing-edge wedge, the main landing-gear doors,

and wing-to-body fairing. Glass and carbonepoxy are used in the nose-landing-gear doors.

The choice of which composite to use for a particular structure depends on the complex interaction of many factors, including critical loading

strength and stiffness criteria, damage tolerance,

repairability, ease of manufacture, and cost. Cost

and “acceptance and understanding by structural

designers” are cited as two reasons why U.S.

manufacturers do not make more use of composites on large commercial transport aircraft.

Smaller civilian aircraft use polymeric-matrix

composites much more extensively than large aircraft. The Beech Starship, a twin-pusher canard

aircraft, is an outstanding example of the full utilization of polymeric composite materials. The

airframe is made of carbon-epoxy facesheets

bonded to a low-density Nomex honeycomb core.

This sandwich structure is very lightweight and

extremely efficient. The structural weight of the

aircraft is about 15 percent less than a conventional aluminum airplane, and the cost of producing

the composite structure is approaching the cost of

fabricating an aluminum structure.

Non-aerospace use

Polymeric composites have a wide variety of nonaerospace applications. The sporting goods in-
36 | Assessing the Potential for Civil-Military Integration: Selected Case Studies

dustry, for example, represents a significant

commercial market: tennis rackets, golf clubs,

high-performance racing bicycles, canoes, kayaks, canoe and kayak paddles, bobsleds, and snow

skis are a few of the applications. Sporting goods

companies have taken composite design and

manufacturing technologies to very high levels.

Indeed, most tennis rackets are currently designed

and manufactured using sophisticated hybrid

composite technologies to create very specific

properties. Carbon fibers and aramid fibers, for

example, are combined to tailor the stiffness (primarily from the carbon) with the energy-damping

characteristics of aramid to produce rackets with

certain power and feel or control characteristics.

Some manufacturers use a combination of ceramic and carbon fibers in their rackets to achieve a

particular balance of properties. No professional

tennis player could be competitive today with the

wood, steel, or aluminum rackets of the past.

Many cars and trucks now have polymeric

composites body panels, hoods, bumpers, cabs,

fairings, air deflectors, and truck sleeping

compartments. These applications represent secondary structure, that is, structure that does not

carry primary loads in the vehicle. Several companies are involved in producing specialty vehicles,

such as mass-transit vehicles and extremely lightweight commuter and delivery vans, that incorporate composite materials, primarily glasspolyesters, in their primary structural components. The design philosophy is to produce onepiece structures that greatly reduce assembly

costs. However, these vehicles are being manufactured in small numbers by fabrication techniques

that require hand custom work, rather than in the

large volumes associated with the mainstream

light-car, light-truck market.

Successful prototypes of cargo-carrying rail

cars have been produced by using filament-winding manufacturing techniques appropriate for

small production volumes at a cost comparable to

that of metal cars. However, no major market for

these cars materialized, the company that developed the techniques was sold, and the new owners

elected not to market the product.

The medical uses of polymeric-matrix composites include x-ray tables, prostheses, and implants.

The potential liability associated with the latter

applications has hindered their use, however.

The commercial marine industry represents a

large potential market for the application of polymeric matrix composites. Major uses are glasspolyester powerboats, pleasure yachts, and

recreational watercraft such as jet skis. The very

sophisticated America’s Cup yachts use carbon,

aramid, and glass composites extensively in their

construction.

The infrastructure market is increasingly important and potentially very large. Polymeric

composite materials, for example, can solve some

of the problems resulting from the deficiencies of

conventional steel-reinforced-concrete materials.

Applications include vehicular and pedestrian

bridge decks (DOD’s Technology Reinvestment

Project has funded a demonstration project),

associated structural components such as pins and

hangers, light poles, in-ground gasoline storage

tanks, and over-wrappings to prolong the structural life of existing bridges and to increase their resistance to failure from earthquakes. Gasoline

retailers now use composite gasoline tanks to replace older, corroded, leaking steel tanks.

Applications of polymeric composites in the

construction industry include composite tub and

shower units, panels for interior partitions, prefabricated equipment shelters, ladders, and glazing

for institutional buildings.

THE STRUCTURE OF THE POLYMERIC

COMPOSITES INDUSTRY

❚ U.S. Structure

The polymeric composites industry is composed

of resin-matrix suppliers, fiber suppliers, prepreggers,3 textile weavers, equipment suppliers, parts

3 Prepreggers take their name from their process: the impregnation of reinforcing fibers with the resins under controlled conditions.
Case Study 2: CMI in the Polymeric Composites Industry 37

Equipment supplier

v

Textile weaver

v v

Prepregger

Parts fabricator <————— —

I

V

Systems integrator or end user

SOURCE: Office of Technology Assessment, 1995, based on information from Off Ice of Technology Assessment, “The Advanced Composites Industry, ” Holding the Edge. Maintaining the Defense Technology

Base, Vol 2. Appendixes.

manufacturers, systems integrators, independent

consultants, and end users. (See figure 7.) The industry has a fair amount of vertical integration.

(See table 9.)

Resin-matrix suppliers tend to be large chemical companies that supply the basic resins and additives to prepreggers. Fiber suppliers also tend to

be large chemical companies that provide various

fiber forms to prepreggers and independent textile

weavers, who weave the fibers into fabrics for various applications. Equipment suppliers provide

such things as fabrication equipment and consumable items used in the manufacture of end-item

parts. Prepreggers combine the fibers with the resins to form prepreg, which is generally used as the

“raw material” for the fabricators. Parts manufacturers actually manufacture component or enditem parts. Systems integrators integrate the

subassembly parts into a final product.

❚ Global Structure

European polymeric composite firms, like U.S.

firms, have forward integrated into the prepreg

and structures manufacturing business to gain the

value added in the business process. In the early

1990s, British Petroleum, for example, worked in

fibers, resins, fabrics, prepreg and structures.

Ciba-Geigy worked in everything except fibers, as

did Shell and Imperial Chemical Industries. (See

box 5.)

As in the United States and Europe, many different companies in Japan produce composite

products. These companies include Toray Industries, Sumitomo, Toho Rayon, Mitsubishi Rayou,

Asahi Hasei Carbon Fiber, and Nippon Polyimide. Japanese companies that typically started as

material suppliers continue to forward-integrate

to expand their business both domestically and in

the United States. In Japan, sporting goods and

leisure products constitute the largest market for

polymeric composite materials.

❚ Industry Trends

There are both negative and positive trends in the

industry. The drops in defense spending and commercial aerospace have had a major negative impact on the industry. The 1993 study by the

Strategic Analysis Division of the Commerce Department found that nearly 40 percent of the firms

in this business reported operating losses in

1991.

4 Overall employment in the industry

dropped nearly 20 percent between 1990 and

1993. Research and development (R&D) employment in 1993 was down nearly 40 percent from its

peak in 1990, indicating a dramatic decrease in

R&D investments in the private sector. Consolidation, divestment, and layoffs of skilled production workers and technologists have become quite

common.

4 Critical Technology Assessment of the U.S. Advanced Composites Industry, op. cit., footnote 51.
38 Assessing the Potential for Civil-Military Integration: Selected Case Studies

Item Company

Resin American Cyanamid, Amoco, BASF, B.P. Chemicals, Ciba-Geigy, Dow, Epolin,

Fiber-Resin Corp., Hercules, Hexel, ICI/Fiberite, Masterbond, McCann,

Minnesota Mining and Manufacturing, Poly-Freeze, Polyrene Development,

PTM&W, Shell, S.P. Systems, Textron

Fiber

Suppliers

Weavers

Composite equipment

Prepreggers

Allied Signal, Amoco, AKZO, Ashland, DuPont, Great Lakes Carbon, Hercules,

Mitsubishi Rayon, Owens Corning, PPG, Textron Specialty Materials, Toho

Rayon, Toray, Zoltek

Advanced Textiles, Atlantic Richfield, BGF, Burnham Products, Clark Schwebel,

Dexter, Fabric Development, Fiber Materials, Highland Industries, J.B. Martin,

J.P. Stevens, Ketema, Miliken, Mutual Industries, North American Textiles,

Precision Fabrics Group, Techniweave, Textile Composites, Textile Technologies,

Textron, Woven Structures, Zoltek

Airtech International, AVS, Bondline Products, Cincinnati Milicron, DOW Corning,

Grim, Icon Industries, Ingersoll, Liquid Controls, North American Textiles,

Precision Fabrics Group, Richmond Aircraft Products, RIM Systems,

Schnee-Morehead, Thermal Equipment, United McGill, Wacker Silicone

American Cyanamid, BASF, B.P. Chemicals, Ciba-Geigy, Fiber Cote, Fiber

Materials, Fiber Resin, Hexel, ICI/Fiberite, McCann, Minnesota Mining and

Manufacturing, Newport Adhesives, Quantum, S.P. Systems, YLA

Major parts manufactures/end users/systems integrators

Defense ABB, Aerojet, Alcoa-CSD, Bell Helicopter, Boeing, B.P. Chemicals, Brunswick,

General Dynamics, Grumman, Hercules, Kaman, Lockheed, LTV, Martin

Marietta, McDonnell Douglas, Morton Thiokol, Northrop, Rockwell, Rohr,

Sikorsky, Teledyne

Commercial Boeing, Chrysler, Composite Horizons, Dunlop, DuPont, Ford, General Motors,

Hercules, Hexel, Prince, Wilson Sporting Goods

SOURCE: Office of Technology Assessment 1994, based on information from H. Reinert and P. Hauwiller, Horizontal Assessment of the Organic

Composites Industrial Base, WLTR928044 (Beavercreek, OH; Universal Technology Corp., July 19, 1992), Office of Technology Assessment,

“The Advanced Composites Industry, ” Holding the Edge: Maintaining the Defense Technology Base, vol. 2: appendixes, 1990, and other sources.

On the other hand, according to the Composites

Institute, the weight of U.S. shipments of composites in 1993 was 5.2 percent higher than it was in

1992.5 In addition, four markets that represent 72

percent of the composites industry by market

share (transportation, construction, electricalelectronic, and marine) were all forecasting faster

growth rates than the general economy.

The major concern of those worried about the

health of the industry is the aerospace-aircraftmilitary sector, where shipments decreased 19.5

percent in 1993. This downward trend is cause for

alarm because this segment of the market generally represents the leading edge in technology development in polymeric composites. In the past,

developments in aerospace/military have tended

to filter down to commercial uses in other segments of the economy, and have provided technological and economic stimulation in those

segments. As a result, this sector is viewed as a

“leading indicator” of the polymeric composites

industry overall.

5 Society of plastics Industry, Inc., Composites Institute Semi-Annual Statistical Report (New York, NY: Society of plastics Industry, Inc.),

August 1992.
Case Study 2: CMI in the Polymeric Composites Industry 39

Consortia are emerging as a powerful force in the composites industry as a result of government

policy initiatives, such as cooperative R&D agreements, that encourage pre-competitive development

activities and that tend to enhance civilian-military integration. The typical consortium consists of

groups of companies, including suppliers, fabricators, and end users, that band together to develop

pre-competitive technology that can be used by all members. Funding is either a combination of federal

funding and member funding or strictly member funding. Several consortia have been formed to address pre-competitive issues related to composites technology. Most of the industry representatives interviewed by OTA consider consortia essential if the U.S. industry is to survive and compete in the global marketplace. Because of the rapidly changing pace of the technology, no one company can afford

the R&D investments required to address all the related multidisciplinary issues. Also, consortia are a

cost-effective means for companies to address pre-competitive technology issues of interest to the entire community. The fact that many in industry have come to the conclusion that pre-competitive

technology cooperation is possible reflects a major shift in attitude toward R&D investment strategy; for

many years, companies believed that all related technology information was competitive in nature.

