Teradyne wins $56M stealth test contract

Electronic News, June 12, 1995

BOSTON--Teradyne last week said it had received a $56 million automatic test equipment (ATE) order for maintenance of the B-2 stealth bomber from prime contractor Northrop Grumman, reflecting a new lean-budget Pentagon policy of buying commercial products which is seen potentially doubling the board test market in five years.

Teradyne said the order was the largest it had ever received for board test equipment. Under the contract, it will supply multiple test systems and test program development stations for depot test and repair of B-2 avionics shop-repairable units (SRUs) and line-repairable units (LRUs). Deliveries are scheduled to begin in 3Q95 and to be completed in 1996, it said.

Teradyne won the competition for the B-2 depot maintenance contract over rival bids from Hewlett-Packard and Gen-Rad, industry sources said. Under the new Pentagon "buy commercial" policy, a Teradyne spokesman indicated there would be comparable competitive contracts to bid on in the future; the firm has won other similar but smaller military orders.

When the Pentagon last year changed its test equipment procurement policy to save money by moving away from expensive test systems custom-designed by military contractors to buying commercial, off-the-shelf (COTS) systems, a new market opened for equipment vendors, according to Jeff Hotchkiss, Teradyne VP and general manager of its Assembly & Test division.

"There's a substantial growth opportunity here. The commercial board test market, which does not include this military spending, (was) about $600 million in 1994. So we're talking about (a military market) opportunity that would grow to about that size over the next five years."

He said the growth is "almost a doubling of the (commercial board test) market" in the next five years as a result of the change in Pentagon policy. The military's purchase of COTS equipment is projected to go "from a fairly low percentage, where it has been historically, to almost 50 percent of the total over a five-year period."

He said the government is spending about $1.3 billion each year on all test equipment and it is estimated that this will slip to $1.1 billion over the next five years, partly because of defense budget cutbacks and partly because of the move to buying less-expensive, commercial equipment.

The total ATE annual market is about $2 billion--divided into device-level testing and board-level testing, Mr. Hotchkiss said, adding the Department of Defense purchases virtually no device-level test equipment.

In his directive last year to the assistant secretaries of the Army, Navy and Air Force, Principal Deputy Under Secretary of Defense for Acquisition and Technology R. Noel Longuemare established a policy that DoD components shall satisfy all acquisition needs for all ATE hardware and software by using designated automatic test system (ATS) families to encourage use of COTS testers and components.