A wide spectrum of technology issues ranging from basic research to materials database development to manufacturing technology development are addressed in consortia.

Composite Materials Characterization, Inc., for example, is composed of Dow Chemical,

Lockheed, General Electric, Grumman, LTV, Rohr, and Sikorsky. These members are primarily resin suppliers, fabricators, and end users of composite products. The purpose of this consortium is to establish

standards for test methods, processes, evaluation criteria, and materials selection. The consortium also

tests new composite materials to establish a consistent independent database of mechanical properties for promising materials. The database is not intended to be a detailed design database for design

allowable; rather, it is intended for screening and general comparison of emerging materials. The participating companies fund this effort with no federal help, and the annual investment is about $500,000

to $700,000. However, the data are available only to consortium members.

The Automotive Composites Consortium consists of the “big three” automotive manufacturers —

Ford, General Motors, and Chrysler. The purpose of this consortium is to establish joint research programs to demonstrate the advantages of structural polymeric composites for automotive applications

and to develop pre-competitive technology necessary for implementation. The consortium is currently

working on a demonstration program on rapid resin-transfer molding of structural parts, such as the

front end of the Ford Escort. Very ambitious goals have been set for the program, including manufacturing the parts in 5 minutes or less using structural reaction injection molding (SRI M). These manufacturing times are necessary for an economically viable production process for the volumes common in automotive production.

The Center for Composite Materials at the University of Delaware operates a U.S. Army Research

Office/University Research Program that concentrates on the manufacturing science of composites from

a research perspective. The Center also offers several educational products, including a Design

Encyclopedia, an interactive videodisk course on the Experimental Mechanics of Composite Materials,

and a video series entitled “Introduction to Composites. ” Each year, it sponsors a workshop about composites for members and a symposium for the public.

The National Center for Manufacturing Science (NCMS) in Ann Arbor, Michigan, is a broad-based

manufacturing consortium that addresses many types of manufacturing technologies and issues relating to manufacturing. Only a very small portion of its work is devoted to composites.

(continued on next page)
40 Assessing the Potential for Civil-Military Integration: Selected Case Studies

The Composites Automation Consortium of Burbank, California, consists of Dow Chemical,

Charles Stark Draper Laboratories, Foster Miller, Hexcel Corp., Ingersoll Milling Machine, Lockheed

Corp., and several others. This consortium is developing automated manufacturing assembly and joining systems to produce composite structures. Its focus is not to develop machines for one assembly or

joining technique but to develop machines that are inherently flexible enough to handle a variety of joining and fiber-placement processes. Automated fiber placement and joining had been identified as a

critical technology for manufacturing polymeric composite structures in a cost-effective way.

The Great Lakes Composites Consortium, Inc., of Kenosha, Wisconsin, is probably the most

broad-based consortium in the United States that concentrates solely on composites manufacturing.

This consortium operates the U.S. Navy’s Center of Excellence for Composites Manufacturing Technology and consists of over 60 members from all regions of the United States. The principal members are

Bell Helicopter-Textron, Inc., Grumman Corp., Lockheed Corp., McDonnell-Douglas Corp., Northrop

Corp., and Rockwell International Corp. Other members represent automotive suppliers, machine-tool

builders, electrical-control manufacturers, shipbuilders, hand-tool manufacturers, and research institutes and universities. The consortium sponsors applied technology development and technology

transfer programs at member facilities. One unique feature of this consortium is the Composites

Technology Center in Kenosha, which is a modern composites manufacturing and teaching facility that

allows members to transfer technology using the concept of “shared manufacturing. ” The consortium’s

major initiatives include materials and process development, affordable tooling development, net-shape

fabrication, fit-up and assembly technology, large structural repair, and environmental-compliance activities.

SOURCE: Office of Technology Assessment, 1995.

Although the number of commercial users of

composite materials is growing, demand for defense products is declining and mirrors the decline

in the defense budget.

An examination of public and private R&D investments in the advanced-composites industry

between 1989 and 1993 reveals another interesting trend. In 1989, when the general perception

was that demand for these materials would increase, private investment was a much greater part

of the total investment in the industry than was

public investment. Confronted with more difficult

business conditions in the early 1990s, however,

the private sector reduced its R&D spending and

the government’s share of the investment risk increased.

Designers and manufacturers are reportedly becoming more sophisticated in their technical capabilities, but there are relatively few technical

experts in composite design and analysis. Most of

these experts have obtained their education

through years of on-the-job experience and/or

graduate school courses. In general, undergraduate schools do not emphasize composites in formal degree programs. One reason often given for

this is that composites technology is truly a multidisciplinary field, and many universities find it

difficult to develop effective undergraduate interdisciplinary programs. To design and use composites effectively, technical experts need to

understand the basics of chemistry, physics, materials science, mechanical engineering, manufacturing engineering, and must be computer literate.

Many in the industry believe that the lack of a formal curriculum in composite materials technology at the undergraduate level has inhibited the

widespread use of composites in industrial applications. Industry is also concerned about the

lack of basic math and science skills for its composites labor force.

Manufacturers interviewed for this study generally reported a need to improve the manufactur-
Case Study 2: CMI in the Polymeric Composites Industry | 41

ing technology of polymeric composites. For

many sophisticated aerospace applications,

manufacturing output is low and costs are high.

Traditional processes are cumbersome and uneven in quality. The federal government has provided a significant amount of funding for

manufacturing-technology development under a

variety of programs, which according to some

industry observers, have yielded good results for

defense applications.6 Examples of manufacturing-technology programs with both defense and

commercial applications include developing resin-transfer molding, injection molding, automated fiber placement, and tooling. (See box 5.)

Material suppliers and small fabricators have

been severely hurt by the downturn in business.

Some have filed for protection under the bankruptcy laws, others have been put up for sale by

their parent organizations. S.P. Systems has been

put up for sale by its Italian parent, Montecatini,

as have the composites operations of B.P. Chemicals. Alcoa attempted to divest itself of its composites operations but took them off the market

when no suitable buyer could be found. The same

thing happened to Fiberite, whose parent company is British-based Imperial Chemical Industries

(ICI). Industry insiders say that the parent organizations often paid too much for the companies

and were subsequently unable to recoup their investments. Continued consolidation and downsizing is expected.

CIVIL-MILITARY INTEGRATION

OTA interviewed several representative firms to

assess the current level of integration and factors

that favor or constrain integration. The firms chosen, all of which have had significant experience

with the government and civilian sectors of the

market, were a large, diversified chemical company that started as a material supplier and forwardintegrated into parts manufacturing; a small, very

capable fabricator that recently diversified out of

the military sector entirely into the commercial

aerospace sector; a small company that provides

the commercial and military marine industries

with composite structures and R&D; and a large,

diversified commercial and military aerospace

company whose development efforts are considered pioneering in the composites field. OTA conducted standardized, indepth interviews with key

executives of these firms. In addition to these interviews, less formal interviews were conducted

with other material suppliers, designers, manufacturers, and users of polymeric composite materials to expand the database and gather as wide a

variety of opinions as possible. Because of competition among firms and the reluctance of some

individuals to be quoted directly, some descriptions of specific applications, customers, market

share, and specific strategies are not given. Rather,

information is presented as general observation.

The firms represent diverse business activities.

Their product mix varies from a high of 30/70 civilian/military, to a 50/50 civilian/military, to

nearly all civilian (aerospace and nonaerospace),

and finally to 100 percent civilian. Their products

range from basic polymeric composite raw materials to large fabricated structures, and almost everything in between, including medical x-ray

tables, bicycle wheels, aircraft structural parts,

recreational boat parts, corrosion-resistant electrical housings, and infrastructure parts, such as

small bridges, piers, and poles.

❚ Factors Favoring Integration

Several technical, market, and policy factors favor

integration.

Technical Factors

Technical factors favoring civil-military integration in the polymeric composites industry include

common design and software, similar manufacturing processes, common inspection technology,

and common materials.

6 Interviews conducted for this assessment.
42 | Assessing the Potential for Civil-Military Integration: Selected Case Studies

Common design and software

The increasingly sophisticated products of both

the civilian and military markets require firms to

update and enhance their design, analysis, and

materials-selection processes. Firms now have at

their disposal a wide range of design, modeling,

and analysis software.7 This software allows the

designer to conceptualize products, often with

three-dimensional details, and translates material

properties into quantitative material requirements

and spatial arrangements to meet product specifications. Much of the impetus for developing modeling capabilities stemmed from military

requirements that demanded detailed design and

analysis of products, and from the need to substantiate the mechanical and environmental performance of products before anyone would buy

them.

The federal government is sponsoring several

design technology R&D efforts. An example is

the concurrent engineering and manufacturing

systems development at the Design and Manufacturing Institute of the Stevens Institute of Technology in Hoboken, New Jersey. This effort, which

has been funded by the Army Research Office and

the U.S. Navy’s MANTECH program, seeks to

develop sophisticated software that incorporates

artificial intelligence in the form of expert-system

rules in the design, analysis, and manufacturing

process and attempts to integrate them into one

package. The goal is to reduce significantly the

time it takes to go from conceptualizing the product to delivering it to the customer. Indeed, now

that the know-how to manufacture high-quality,

low-defect products is widespread, time to market

is the key issue in global competitiveness.

Similar manufacturing processes

End-use-product structural and environmental requirements greatly influence, and in many

instances dictate, the choice of the manufacturing

process. Many common manufacturing-process

technologies, however, can be used to make products for both the defense and commercial markets.

For example, injection molding of short-fiber

composites is used to produce electronic enclosures for commercial computers or military electronics, and autoclave curing technology, coupled

with continuous fiber-reinforced raw materials, is

used to produce wing skins for commercial jetliners and military fighter aircraft.

Not all manufacturing-process technologies,

however, can be adapted to produce civilian and

military products in cost-effective ways. For

instance, manufacturing technologies required to

produce low-observable structures for military

applications have been rather expensive because

of the unique nature of the product’s requirements.

Several firms in conjunction with DOD are pursuing the development of lower-cost manufacturing

processes for stealth structures.

Common inspection technology

Nondestructive testing techniques developed primarily to assess military applications product

quality are applicable in both markets. Information derived from inspection investigations helps

to provide a database and the knowledge needed

to improve and optimize existing manufacturing

processes. However, commercial products, especially nonaerospace commercial products, rarely

have the same high level of formal inspection re7 One reasonably priced software package called Auto-Cad (manufactured by Auto-Desk, Inc.) runs on personal computers, features threedimensional modeling, and sells for a few thousand dollars. Another design package named Pro-Engineer (manufactured by Parametric

Technology Corporation) features three-dimensional modeling and parametric dimensioning, which uses mathematical equations to describe

and automatically recalculate the relationship among part attributes, such as length, width, and height, when changes are made. This type of

software package costs about $10,000. SDRC, Inc., manufactures IDEAS, a parametric-based three-dimensional modeling system that includes

finite element modeling capabilities for stress and thermal modeling and fluid dynamics. This system is in the $10,000 to $20,000 price range. A

much more sophisticated system, ICAD, is being marketed by ICAD, Inc. ICAD incorporates artificial intelligence in the form of knowledgebased rules to assist the designer in creating sophisticated parts. This type of system is in the $100,000 price range.
Case Study 2: CMI in the Polymeric Composites Industry | 43

quirements as do military or commercial aerospace products.

Common materials

Another technical factor favoring civilian-military integration in the polymeric composites industry is the ability to use common materials,

especially in the aerospace sector. Both commercial and defense aerospace demands that structures be made from materials deemed to be

qualified in various mechanical-property evaluations and manufactured in a precisely controlled

process. In the case of some commercial applications outside the aerospace market, however, the

aerospace way, as it has been termed, may actually inhibit integration because of the cost of precisely controlling the process.

Market Factors

The major market factors that favor civil-military

integration in the polymeric composites industry

are the reduced defense market and the current approaches to quality assurance and customer satisfaction.

Reduced defense market

The reduced demand for military aerospace products has already been noted. Commercial aircraft

producers are also experiencing a downturn in demand for new aircraft. Many airlines have either

not exercised production options or have canceled

existing production options. The reduction is forcing material suppliers and manufacturers, as well

as end users, to look to new markets if they are to

survive and grow. The civilian nonaerospace market (composed of bridges, railcars, light poles,

prostheses, highway dividers, structural enhancements to existing structures, and sporting goods

and other recreational products) is the logical

place to look for new product applications. Many

firms are doing so, but with mixed results.

Bridge components such as pins, hangers, and

cables are thought to be huge potential markets for

the industry. Some have suggested that the federal

government, through the Federal Highway Administration, could increase the funding for demonstration projects already under way, sponsor

additional projects, and accelerate the rate at

which technology is demonstrated and applied.

The Technology Reinvestment Project awarded a

multimillion-dollar contract to the Advanced

Technology Transfer Consortium to develop and

deploy many of the technologies needed to exploit

the use of composites in the infrastructure, especially in vehicular and pedestrian bridge-building

and bridge-repair technologies.

The development of new, nondefense composites markets could allow firms to stabilize their

business base, thus facilitating military-civilian

integration. As was noted earlier, the transportation, marine, construction, and electrical-electronics markets were expected to grow faster than

the general economy in 1993, making them attractive possibilities. There is, however, a question

about how cost-effective the transition from military and civilian aerospace applications to nonaerospace commercial applications will be. Such

transitions often require significant changes in a

firm’s culture and its business practices. (See Factors Inhibiting Integration, below.)

Approaches to quality and

customer satisfaction

The trend toward lean production will also enhance civilian-military integration in the composites industry. This strategy is not the same as

traditional divestment and consolidation; rather, it

refers to redesigning the business to provide existing customers and markets with high-quality

products in a timely fashion. This concept has

been extended to new-product development, forcing firms to integrate their development activities

and to transfer technology between previously

separate customer bases.

In the past, the predominant view in both the

military and commercial composites sectors was

that quality was inspected in the product. Each

item was inspected separately. This practice led to

a very large and cumbersome quality-control system that added significant cost to products. Over

the past decade, the military and commercial companies have moved to implement a different philosophy of quality, reducing reliance on detailed
44 | Assessing the Potential for Civil-Military Integration: Selected Case Studies

examinations and increasing the reliance on detection and elimination of process problems.

Changes in federal regulations and paperwork requirements are needed to promote this approach at

DOD. The DOD changes in the application of military specifications and standards address some of

these issues.

The adoption of a modern philosophy of quality strongly affects a firm’s approach to operations

in general and to manufacturing operations specifically. The development of high-quality, flexible

manufacturing processes is an outgrowth of these

improvements and should help firms serve both

the civilian and military markets.

Policy Factors

Finally, several recent policies appear to favor civilian-military integration efforts in the composites industry. The DOD attempt to adopt the total

quality management (TQM) philosophy is one

step. Adopting a TQM approach promotes integration efforts because it encourages defense

firms to move toward “lean production” and develop closer cooperation among suppliers and

customers. Further, if the government truly adopts

this philosophy, defense-procurement activities

should be conducted more like those in the private

sector and firms seeking to serve both markets

would not have to support two different operational systems (e.g., defense and commercial accounting and quality control). However, the fact that

one company interviewed for this study recently

spun off a sister company as a means to separate

its government and commercial composite business activities is evidence that the objectives of

this policy have not yet been achieved.

ARPA’s Technology Reinvestment Project

(TRP) includes several composite projects. Industry representatives interviewed generally believed

that the TRP can have a significant positive impact on integration in this industry. Some argued

that the TRP is emphasizing dual-use technologies that apply equally well to military and civilian uses. The development of product applications

for both markets could lead to an overall expansion in the use of composite products. This expansion would tend not only to lower overall costs for

existing and new products but would also create

spinoff applications. Further, firms stated that

TRP funding, which is cost-shared by the private

sector, represents investments in the technology

that could not otherwise be made by the industry.

(See box 6.)

❚ Factors Inhibiting Integration

Technical Factors

Several technical differences between markets inhibit civil-military integration, including the

length of the design process, product requirements, and the material-properties database and

testing methods.

Length of the design process

In the military market and in the civilian aerospace

market, customer requirements tend to be developed by large, complex organizations over relatively long periods. In contrast, firms providing

commercial, nonaerospace applications of composites are required to respond to relatively rapid

market changes and the design phase is compressed. Complexity is also a factor in the length

of the design process. Aerospace products perform functions that are often more complex and

potentially more dangerous than are those of other

commercial products. Problems can arise when

one organization attempts to serve both markets

simultaneously because organizations often have

difficulty “shifting gears” to meet customer needs.

Product requirements

Civilian and military applications usually have

very different product requirements, especially

for nonaerospace applications. To serve a market

with diverse product requirements, an organization needs diverse design and manufacturing

skills. However, because of the nature of military

products, specialists tend to concentrate in rather

narrow technical areas. This specialization can become a barrier to addressing the wide range of

technical issues arising in the commercial nonaerospace market.
Case Study 2: CMI in the Polymeric Composites Industry | 45

As a result of differing product requirements,

the manufacturing technologies and procedures

needed to satisfy many commercial applications

are quite different from the ones that are suitable

for military applications. Even when these skills

can be developed within an organization, the cost

of doing so can be very high. In addition, diverse

manufacturing methods often require the use of

different types of equipment, which can require

large amounts of capital investment.

Material-properties database and

testing methods

The development of acceptable material properties and testing standards represents a significant

investment. Often, the data needed to serve one

market are vastly different from those needed for

another market. Testing standards required to certify or produce “believable” results can cost millions of dollars. Many firms simply cannot afford

this investment.

Industry members and federal users of composite materials are attempting to develop standards

for testing and a common database for the mechanical and environmental performance of composite materials. Much of this work is funded by

DOD and defense firms, which contribute the time

and travel expenses of their technical experts in

the field. The development and acceptance of

standard testing methods and a commonly accepted design database would help lower the cost

of using composites.

Market Factors

Certain product or market characteristics inhibit

civilian-military integration, including production volume and size and procurement practices.

Production volume and size

Typical military and commercial aerospace

products are usually large and are produced in relatively low volumes. Because aerospace manufacturing equipment and processes are geared to

large, low-volume products, these firms find it

difficult to address civilian markets that are composed of small, very high-volume products. One

potential exception is the use of composite structures in infrastructure applications, such as

bridges, which are large structures produced in

relatively low volumes.

Procurement practices

Almost every industry participant interviewed by

OTA cited government procurement practice as

one of the leading factors inhibiting civilian-military integration. Government procurement regulations are viewed as too complex, often

contradictory, and difficult to interpret. Because

of the nature and complexity of the regulations,

significant costs are incurred.

Some observers have argued that large organizations sometimes have difficulty quantifying

the effects of the regulations on product costs because these organizations employ so many people

who are working both on the government procurement process and on civilian markets. Although

most of these organizations segregate costs very

precisely according to government accounting

regulations, there is still inefficiency and some

level of error in the process.

One small company that serves the military and

civilian markets reported that if a commercial

product has a cost of 1.0, the nearly identical government product would cost between 1.6 and 2.0.

Three factors generally account for this differential: quality-assurance and documentation costs,

security costs, and contract administration costs.

Quality assurance and documentation is estimated

to be responsible for approximately 50 percent of

the increase; security, 30 percent; and contract administration, 20 percent.

Policy Factors

Government policies were identified as perhaps

the most complicated factors inhibiting civil-military integration in the polymeric composites industry. They encompass a wide range of often

competing social, economic, and business policies, including policies to limit profits, subsidize

foreign competitors, require domestic investment, set taxes, protect intellectual property, establish export controls, and defer cost-sharing

requirements.
46 Assessing the Potential for Civil-Military Integration: Selected Case Studies

The Federal government has sponsored a considerable amount of composites R&D and has

made significant attempts to coordinate these activities across the various federal agencies. The Federal Coordinating Council for Science, Engineering, and Technology (FCCSET), established in 1976 to

address science and technology policy issues affecting multiple federal agencies, included the Committee on Industry and Technology (CIT). The CIT has promulgated the Advance Materials and Processing Plan (AMPP) designed to improve the manufacture and performance of advanced materials, to

increase productivity, and to bolster economic growth. A CIT Working Group on Materials (COMAT) was

established to coordinate ClT’s activities.

Federal funding for R&D in advanced materials was $2.1 billion in FY 1993 with a planned $2.1

billion in FY 1994. Federal investment for composites, including ceramic and metal matrix composites,

in FY 1993 was $225,3 million with a projected $199,7 million in FY 1994, The decrease in FY 1994

reflected DOD budget cuts. Such figures exclude classified R&D activities funded under specific DOD

systems-related programs. The funding for such activities is said to be considerable.

All the military services and ARPA invest in composites technologies. DOD programs range from

basic R&D through exploratory and advanced development to manufacturing technology development.

The Services tend to support programs that directly affect their missions: the Army supports programs

involving the use of composites in helicopters and ground fighting vehicles; the Air Force supports activities related to aircraft structures, missiles, and satellites; and the Navy supports activities related to

submarines, surface ships, and aircraft. ARPA tends to concentrate its efforts in higher-risk, higher-payoff areas than do the Services.

NASA has invested most of its efforts in two composites-related activities: the Advanced Composites Technology (ACT) program and the High Speed Civil Transport (HSCT) program. ACT concentrates primarily on applications for transport aircraft. It is aimed at improving structural performance,

particularly damage tolerance, while reducing processing and fabrication costs. Stated goals include

Many people believe that reform of the procurement process and related regulations is the

single most important task to be accomplished in

enhancing civilian-military integration. Many of

those interviewed pointed out that current procurement regulations are poorly thought out and

are often inconsistent. They observed that current

practices stem from an attempt to control a small

minority of firms that have taken advantage of the

system in the past and that the majority of honest

firms are being penalized. The procurement process is said to actually inhibit the adoption of modem quality and manufacturing practices because

current regulations are too complex, stipulate the

exact process to be followed by contractors, discourage close product-supplier partnerships that

might be very efficient and cost-effective, and

tend to perpetuate inefficient manufacturing and

engineering practices. Moreover, the paperwork

associated with government contracts is thought

to be excessive. Many businesses make the case

that they simply could not compete in the global

commercial economy if they were required to generate the paperwork associated with government

contracts.

Limiting “profit,” or earnings as a fixed percentage above costs, reportedly inhibits integration. Industry (especially the carbon-fiber

manufacturers) believes that the capital-intensive

nature of the polymeric composites business was

not adequately addressed when the allowable

profits were determined. Typically, $2 to $4 of invested capital is required to generate $1 of sales

revenue in this technology. Given the guidelines

now in effect, coupled with the downturn in DOD

business volumes, the industry as a whole generates poor returns on invested capital.
Case Study 2: CMI in the Polymeric Composites Industry 47

cutting acquisition costs by 20 to 25 percent and reducing structural weights by 30 to 50 percent for

resized aircraft, Automated manufacturing techniques, such as filament winding, pultrusion, resin transfer molding, and automated tape-to-fiber placements, are being explored as ways to improve quality

and cut manufacturing costs. Emphasis is being placed on automated textile processes needed to fabricate near net-shaped structural elements, which have significantly improved damage tolerance with

respect to conventional structures, Over $100 million was invested before 1994. About $25 million has

been committed until 1997, when investments are projected to be in the $45 million to $65 million range

until the program is completed in 2002.

Investments in HSCT are directed primarily toward development of composite materials. Projected requirements for these materials include a 60,000-hour service life at about 300 to 350 OF The

long service-life requirement represents the major challenge for polymeric matrix composites in this application,

The Department of Energy (DOE) has supported composites technology primarily in or through

its classification of “materials characterization, synthesis and processing. ” A recent initiative is aimed at

developing lightweight composite materials that can be used in passenger automobiles and later recycled. Candidate components include chassis, frames, body parts, and panels.

The Department of Commerce’s National Institute of Standards and Technology (NIST) has sponsored significant efforts in polymeric matrix composites. The two main areas of interest are improving

the speed, reliability, and cost-effectiveness of fabrication and developing a better understanding and

predictive capability for long-term performance. Specific technical initiatives include the development

of mold-filling models useful for resin-transfer molding and cooperation with the Automotive Composites

Consortium to demonstrate front-end structures and cross members. Another technical effort Involves

implementing in situ process monitoring and control for the resin transfer-molding process.

SOURCE” Office of Technology Assessment, 1995.

Firms also complained about foreign-government subsidies. American firms report difficulty

competing in the bidding process with companies

that are heavily subsidized by their own governments. Moreover, firms argued that foreign companies are able to form joint ventures with little

concern for antitrust laws. Many of those interviewed think that regulations related to vertically

integrated industrial consortia could be simplified

and in some cases relaxed to allow U.S. firms

additional competitive advantages. In the Department of Commerce study cited earlier, individual

respondents generally expressed a fear of U.S. antitrust regulations, even though a majority admitted that they had not adequately examined the

technical details of the regulations and could not

say whether they were really a barrier to working

together.

One legislative mandate ( Public Law 100-202,

Statute 1329-77, Section 8088, and the related

DFARS 225.7013-2 and DFARS 252.225.7022)

requires domestic investment in facilities as a prerequisite for participation in future government

programs. This requirement created an unprofitable situation in the carbon-fiber industry by increasing capacity much faster than demand.

Several companies have reported that after they

made the investments, the market for carbon fibers in these DOD applications did not materialize, and they were unable to recoup their

investments.

Some of those interviewed argued that current

tax policies inhibit investments in the advancedcomposites business. The specific concern was

the limit on a firm’s abilities to depreciate obsolescent equipment (thus decreasing income taxes) in
48 | Assessing the Potential for Civil-Military Integration: Selected Case Studies

a technology that changes very rapidly. Historically, accelerated depreciation has allowed firms to

reduce taxes and increase cash flow. These increased cash flows can be used to finance further

investments. In terms of available investment capital, it can be argued that firms that attempt to

serve the civilian and military markets require

more capital because the equipment and manufacturing-process requirements needed to serve both

markets might be quite diverse.

The protection of intellectual property is a concern for firms conducting military business. Many

of the firms believe U.S. intellectual property is

subject to unauthorized transfer to foreign entities

as a result of participation in offset programs. Although protection against unauthorized transfer is

in place, some of those interviewed said they were

nervous that such transfers may happen inadvertently.

On the other hand, others interviewed raised

concerns about export controls. Some argued that

export controls imposed by the United States have

arbitrarily limited the participation of many U.S.

companies in foreign markets where the application of polymeric composites in civilian markets

is widespread. Some argue that many European

countries are more advanced in their use of polymeric matrix composites and that restrictions on

U.S. firms and U.S. technology place arbitrary

limits on their ability to compete in these markets.

Industry insiders also point out that technology

transfer from Europe to the United States would

be a plus.

Finally, some industry observers expressed

their belief that the TRP cost-sharing requirements are detrimental to integration. The idea of

deferring cost-sharing requirements until a particular project generates enough profit may have

merit, especially in an industry such as polymeric

composites, where nearly half the companies reported operating losses as a result of their dependence on defense business. Deferring cost-sharing

may be especially advantageous for small firms

that have very few resources to commit to ideas

and whose access to investment capital, especially

R&D capital, is quite limited.

❚ Implications of Enhanced Integration

For the Defense Sector

The reduction in defense spending has had a major

impact on those firms who have done defense

work. Some companies have left the business entirely, and one major company is in bankruptcy.

Thousands of high-skilled jobs have already been

lost, and thousands more will be lost if firms do

not find additional markets. Enhanced civil-military integration might help stabilize this situation

and ensure that essential skills and capabilities are

available to serve the national interest.

Integration might also reduce costs of raw materials and manufactured goods, especially if policies and procedures are adopted that allow

commercially accepted products to be used for

military applications. This argument is essentially

the common volume-price argument—that is, as

demand for a product increases, manufacturers

can use economies of scale to reduce costs, thereby reducing prices for the end user. Some in government argue that using commercial products for

military applications will often not work because

many military applications have unique requirements. Arguably, there is merit to the notion of

“peculiar and extreme use” for certain specific applications; however, other observers have argued

that military requirements are sometimes generated from a list of “nice-to-have” attributes rather

than mission-essential characteristics.

Civilian products are often engineered and developed more rapidly than typical military products. A more integrated base might include closer

cooperation between defense-oriented firms and

other firms skilled in rapid design and product

prototyping.

For the Civilian Sector

Those interviewed also thought that enhanced integration might benefit the civilian sector. It was

pointed out that a significant amount of specialized engineering and manufacturing technology

that has been developed for defense applications

can be used in commercial applications. Examples include specialized information on electro-
Case Study 2: CMI in the Polymeric Composites Industry | 49

magnetic shielding and on structures that require

electrical continuity. This technology transfer

could result in new products and markets in the civilian sector, perhaps in the computer industry,

thereby stabilizing and creating additional employment. Care would still have to be taken with

respect to any security implications of this

technology transfer.

Another area of potential interest is the considerable amount of specialized performance data

generated for defense applications that could be

used as a basis for new-product development in

the civilian sector. For example, the specialized

electrical, vibrational-damping, and acoustical

data generated for composites could be used in

unique electronic or sonic-electronic applications

for the information superhighway. In addition,

several firms have said that the defense emphasis

on a rigorous approach to quality has helped them

to improve their own quality, but they have found

that the paperwork associated with the defense approach is unnecessary.
Case Study 3:

Shipbuilding

he importance of an American shipbuilding industry has

long been the subject of debate. A strong U.S. shipbuilding

industry is considered an essential national attribute by

many observers. The United States is, after all, a maritime

nation, is one of the world’s largest trading nations, and has the

world’s largest single national economy. Many of the nation’s

goods are shipped by sea. Further, the world’s oceans are critical

to U.S. military security. Indeed, every significant U.S. military

engagement in the 20th century has included ocean transportation

of U.S. military forces. The oceans that provide barriers to foreign

threats also make deployment of American forces abroad more

difficult. But while the United States has developed and deployed

the largest and most technically advanced naval forces to guard its

approaches and to project U.S. military power; in the post-World

War II period, foreign-owned and foreign-built ships have provided most of the nation’s ocean transportation.1

The U.S. shipbuilding industry has been in decline since the

mid-19th century, when except for wartime production, it peaked.

Over the years, the U.S. government has enacted many laws

designed to retain shipbuilding capabilities. For example, laws

passed in the late 19th and early 20th centuries granted a monopoly to U.S. shipyards to build ships for trade between U.S. ports. A

1936 law authorized a direct subsidy to shipyards building vessels for U.S. foreign trade, and U.S. naval construction, repair,

and overhaul work has largely been reserved for domestic yards.

Nonetheless, many argue that there is less long-term government

1 Some of these ships have U.S. owners but foreign registry, largely to reduce costs

associated with U.S. labor and safety laws | 51
52 | Assessing the Potential for Civil-Military Integration: Selected Case Studies

support for shipbuilding than for competing transportation technologies such as aviation.

Concern about the health of the entire shipbuilding base grew, however, as fierce global

competition and a worldwide slump in shipbuilding reduced American commercial large-ship

construction to zero. This situation was compounded by the reevaluation of naval requirements and the subsequent reduction in naval

shipbuilding as a result of the end of the Cold War.

By the end of the 1980s, the Bush Administration

had concluded that “Navy shipwork alone will not

sustain the U.S. Shipbuilding Industrial Base.”2

Expected reductions in naval forces make it

even more difficult for Navy work alone to maintain a viable U.S. shipbuilding industry. Critics argue that a strategy focused solely on Navy

shipbuilding can neither provide the Navy with affordable ships, nor provide the basis for rapid expansion of naval construction if such an expansion

is needed in the future.3

Two principal alternatives have been suggested

to preserve a Navy shipbuilding capability. One is

to shrink to a small shipbuilding base dedicated to

military shipbuilding. A second alternative is to

reestablish the United States as a globally competitive commercial shipbuilder and to use the renewed commercial capability, which would reside

in an integrated base, to help meet future U.S.

Navy needs. The Shipbuilders’ Council of America for example, has stated that: “The only way a

reconstitutable shipbuilding base can survive in

the United States is for U.S. yards to build commercial ships.”4 During the course of OTA’s civilmilitary integration study, the potential for an

integrated shipbuilding base was examined.

In the face of the moribund U.S. commercial

shipbuilding program for large ships, however, reestablishing a commercial base is indeed a challenge. In 1993, the United States, the world’s

largest trading nation, ranked a distant 27th in

merchant shipbuilding, with two-tenths of 1 percent of the world’s gross tonnage on order and

only one commercial ship under construction.5

During the course of the CMI assessment, a significant government effort aimed at enhancing U.S.

commercial shipbuilding was initiated. This effort is discussed later.

This case study considers the potential for integrating the defense shipbuilding base with a reestablished commercial base. The study briefly

outlines the current structure and condition of the

U.S. shipbuilding base. It discusses the national

security shipbuilding base that might be needed in

the future and considers some market trends. It examines alternatives for reestablishing a commercial element of the base. Finally it considers

factors that inhibit integration and factors that favor integration in shipbuilding.

STRUCTURE AND CONDITION OF

U.S. SHIPBUILDING BASE

The shipbuilding industry includes shipyards that

build, repair, and overhaul ships; component producers that develop and build critical ship parts;

research organizations that explore new marine

technologies; and design firms. The industry has

an extensive public sector component composed

of shipyards, research laboratories, supporting naval industrial centers, and the Navy’s ship-acquisition organization. This public sector portion

2 U.S. Department of Defense, Report on the Effects of Navy Shipbuilding and Repair on U.S. Public and Private Shipyards and the Supporting Industrial Base, January 1990.

3 A 1992 report by the General Accounting Office, for example, noted that the costs for submarines and other ships being built by the two

submarine shipbuilders would probably increase because of the amortization of overhead costs over a smaller production base; a smaller but

more senior, and therefore more highly paid, workforce; and higher vendor costs. U.S. General Accounting Office, GAO/NSIAO-93-32-BR

(Washington, DC: U.S. Government Printing Office, 1992).

4 Shipbuilders Council of America presentation to Presidential Transition Team, Washington, DC., Dec. 14, 1992.

5 U.S. Department of Commerce, U.S. Industrial Outlook 1994: Shipbuilding and Repair (Washington, DC: U.S. Government Printing Office, January 1994), p. 21-1. Japan led the world with 31 percent, South Korea with about 20 percent, and China with about 5 percent.
Case Study 3: Shipbuilding | 53

of the base is important to any strategy for integrating the commercial and defense bases. It currently does much of the repair and overhaul work

and has a profound impact on military construction.

The shipbuilding base is geographically dispersed and is a major source of employment. According to Department of Labor statistics, over

109,000 people were employed in shipbuilding

and repair alone in 1993 (down from 123,000 in

1992). Employment generated in the lower, or

supporting, tiers is also probably significant. For

example, OTA estimates of spending patterns

based on Bureau of Economic Analysis input-output analysis data indicated that in calendar year

1992, defense shipbuilding purchased almost $7

billion in goods and services at the first tier (i.e.,

government prime contracts to firms classified

under the Standard Industrial Classification under

SIC 3731—shipbuilding and repairing). This

spending, in turn, induced demand of almost $3

billion at the second tier (major components),

over $1 billion at the third tier (subcomponents),

and about $600 million at the lower tiers (materials).6

❚ Research and Development

Nondefense shipbuilding research and development (R&D) in the United States was extremely

limited during the 1980s (probably averaging less

than $100 million per year).7

Shipbuilding R&D has included the National

Shipbuilding Research Program (NSRP), a cooperative program between government and industry. NSRP aims to develop and implement

improved shipbuilding and repair processes. The

program was funded by the Maritime Administration (MARAD) at a rate of about $2 million a year

between 1972 and 1985. The Navy, mostly

through its MANTECH budget, provided about

$2 million a year from 1982 to 1985 and between

$500,000 and $1.75 million a year from 1987

through 1992. The shipyards absorbed the indirect

costs and were responsible for implementation

costs.

Companies also invest their own funds in R&D

projects. In the recent past such spending may

have been more common among so-called second

tier shipyards than large shipyards. For example,

the Trinity Marine Group in Gulfport, Mississippi, developed and built a vessel made of composite Kevlar that has been sold to Mexico and is

being shown in the Middle East.

The low level of R&D spending is partly attributable to the industry’s assessment of market prospects. A 1985 OTA report on maritime R&D, for

example, surveyed U.S. ship operators and shipyards and found that expected market demand was

the single most important factor in determining

company R&D investments.8 The report concluded that the low demand for U.S.-built ships

during the 1980s had “forced the shipbuilding industry to be extremely conservative in devoting

funds to R&D.”9 Such low levels of R&D investment have, in turn, limited American competitiveness in shipbuilding because companies that do

not develop better ways to build ships or other desirable products cannot hope to compete for future

sales.

Observers argue that there are few university or

college programs supporting the maritime industry. Only a few American universities have pro6 These estimates are based on the latest available U.S. Department of Commerce, Bureau of Economic Analysis tables: “1987 Annual I-O

Tables,” (unpublished), and Bureau of the Census CY 1992 spending by the federal government for national defense.

7 In comparison, the automotive industry reportedly spends about $12 billion each year on R&D. While this figure includes much development work for new model cars, it also includes longer term research on propulsion, structures, materials and other items. Automotive Trade

Association, McLean, VA (personal communication).

8 U.S. Congress, Office of Technology Assessment, R&D in the Maritime Industry: A Supplement to an Assessment of Maritime Trade and

Technology, OTA-BP-O-35 (Washington, DC: U.S. Government Printing Office, May 1985).

9 Ibid., p. 6.
54 | Assessing the Potential for Civil-Military Integration: Selected Case Studies

grams in naval architecture and naval engineering,

including the Massachusetts Institute of Technology (MIT) in Cambridge, the Stevens Institute of

Technology in Hoboken, New Jersey, Webb Institute of Naval Architecture and the University of

Michigan at Ann Arbor. The Japanese, in contrast,

appear to have a robust network of research support for their maritime industry. For example, Japan’s Ship Research Institute supports research on

new types of ships and addresses such topics as

fuel-saving marine engines. Japan also has a Marine Technical College for vocational training and

an Institute for Sea Training for on-board training

for students from universities and colleges.

The outlook for increased U.S. shipbuilding

R&D has brightened recently as the commercial

market possibilities have improved. Several firms

have reported investments in new manufacturing

technologies and are studying new ship designs.

Furthermore, the improving commercial market

has coincided with government initiatives with

heavy R&D components. The Clinton Administration’s shipbuilding initiative includes the Advanced Research Projects Agency (ARPA)

managed MARITECH Program aimed at developing and applying advanced technology to

improve the competitiveness of the U.S. shipbuilding industry.10

❚ Design

The design element of the shipbuilding base resides in both shipyards and in separate marine design firms. These separate firms often work

closely with a shipyard, or with the Naval Sea Systems Command (NAVSEA) to develop new ship

designs. Once a Navy design is selected, it is

passed on to production yards, which do the final

design.

Because no builder or prospective owner or operator has shown an interest, however, design

houses have produced few new commercial designs in recent years. The industry has been forced

to survive largely on Navy work and the ability to

provide services other than designing ships.

❚ Production

American shipbuilding establishments are usually classified into four basic categories: major shipyards engaged in the construction and repair of

ships, major ship-repair and dry-dock facilities,

smaller shipyards that service inland waterway

and coastal commerce, and topside-repair facilities. In the past, the benchmark for tracking the

U.S. shipbuilding industry was the active shipbuilding base (ASB), defined by both shipyard capability and business criteria. Due to the reduction

in construction of new ships, especially of those

1,000 gross tons and over, the ASB has been replaced by a measure based primarily on capability.

This new benchmark is the U.S. major shipbuilding base (MSB), defined as privately owned yards

that are open and have at least one shipbuilding

position—either an inclined way, a side-launching platform, or a building basin capable of accommodating vessels 122 meters or more in

length. With few exceptions, these shipbuilding

facilities are also major repair facilities with drydocking capability. Under the new definition,

there were 19 major shipbuilding facilities in the

United States on October 1, 1993 (versus 14 shipyards in the former ASB).11

Several hundred medium- and small-sized, or

second-tier, U.S. shipyards primarily support the

inland waterway and coastal commerce business.

These shipyards produce tugboats, ferries, fishing

vessels, barges, small government-owned ves10 Strengthening America’s Shipyards: A Plan for Competing in the International Market, The White House, Oct. 1, 1993, p. 7.

11 U.S. Department of Commerce, op. cit., footnote 5, pp. 21-1 and 21-2. MSB shipyards employ about 73 percent of all employees in the

sector. The remaining 27 percent is distributed across the approximately 550 other establishments classified under SIC 3731 (shipbuilding and

repairing). Not included are the nine government-owned shipyards (some now scheduled for closing) which do not engage in new construction,

but do overhaul and repair of Navy and Coast Guard ships.
Case Study 3: Shipbuilding 55

Fabricated plate work (boiler shops)

Condensers

Diesel engines

Steam turbines

Propellers

Reduction gears

Large shafting equipment

Electrical power equipment

Power distribution switchboards

Air circuit brakers

Gas turbines

Heating and ventilation

Periscopes

Combat systems

Electronics

Heavy handling equipment (Cranes)

SOURCE: Office of Technology Assessment, 1995,

sels, and oil-drilling equipment. Some are currently engaged in large riverboat projects as a result of legislation that allows gambling on inland

waterways. These yards have generally maintained a better commercial business base over the

past decade than have the large yards. Many are

considered internationally competitive having

built fishing trawlers, patrol craft, and other vessels for export.

Several major component sectors, each an industry in its own right, support shipbuilding (table

10). These sectors, in turn, draw on a host of subcomponent producers and material suppliers. For

example, the Naval Sea Systems Command reported in 1990 that the construction of the Arleigh

Burke class of guided-missile destroyers

(DDG-51) involved over 500 primary equipment

subcontractors and thousands of subcontractors in

the lower tiers. 1

2 The supplier base has been consolidating as a result of reduced Navy spending

and little commercial work. Many firms have reportedly either left the industry or have devoted

most of their work to supporting military shipbuilding. A 1991 survey of U.S. marine machinery suppliers found that only 81 percent of those

surveyed were at the time of the survey supporting

the marine industry and that 71 percent of those

supporting the marine industry were directly involved in U.S. Navy shipbuilding. Many of the

firms reported that they were working at only 40 to

70 percent of full capacity.13

Component producers have also been hurt by

the increasing use of imports by the U.S. shipyards. The U.S. Marine Machinery Association,

for example, has estimated that over 70 percent (in

terms of value) of components used by U.S. shipyards in repairing or building commercial ships

are imported. Industry sources cite the reduction

of the supplier base as one reason for higher

construction and repair costs and longer shipconstruction time in the U.S. shipbuilding industry.

Some of the sectors shown in table 10 support

both commercial and military shipbuilding, while

others, particularly combat systems and electronics, principally support the military. Some participants from component producers in the OTA

shipbuilding workshops reported that they were

integrated in production and could survive without government business in the future. Indeed,

they argued that the current government acquisition laws and regulations encouraged many component producers to quit accepting government

business, further reducing the level of CMI. The

Federal Acquisition Streamlining Act of 1994,

combined with changes in the use of military

specifications and standards, is expected to have a

positive effect on allowing firms to continue to accept both defense and commercial business.

❚ Maintenance and Repair

Maintenance and ship conversion

portant element of the industry.

nance and repair is split between

work is an imNavy maintethe public and

12 OTA, Building Future Security: Strategies for Restructuring the Defense Technology and Industrial Base, op. cit., footnote 1, p. 81.

13Ivars Gutmanis, Analysis of the Civil-Military Integration Feasibility for Selected U.S. Industry Sectors (Washington, DC, Hobe Corp.)

August 1993, p. 32.
56 | Assessing the Potential for Civil-Military Integration: Selected Case Studies

private sectors, with work either allocated directly

to public yards or awarded to private yards under

competitive bid. In 1993, Navy work was performed at eight naval shipyards, two Navy-owned

ship-repair facilities, and 36 privately owned

shipyards. Some repairs are also done overseas.

The overwhelming amount of Navy ship repair

goes to public yards.14 Under the Navy competition program, most submarine repairs have gone

to the public sector and most surface-ship repair

to the private sector.15

❚ Industry Trends

The large U.S. shipyards are highly dependent on

U.S. government business, and military construction is falling. According to the Department of

Commerce, 65 military ships greater than 1,000

light displacement tons (ldt) were on order, or under construction, as of October 1993 in 12 privately owned shipyards.16 (See table 11.) In 1993, the

Navy ordered the first of several sealift ships. Five

commercial container ships were converted to

meet military requirements. Eleven new sealift

ships were included in the FY 1994-99 shipbuilding program. Many viewed these ships as a potential means to help shipyards make the transition to

more commercial work, but the initial contract

awards were controversial, with some critics arguing that the decisions paid inadequate attention to

preservation of the shipbuilding industrial base.17

Commercial possibilities for U.S. shipbuilders

remain mixed. On the one hand, the market for

large commercial ships is improving and U.S.

shipyards such as Newport News Shipyard have

secured contracts for commercial ships from foreign owners. On the other hand, Korean shipyards

have announced major expansions in shipyard capacity to meet the anticipated market demand.

Second-tier shipyards are reportedly in better

shape, although they, too, have had to contend

with a downturn in business because expected increases in demand for vessels to carry grain and

coal failed to materialize. Nevertheless, the Commerce Department reports that Gulf Coast shipyards “continue to invest in and expand their

facilities and equipment used in ship repair and

conversion work.”18 Firms such as Trinity Marine

Group, for example, have reported that they are

applying new manufacturing technologies such as

plasma arc cutting to gain higher precision in parts

manufacturing, single-side welding of plate, and

automated blast and paint facilities, to improve

productivity and reduce the labor input.19

Another important trend that emerged in the

early 1990s was the increased U.S. government

interest in improving U.S. shipyards commercial

competitiveness. The Clinton Administration’s

interest in strengthening U.S. shipbuilding was

preceded by interest from Congress. The National

defense Authorization Act for Fiscal Year 1993

(Public Law 102-484) included a number of shipbuilding initiatives including the requirement that

sealift ships built under the fast sealift program be

designed and constructed to commercial specifications. The law directed the President to develop

a plan to ensure that domestic shipyards could

compete effectively in the international marketplace.

The following year, the National Shipbuilding

and Shipyard Conversion Act of 1993 included:

14 U.S. Department of Commerce, op. cit., footnote 5, p. 21-4. The FY 1994 budget requested about 14 percent of the ship repair funds be

allocated to competition.

15 Ibid.

16 Ibid., pp. 21-2 and 21-3.

17 R. Holzer, “Major U.S. Shipyards Question Navy Awards,” Defense News, Sept. 20-26, 1993, p. 6.

18 U.S. Department of Commerce, op. cit., footnote 5, pp. 21-2 and 21-3.

19 H.B. Walpert, Senior Vice President, Trinity Marine Group, “Vessel Technology: U.S. Shipyard Perspective,” speech to the International

Conference on the Maritime System of the Americas, Mar. 25, 1993.
Case Study 3: Shipbuilding 57

Type Number

Fast combat-support ship (AOE)

Guided-missile cruiser (CG)

Aircraft carrier

(nuclear-powered) (CVN)

Guided-missile destroyer (DDG)

Amphibious assault ship

(multipurpose) (LHD)

Dock-landing ship (LSD)

Mine-countermeasures ship

(MCM)

Attack submarine

(nuclear-powered) (SSN-21)

Attack submarine

(nuclear-powered) (SSN-688)

Ballistic-missile submarine

(nuclear-powered) (SSBN)

Oceanographic research ship

Fast sealift

Ice breaker (WAGB)

Ocean surveillance ship

(T-AGOS-23)

Ocean survey ship (T-AGS-60)

Fleet Oiler (T-AO)

Total

4

1

2

23

3

3

2

2

9

4

1

2

1

1

3

4

65

SOURCE: U.S. Department of Commerce, U.S. Industrial Outlook

7994, table 1, p 21-2.

1.

2.

a financial incentives program to provide loan

guarantees to initiate commercial ship

construction, encourage shipyard modernization, and support increased productivity;

a technology development program (subsequently carried out by ARPA in its MARITECH Program) to improve the technology

base for advanced shipbuilding and encourage

innovative commercial ship design and production processes and technologies;

3.

4.

enhanced DOD support for the Navy’s Affordability Through Commonality Program to foster the use of common modules for military and

commercial ships; and

enhanced support for those portions of the

Navy’s Manufacturing Technology and

Technology Base Program that are associated

with shipbuilding and ship repair technologies. 20

The Clinton Administration’s shipbuilding

plan addressed many of the Congressional objectives through a combination of international negotiations, the MARITECH program, acquisition

reform, loan guarantees, and international marketing support.

These government initiatives could potentially

have significant impact on CMI. In 1995, the MARITECH program claimed some success from its

near-term technology development projects in

helping firms win commercial contracts.21

❚ Market Forecast

Workshop participants and others interviewed

during this case study stressed the importance of

the commercial market to shipyard survival, and

the need for U.S. shipbuilders to understand and

address market needs in order to succeed in reentering commercial shipbuilding. Some shipyards

espoused a market niche strategy aimed at capturing a part of the market that includes specialty

ships, such as cruise ships, survey ships, one-of-akind ships, or few-of-a-kind ships. Other builders

reportedly plan to apply advanced technologies to

directly attack the global competition (e.g., the

Japanese and Koreans) in high-volume sectors

such as large tankers.

As noted earlier, however, the prospects for a

renewed demand for large commercial ships remains a matter of debate. More than 14,000 ships

from the global commercial fleet will probably

20 National Shipbuilding and Shipyard Conversion Act of 1993, 10 U.S. Code 2501.

21 Specifically listed were Newport News Shipbuilding’s construction of a 40,000 deadweight ton (DWT) product carrier, Todd Shipyards’

success in winning a contract for Washington State ferriers, and Alabama Shipyard’s Inc. letter of intent to build from bulk cargo ships for Tritea

Maritme Ltd. of Piraeus Greece. See MARITECH Program Fact Sheet.
58 Assessing the Potential for Civil-Military Integration: Selected Case Studies

Average Overhaul/repair

Service new ships Building projects Overhaul/repair

Ship category Fleet size life per year yards per year docks needed

Aircraft Carriers 1 2/1 o 40 0.3/0.25 1/1 1 .5/1 3/2

Submarines 55/45 30 1.8/1 .5 1 to 2/1 8/7 9/8

Surface combatants 1 30/100 30 4.3/3.3 2/1 to 2 18/1 4 20/1 6

Amphibious/replenishment

ships 128/95 30 4.3/3.2 2 to 3/1 to 2 18/14 20/1 6

Mine warfare/support

ships 75/50 30 2.5/1 .7 1/1 11/8 12/9

Total 400/300 13.2/1 O 9 to 7/7 to 5 56.5/44 64/51

SOURCE: Office of Technology Assessment, 1995.

need to be replaced by the turn of the century. Almost 2,000 additional new ships are expected to

be required to meet expanded needs. But despite

the many forecasts of a commercial shipbuilding

boom in the 1990s, the worldwide number of large

merchant ships on order, or under construction in

1993, declined. Still, new construction is expected to develop to provide the double-hull oil

tankers to comply with the Oil Pollution Act

which became law in 1990. These tankers are

scheduled to be phased in between 1995 and 2005,

but might not be built in U.S. yards. Further,

changes in environmental regulations could have

an impact on the speed with which these ships are

introduced. U.S. production ultimately depends

on what percentage of the global market the

United States is able to capture.

Other potential commercial work includes oil

drilling rigs, marine structures, and large land

structures demanding extensive welding or using

shipbuilding techniques.

Although Navy shipbuilding, conversion, and

repair activities are expected to continue to decrease, Navy work will still dominate the U.S.

shipbuilding and ship-repair industry in the near

term. A principal national security concern is how

to preserve the capability to build nuclear submarines and aircraft carriers. But while these programs represent important defense capabilities,

they appear to have limited direct CMI effects,

with most CMI potential being in supporting industries such as electronics.

Other Navy programs are more directly applicable. The Navy sealift program, for example, was

viewed by many of those interviewed as an opportunity to assist the transition to commercial shipbuilding business. There has been considerable

debate, however, over the extent to which CMI

can be achieved given the current design requirements of the sealift ships. Participants at OTA’s

shipbuilding workshops disagreed over whether

the planned ships were too militarily unique.

The size of the Navy fleet is currently projected

to fall from over 500 in 1993, to between 300 and

400 ships under the DOD’s Bottom-Up Review.

Table 12 gives an estimate of the level of work and

number of shipbuilding and overhaul facilities

that might support a Navy of 300 to 400 ships.

Given reasonable assumptions about service

life, new Navy construction for a force of this size

might range from 10 to 13 ships a year. This new

construction might be supplemented with the

overhaul and repair of 44 to 67 vessels, but overhaul and repair work is also decreasing as the

Navy moves away from its past practice of allowing 35 percent of a ship’s service life to be spent

out of commission in major repair and overhaul,

and toward the commercial industry’s figure of

about 5 percent.

Participants in OTA’s shipbuilding workshops

concluded that three building yards might be the

minimum necessary to meet anticipated Navy

shipbuilding needs for a force this size. Partici-
Case Study 3: Shipbuilding 59

Design, develop, build, and support effective naval

forces

Preserve a skill base in design, engineering, and

production

Maintain key facilities

Lower the costs of naval vessels

Enhance the transfer of critical technologies

SOURCE. Off Ice of Technology Assessment, 1995.

pants argued, however, that five to six yards were

preferred. Building yards and overhaul and repair

docks are important not only to provide normal

peacetime support but also to handle unforeseen

peacetime accidents or combat damage that might

disable a vessel. A future shipbuilding defense

base might include the following types and numbers of building yards:

■ one carrier yard

■ one submarine yard

■ two surface-combatant yards

■ two auxiliary yards

Some of these yards could, of course, build more

than one type of ship.

CIVIL-MILITARY INTEGRATION

Some CMI currently exists, particularly in the

subtiers, but integration at the shipyard level is

limited. Increasing CMI at all levels is made more

challenging by the lack of commercial competitiveness in building large ships.

Industry and government personnel participating in the two OTA shipbuilding workshops argued that civil-military integration of the

shipbuilding base demanded a clear statement of

the objectives to be achieved by such integration.

Five defense objectives (see table 13) were identified. The highest-priority defense objective is to

preserve the capability to design, develop, build,

and support the vessels needed to perform the

Navy’s basic missions: sea control and sea denial

in war, forward presence and support of political

interests in peacetime.

Ensure profitability

Preserve a skill base in design, engineering, and

production

Maintain key facilities

Lower the costs of commercial vessels

Enhance the transfer of critical technologies

SOURCE: Off Ice of Technology Assessment, 1995.

Workshop participants also identified five civilian objectives of integrating shipbuilding (see

table 14) and noted that commercial success in

building ships demands that the operations be

profitable. Participants observed that the mix of

skills for commercial production might differ

from those needed in the defense base. For example, the skills needed for modular construction of

commercial vessels might be very different from

those needed for defense, with the commercial

base having less demand for highly skilled electricians and electronics personnel and more demand

for basic welders and assembly personnel.

Shipbuilding facilities appear to have considerable defense and commercial overlap. Although

defense might demand some unique facilities

(e.g., nuclear), many of the costly, fixed shipbuilding facilities can be used for military or civilian work.

Workshop participants argued that technology

transfer is as important to the commercial sector as

it is to defense. Certain technologies, such as the

technology to produce large composite structures,

may be needed in both civilian and defense work.

Armaments technologies, however, have few

commercial uses.

Although many of the broad defense and civilian objectives overlap, the difference between the

first priority of each list underscores the fundamental difference that makes CMI difficult. Government goals stress combat performance and

oversight of public funds. Commercial goals, of

necessity, stress profitability, which is key to staying in business. While the differences between
60 | Assessing the Potential for Civil-Military Integration: Selected Case Studies

such objectives might be reduced, they are unlikely to be eliminated.

❚ Factors Favoring and Inhibiting

Integration

There are a number of technical, market, and

policy factors favoring increased integration in

the shipbuilding sector.

Technical

Although there are many acknowledged differences between defense and commercial hull designs, propulsion systems, and weapons systems

on board, government and industry personnel argued that there are also many commonalities in

components and that technological developments

in design and manufacturing processes—if exploited—might enhance integration within the

shipbuilding sector. The possibility of such integration has increased with the new DOD policy

toward the use of military specifications and standards.

Both the commercial and defense sectors face

many common environmental and safety problems. Research efforts in these areas, as well as in

design and manufacturing processes, might be expected to provide useful information to both the

commercial and defense sectors. In July 1994 the

Deputy Director for Defense Research and Engineering for Laboratory Management reported on a

DOD effort to determine what research and

technologies might be sourced from non-DOD

laboratories and which ones might be expected to

remain in the more militarily unique Service laboratory environment. Increased out-sourcing potential for naval systems included: habitability

and outfitting, shock, propulsion machinery, and

electrical power systems.22 In order to exploit

technical developments, the Non-Government

Panel studying the issue recommended that Navy

laboratories establish strong collaborative programs with industry and university partners.23

The MARITECH Program aims to use a wide

variety of technologies that appear to have application to both commercial and defense needs.

These include exploiting developing technologies:

 in simulation and modeling, virtual prototyping, and advanced materials to enhance integrated product development;

 in simulation and modeling, prototyping, and

communications to enhance integration in design;

 in flexible automation/robotics, real-time physical measurement, agile manufacturing and advanced methods in cutting, welding, and

pasting to enhance integrated construction; and

 in communications and advanced repair to enhance integration in follow-on support.24

Navy studies on Affordability through Commonality (ATC) have examined concepts for modular construction, equipment standardization, and

process simplification. In many cases these processes and the equipment might be confined to using standardized militarily unique items. Indeed,

past standardization programs have sometimes

isolated the military from commercial developments when the standardization has been to specifications not used in the commercial sector.

Component producers interviewed by OTA argued, however, that standardizing to commercial

specifications in areas where they appear appropriate (e.g., many of the different pumps and

valves that go on ships), is feasible and can promote savings.

Civil-military integration at the shipyard level

is aimed at maintaining a skilled workforce, shipyard facilities that can accommodate large naval

22 The Laboratory Infrastructure Capabilities Study: Non-Government Panel Meetings June/July 1994. Summary available through DOD

Laboratory System World Wide Web Services: LabLINK Home Page: Projects.

23 Ibid.

24 Robert Schaffran, “MARITECH,” Presentation at the ARPA Seventeenth Systems & Technology Symposium, Oct. 25-27, 1994, San

Francisco, CA.
Case Study 3: Shipbuilding | 61

vessels, and at improving U.S. shipbuilding

technology. Workshop participants concluded

that much of the hull work can be automated.

Computer aided design and computer aided

manufacturing (CAD/CAM), for example, can

drive a battery of robots in welding. Much of the

rest of the ship can be built in specialized factories.

Workshop participants noted that foreign

technology is important and that U.S. firms may

gain access to it through partnerships with international firms (such as those developed in the electronics industry) or through direct license

agreements.

At the sector level, technological opportunities

for integration are enhanced by the availability of

public sector facilities for private sector use. This

appears to make most sense when the facility investments are too costly for the private sector to

make individually. For example, the David Taylor

Naval Ship Research and Development Center in

Carderock, Maryland, has one of the largest maritime model basins in the world. Research topics at

the Center include hull-form structures, propulsion, silencing, maneuvering and control, auxiliary machinery, environmental effects, pollution

abatement, logistics, computer techniques, and

software for analysis and design—most of which

have some commercial application. The enabling

legislation for the Center specifies that experiments can be conducted for private shipbuilders if

the builders defray the cost of the experiment.25

The authority, however, has reportedly seldom

been used, except for examining some hull designs.

Other possibilities exist in facilities such as the

Navy Surface Warfare Center’s Crane Division of

Crane, Indiana, which conducts R&D on a variety

of systems, including microwave devices, acoustic sensors batteries, and microelectronic technology. While these efforts are directed at fleet

support, some might be exploited to enhance commercial capabilities.

National laboratories represent additional government resources available for use in shipbuilding. The use of supercomputers at Sandia National

Laboratories to solve planning problems in design

and manufacturing is an example of sector level

integration. Both the Sandia National Laboratories and Oak Ridge National Laboratory currently

have supported shipbuilding activities. Sandia,

for example, has a Cooperative Research and Development Agreement (CRADA) with one of the

shipyards in advanced welding techniques, and

Oak Ridge has ongoing cooperative work in

manufacturing.

Exploiting commonality in process technology

(e.g., design, manufacturing, testing) appears fairly straightforward. The use of commercial components on combatants, however, raises questions

about the durability of products manufactured under commercial standards. Critical questions

about shock resistance, for example, must be

addressed. Many electronic components are currently meeting such requirements through ruggedization, a process by which commercial items

are placed in a rugged container that can resist the

shocks and stresses of combat. In common with

findings in other critical combat areas, those interviewed generally agreed that design, manufacturing processes, and components represent the

greatest opportunities for integration.

Market Factors

The U.S. military and commercial shipbuilding

markets have almost been mutually exclusive at

the shipbuilding level. Yet many OTA workshop

participants argued that this need not be the case.

Workshop participants and others interviewed

during the assessment stated that ship components

and subcomponents are the most likely items to be

purchased, but major end items might also be

bought commercially. The Navy, for example,

used an off-the-shelf merchant tanker, modified

25 OTA, R&D in the Maritime Industry: A Supplement to an Assessment of Maritime Trade and Technology, op. cit., footnote 8, p. 35.
62 | Assessing the Potential for Civil-Military Integration: Selected Case Studies

with defense features, to provide underway replenishment to fleet combatants in 1972.

The Navy’s T-AGOS program was run “commercially” from 1981 until 1986. The commercial

philosophy followed in that case reportedly allowed the program to reduce Navy oversight significantly.

More recently, the United Kingdom contracted

for construction of a helicopter carrier based on a

commercial, rather than a military, hull design. By

modifying a commercial design rather than using

a militarily unique one, the United Kingdom expects to save over $76.5 million.26

The French have also used a more commercial

approach to meet some of their needs. An earlier

OTA study reported that the French Navy, in developing a new class of frigates for routine patrol

missions, decided against sophisticated and expensive warships to perform these missions.

A commercial shipyard, Chantiers de l’Atlantique (owned by the Alcatel-Alsthom GEC Group),

that specializes in the design and construction of

passenger liners, received the contract. In lieu of

military specifications, the French Navy permitted Chantiers de l’Atlantique to use somewhat

less rigorous “safety of life at sea” norms conceived for merchant-marine and passenger ships.

The patrol frigates are equipped with the same

weapons systems as are standard frigates, but lack

a computerized battle-management system capable of integrating them into a naval task force. Because of these economies, the patrol frigates were

developed and built at one-third the cost of frigates built to military specifications. The limited

defensive capabilities of the patrol frigates could,

however, prove problematic if they confront comprehensive threats.27

More market commonality may be achieved in

naval transport ships, but there were mixed views

on whether this will occur. As noted earlier, some

participants in OTA’s shipbuilding workshops expressed concern that the ships then in the Navy’s

sealift program had little commercial overlap,

while DOD participants argued that the ships were

“the least military-specified ship ever” and that

the specifications that did exist were mostly performance specifications.

One argument made by those concerned about

CMI was that the design’s performance specification forced noncommercial solutions, and that if

support for a commercially viable ship had been a

consideration, a different design would have

emerged. It was the opinion of some participants

that the DOD could have met 90 percent of the lift

requirement at 50 percent of the cost and had a

commercially viable ship. Concerns were focused

on the requirements for off-loading and the hazardous cargo requirements. Regardless of their

views on current designs, workshop participants

generally supported the idea of moving toward a

more commercial vessel for most Navy purchases.

Policy Factors

The recent government shipbuilding initiatives

aim not only at developing technology but also at

applying that technology to demonstration vessels with the objective of reestablishing the U.S.

shipbuilding industry as a self-sufficient, internationally competitive industry.28 The MARITECH

program, outlined earlier, is designed to develop

and apply advanced technology to improve the

competitiveness of the U.S. shipbuilding industry. According to Dr. Larry Lynn, Director of

26 P. Felstead, “VSEL Wins Contract To Build U.K. Helo Carrier,” Janes Defense Weekly, May 22, 1993, p. 10.

27 U.S. Congress, Office of Technology Assessment, Lessons in Restructuring Defense Industry: The French Experience, OTA-PB-ISC-96

(Washington, DC: U.S. Government Printing Office, June 1992), p. 26.

28 National Defense Authorization Act for Fiscal Year 1994, Public Law 103-160, Nov. 30, 1993, Sec. 1352. 10 USC 2501.
Case Study 3: Shipbuilding | 63

ARPA, “MARITECH will ensure that a domestic

shipbuilding infrastructure, capable of building

competitive ships, is available to procure affordable Navy ships at such time that new construction

tonnage is needed.”29

As a part of its plan for strengthening America’s shipyards, the Clinton Administration has

also pursued efforts to eliminate foreign shipbuilding subsidies through the Organization for

Economic Cooperation and Development, provided guarantees through the Department of Transportation for ship construction, and extended loan

programs to cover ships built for export.

Workshop participants raised and discussed

several other near-term strategies, including

building and leasing commercial ships in place of

the Ready Reserve Fleet and purchasing a fleet of

vehicle carriers that would be on a standby arrangement under government contract for use in

an emergency. (See box 7.)

❚ Factors Inhibiting Integration

Several factors have inhibited integration in the

shipbuilding sector. The major factor has been the

almost total lack of commercial shipbuilding. The

dearth of commercial shipbuilding is partly a

function of the technical, market, and policy factors noted below.

Technical

As discussed earlier, naval combatants have very

specific tasks to perform that often have little or

no overlap with commercial activities. They must

be capable of withstanding damage that would not

be expected in a commercial vessel. Shock tests,

and special fire-fighting equipment are often essential. Because of the potential for sustaining

combat damage, many observers question the capability of the new French patrol frigates to operate in a high-intensity combat environment.

Since they incorporate many technologies that

are different from those used in large commercial

vessels, the construction of combatants often requires different skills than do commercial ships

(e.g., electronics integration and weapons systems installation). Much of the value added in

combat vessels is associated with these complex

electronics and weapons systems. CMI here is

more likely to occur at the electronic component

level. Thus, while process technology may potentially be easily integrated, the special needs of

combat vessels will create some technical limits

to product integration. The existence of many militarily-unique systems must be acknowledged in

considering a realistic CMI strategy in this sector.

The lack of competitiveness of the American

shipbuilding industry has been exacerbated by the

general absence of investment in new process

technology in the industry. Although smaller

yards report investments, representatives from the

major yards participating in the OTA workshops

estimated that large U.S. shipyards are as much as

10 years behind in technology. The result is that

production time per ship is two to three times

as long in U.S. yards as it is in the best foreign

yards. The MARITECH Program is aimed at

introducing new technologies, but the workshop

concensus was that outdated yards will require

substantial new investment to become commercially competitive.

New technological developments in the United

States are aimed at both reducing the number of

workers needed to build a ship and the time needed to complete a ship. Although American wages

have declined to the degree that they are slightly

lower than Japan’s and much lower than those in

Western Europe, they remained high compared to

South Korean wages or those of the People’s Republic of China. Further, almost all major foreign

yards can reportedly build ships faster and with

fewer people than can U.S. yards. For example,

29 Statement by Larry Lynn, Acting Director, Advanced Research Projects Agency, before the House Appropriations Committee, Subcommittee on National Security, Mar. 23, 1995.
64 Assessing the Potential for Civil-Military Integration: Selected Case Studies

Workshop participants generally agreed that the falling rate of Navy construction, combined with

the lack of a commercial market for large ships, necessitated drastic action to reestablish a domestic

shipbuilding industry. A number of alternatives were discussed in addition to integrating the commercial

and defense bases. These included: ceasing to transfer ships to other nations as the Navy decommissions them because this practice eliminates potential customers; building ships directly for the export

market (including diesel submarines); starting a major building program for Coast Guard ships.

Participants suggested that there should be greater support for foreign military sales. Such sales

may be controversial, however, because they can potentially create threats to U.S. forces. On the other

hand, they can sustain important high-level skills in the absence of commercial work. Some participants discounted the possibility of future threats to U.S. forces.

Participants also proposed changing the duration of the charter of MSC ships. Longer charters

could certainly be used to facilitate sealift acquisition. Participants indicated that tankers, as well as

vehicle carriers, might be built for a five-year charter. They pointed out that the production of doublehulled tankers, coupled with a focused sealift construction program built around longer charters, might

create a commercially viable program.

Finally, workshop participants suggested that the Nation needs to develop incentives that support

the shipbuilding industry. The Norwegians, for example, use tax policy (i.e., high depreciation rates for

ships) to sustain a very modern fleet. Liberia and Bahrain are both tax-free environments. U.S. tax

policy, on the other hand, was viewed as punitive to the shipbuilding industry.

SOURCE: Office of Technology Assessment, 1995.

the Japanese are estimated to have cut the percent- good investments and that government loans were

age of labor cost in the cost of a ship from about

40 percent in 1987-88 to 20 to 25 percent in

1991.30 A ship operator noted that the international ship market is highly dependent on the lowest

price. Technology aimed at productivity improvements is essential.

Participants at OTA’s shipbuilding workshops

expressed concerns about the ability of shipbuilding firms to gain access to necessary financing to

make technology investments. They estimated

that U.S. yards would require new technology and

facilities—thought to cost between $100 million

and $200 million per yard—to compete effectively. Component producers complained that small

firms could not get access to such financing, and

they called for government guarantees. Others argued, however, that financing was available for

therefore unimportant.

Market

A number of market factors inhibit integration.

One of the greatest is the uncertainty in the market

for large ships. Despite the expectation of increased demand, expansion has been slow. A further problem is fierce international competition.

Several Korean shipyards, for example, have announced major capacity expansions to meet the

expected increased market demand. Japanese and

European yards can also be expected to be competitive.

Owners, operators, and government workshop

participants noted that U.S. shipyards have been

very poor at marketing. Although shipyards com30Drewry World Shipbuilding, The Next Ten Years:Can the Challenge Be Met? (Drewry Shipping consultants, Ltd., London: April 1992) ,

p. 26.
Case Study 3: Shipbuilding | 65

plain about a lack of orders, some workshop participants argued that American shipyards lack a

commitment to marketing and often fail to visit

firms interested in buying new ships. Foreign

builders, on the other hand, are said to visit regularly.

Market subsidies were hotly debated at the

workshop. Many workshop participants argued

against direct, long-term subsidies, stating their

belief that federal subsidies have hurt the base by

isolating it from competition.31 A 1983 OTA report hinted at this, noting that:

Over the past two decades the United States

has only built major merchant ships when Federal subsidies were used to pay a large portion of

the cost or when laws, such as the Merchant Marine Act of 1920 (Jones Act), required that the

ship be built in a U.S. yard.32

Instead, participants generally supported a program in which shipyards would receive initial

transition funding to help them convert to commercial shipbuilding. Such a program would also

include a commitment on the part of the government to encourage shipbuilding through incentives.

Some workshop participants advanced a different market approach. They suggested that smaller,

cheaper ships might be better suited to the new defense environment and take advantage of technology developments to retain combat capability. For

example, smaller fighting ships might be built (at

$250 million a copy) with an acceptable compromise in performance by capitalizing on spacebased (or airborne) command-control links whose

costs would be met through joint service support.

Expensive, large radars and associated equipment

could then be removed in favor of off-board sensors. A modular design would allow additional

“tuning” of ships for particular needs in various

locations around the world.33 A small ship might

also be more likely to develop an export market.

Policy Factors

Government acquisition laws and regulations that

have effectively separated much of the defense

and commercial bases have had a negative effect

on the shipbuilding industry too. As in other sectors, special rules have driven up costs. For example, although Navy and commercial hull welding

for surface ships might be similar, the costs are far

higher for Navy work because of the additional

testing required and the more stringent labor requirements to certify those tests. It was reported

that certified welders were paid $16 an hour for

Navy work and $10 an hour for commercial work.

As a result, a yard doing both Navy and commercial work reportedly either had to have two labor

forces with different training requirements and

pay scales, or use the more highly skilled workers

and pay the higher wages for commercial work as

well.

Government cost-accounting and inventory requirements that differ from commercial practices

have also reduced commercial competitiveness

and ultimately inhibited integration. Workshop

participants noted that commercial and Navy

ships were once built side-by-side and that such

construction was helpful; now, partly because of

government acquisition rules, this does not, and

cannot, occur. Integrating production processes in

the shipyards will continue to be difficult if current acquisition laws are not changed. Shipyards

argue that the paperwork associated with govern31 The subsidies included a construction-differential subsidy (CDS) under the Merchant Marine Act of 1936. The CDS provided for the

government to pay a shipyard, contracting with an American foreign-trade ship operator, the difference between the higher American cost and

the lower foreign production cost. The Merchant Marine Act of 1970 anticipated the building of 300 ships under CDS over a 10-year period.

32 U.S. Congress, Office of Technology Assessment, An Assessment of Maritime Trade and Technology, OTA-O-220 (Washington, DC: U.S.

Government Printing Office, October 1983), p. 85.

33 A. Skolnick, “Sea Power, Peacekeeping, Defense Conversion and Budgets: Can They Be Balanced?” Naval Engineers Journal, September 1993.
66 | Assessing the Potential for Civil-Military Integration: Selected Case Studies

ment regulations drives up the cost of commercial

products.

Finally, military specifications and standards

have separated shipbuilding in much the same

way they have affected other defense sectors. Extensive discussions about the impact of military

specifications and standards took place in both the

OTA shipbuilding workshops and during interviews. Some of the component producers predicted that continuing the same level of Navy

specifications and standards would drive many

component producers out of the government market. Although some specifications and standards

are viewed as valid, many are thought to be inappropriate. The effects of Secretary of Defense Perry’s changes in the use of military specifications

and standards are not yet clear, but are considered

to be helpful.34

Many of those involved in the workshops argued that in the past, decisions to modify the use

of military specifications and standards often did

not filter down to those charged with writing and

implementing the specifications and standards.

As a result, little seemed to change despite decisions to proceed with specification reform.

U.S. Coast Guard safety standards for ships

built and/or requested in the United States (including the use of nonflammable materials and different boilers) were cited as inhibitors by some

workshop participants because of their impact on

the price of U.S.-built ships. The cost of a boiler

that meets U.S. Coast Guard standards, for example, was said to be twice that of one that did not

meet those standards.

The actual cost impact of U.S. Coast Guard

standards on new commercial construction, however, is disputed. The Coast Guard maintains that

the actual cost of compliance is far below the 15

percent figure often cited by shipbuilders. The

Coast Guard uses a 1973 report by the American

Commission on Shipbuilding that cites a 3 to 5

percent additional “cost of a U.S. flag vessel for

compliance with the technical requirements of the

Coast Guard, American Bureau of Shipping

(ABS), and the U.S. Public Health Service.”35

Further, the Coast Guard argues that even in the

absence of Coast Guard regulations, U.S. shipyards are not competitive and that the absence of

foreign flag shipbuilding in the United States

must be attributed to factors such as the long delivery schedules and corresponding high delivery

costs at U.S. yards, rather than any added cost of

compliance with Coast Guard regulations.36 In

support, several in industry noted that “what we

need is globalization of standards” to level the

production field and improve safety.

❚ Implications of Increased Integration

Increased integration is thought by many to be essential for the preservation of a domestic shipbuilding base that can provide affordable ships for

the Navy. Without increased non-defense work it

will be difficult to preserve more than a very few

building yards. Greater use of common components and greater use of common design and

manufacturing technologies appear useful for

both the defense and commercial sectors. It is in

these areas that the greatest potential for CMI may

exist.

34 Secretary of Defense William J. Perry, Memorandum for Secretaries of the Military Departments, Subject: Specifications & Standards: A

New Way of Doing Business, June 29, 1994.

35 White Paper: Cost of U.S. Coast Guard Regulations to U.S. Shipbuilders and the Initiative with the Shipbuilders’ Council of America To

Reduce These Costs, Sept. 6,1991 (updated December 1992), p. 2.

36 Ibid., p. 8.
Appendix A

Workshops

Workshop on Shipbuilding, June 23, 1993

Jack Nunn, Chair

International Security and Space

Program

John Bissell

Director of Industrial Planning

Branch

Industrial Planning Division

Naval Sea Systems Command

John J. Carr

Executive Vice President

IMO Industries, Inc.

Robert Draim

Executive Officer

Naval Sea Systems Command

Ron McAlear

Vice President, Advanced

Program

Avondale Shipyard

James A. Palmer

Vice President

Aircraft Carrier Construction

Newport News Shipbuilding

David Reece

Executive Director

Naval Surface Warfare Center

Crane Division

Paul M. Robinson, Captain, USN

Director, Supportability,

Maintenance and

Modernization Division

The Pentagon

George Sawyer

Executive Vice President

J.H. Lehman

Robert Schaffran

Program Manager

PRC/Maritime Systems

Technology Office

Fred Seibold

R&D Program Manager

Maritime Administration

Alfred Skolnick

System Science Corp.

Peter Tarpgaard

Professor

Naval War College

Harvey Walpert

Senior Vice President,

Administration

Trinity Marine Group

John Welch

Vice President

Program Management/

Development

General Dynamics Electric Boat

Division

William Wert

General Manager

G.E. Navy and Small Steam

Turbine Department

| 67
68 | Assessing Potential Integration of Defense and Civilian Technology and Manufacturing

Workshop on Shipbuilding, August 19, 1993

Jack Nunn, Chair

International Security and Space

Program

Steven G. Buttner

Vice President Strategic Planning

Bath Iron Works

J. William Charrier

President and CEO

American Automar, Inc.

David P. Donohue, RADM, USN

(Retired)

The Jonathan Corp.

Robert Draim

Executive Officer

Naval Sea Systems Command

Tom Ellis

Manager

Micro Electronics Department

Naval Surface Warfare Center

John H. Ferrara

President

Maersk Lines, Ltd.

George R. Fister

Vice President, Government

Programs

Shipbuilders Council of America

James B. Greene, RADM, USN

Deputy Chief of Naval

Operations Logistics

The Pentagon

Paul Hagstrom, Captain, USCG

Chief of Naval Engineering

Division

U.S. Coast Guard Headquarters

Gerry Lamb

Director of Washington

Operations

Bath Iron Works

Paul Martineau

Executive Director

Ingalls Shipbuilding—

 Washington Office

Robert J. Scott

Vice President

Gibbs & Cox, Inc.

Alfred Skolnick

System Science Corp.

Guner Woehling

Vice President & General

Manager

Henschel, Inc.