BILLION DOLLAR OPPORTUNITIES IN THE INDIAN DEFENCE SECTOR

Dr VK SaraswatDAE Homi Bhabha Chair

Former Secretary Dept of Defence R&D; Scientific Adviser to Raksha Mantri and

Director General DRDO & ADA

Conference on Defenceby Edelweiss Securities Ltd, Mumbai

On18 Jul 2014

Development & Production Culture1960-2010

Indian Defence Industry (Govt & Public)Product Profile

No. of Factories : 39 + 2 Principal Items - 881Manpower : 99000 (approx) Anti Tank Guns, Field Guns, Mortars, Small Arms, Bombs,

Rockets, Grenades, Mines, Depth Charge, Explosives, Propellants, Pyro Technique Stores, Transport Vehicles, Optical and Fire Control Instruments, Bridges,Assault Boats, Clothing / Protection Suits, Parachutes

HAL(19 Div)

BEL(9 Div)

BEML(4 Div)

BDL(3 Div)

SHIPYARDS(4 Units)

MIDHANI(1 Div)

Sale Rs.1,43,230

Cr

Sale Rs.6,012 Cr

Sale Rs.3,290 Cr

Sale Rs.475 Cr

Sale Rs.2,798 Cr

Sale Rs.2,424 Cr

Aircrafts Radars Mining / Construction Eqpt

Missiles Ships Super Alloys Prodn

Helicopters Communication

Rail / Metro Products

Torpedoes Submarines Titanium Spl.Purpose Steel

UAV EW Systems Wheeled Vehicles

Launchers Boats Turnover Rs.510 Cr

Radars Elect/Opt Systems

Decoys Integration of Sensors / Weapons / Communication

Communication

NVD

Aero Engine SonarsAvionics Naval

Communication

Defence Public Sector Undertakings

Ordnance FactoriesProduct Profile

No. of Factories : 39 + 2 Principal Items - 881Manpower : 99000 (approx) Anti Tank Guns, Field Guns, Mortars, Small Arms, Bombs,

Rockets, Grenades, Mines, Depth Charge, Explosives, Propellants, Pyro Technique Stores, Transport Vehicles, Optical and Fire Control Instruments, Bridges,Assault Boats, Clothing / Protection Suits, Parachutes

Product ProfileNo. of Factories : 39 + 2 Principal Items - 881Manpower : 99000 (approx) Anti Tank Guns, Field Guns, Mortars, Small Arms, Bombs,

Rockets, Grenades, Mines, Depth Charge, Explosives, Propellants, Pyro Technique Stores, Transport Vehicles, Optical and Fire Control Instruments, Bridges,Assault Boats, Clothing / Protection Suits, Parachutes

Licensed Production Culture Poor Design innovation capabilityNo R&D Activity Outdated Production Management SystemNo Modernisation of production technologies Highly over staffedExcessive Government Control Poor Participation of private sectorOver Dependence on Licensor No initiatives for indigenization

BASANTPUSHPAK KRISHAK

PROGRESS OF INDIAN CIVIL AVIATION

HANSA

1960-70

1990’S AND BEYOND

SARAS

MIDDLE YEARS OF INDIAN MILITARY AVIATION1970-80

MIG-21

MIG-27

JAGUAR

LATER YEARS OF INDIAN MILITARY AVIATION1980-2000 AND BEYOND…..

CHEETAH CHETAK ALH

MIG-29 SU-30 LCA

OVERVIEW OF SYSTEMS & TECHNOLOGIES

DRDO52 Labs

Aeronautics Armament & Combat Engg

Missiles &Strategic Sys

Naval SystemsMaterials &

Life Sciences

Electronics

30,000 Workforce:• Scientists - 7000

• Technical Staff – 12,000

• Allied Staff – 11,000

OUR MISSIONOUR MISSION Design, develop and lead to production state-of-art defence systems and technologies Provide technological solutions to the Services to optimise combat effectiveness Develop infrastructure and committed quality manpower and build strong indigenous technology base

05/03/23

PRO

DU

CT

ION

ISA

TIO

N &

DE

LIV

ER

Y

EVOLUTION OF DEFENCE R&DEVOLUTION OF DEFENCE R&D

1958 1970 1980 1990 2000 2010

INC

EPT

ION

INSPECTIONAGENCY REVERSE ENGG.

TECHNOLOGY GENERATION

SCIENTIFICRESEARCH

MA

JOR

SY

STE

MS

& P

RO

GR

AM

ME

SIN

ITIA

TE

D

PRO

TO

TY

PES

& T

RIA

LS

IGMDPLCAMBT

EW SYSTEMS

IMPORT/EXPOSURE TO FOREIGN

TECHNOLOGIESDESIGN &

DEVELOPEMENT CONCURRENT

ENGG

LSP

, USE

R T

RIA

LS

& A

CC

EPT

AN

CE~ 20 YEARS

NE

W S

YST

EM

S

SYST

EM

ST

UD

IES

AN

D A

NA

LY

SIS

Funding

TYPICAL TIME FRAME FOR FIRST TIME SYSTEMS ELSEWHERE TOO

PROGRAMME DRIVEN PRODUCTION INFRASTRUCTURE

PROGRAMMES : SLV3, PSLV, IGMDP1970 – 1980 - 1990

IGMDP Management System• Three tier management system for Review and Execution• Concurrent development & production • Production agencies identified at conception of programme • Involvement of production agencies in development• Involvement of R&D labs in setting production infrastructure• DRDO/Space invested in HAL(ASD), BE, BEML, BDL, OF, ECIL• Strong Review Mechanism• Policy decision on - Cost plan development - Cost control - Redundancy management• Involvement of finance at every level

Benifits• Manufacturing technology upgradation at production agency

• Introduction of productionisation culture

• Improved quality assurance and certification system – MSQAA

• Ownership of programmes with synergy between R&D and PA

• Prithvi and PSLV production achieved in 5 years with involvement of - 40 Private Industries - 09 public Sector Industries

PROGRAMME DRIVEN PRODUCTION INFRASTRUCTURE (Contd)

INDUSTRIESHAL LARSEN & TOUBROBDL GODREJ & BOYCEBEL JOHNGALT INTLBEML SEC INDUSTRIESOF’S VEM ECIL RASU TOOLSKELTECH PRAGA TOOLS

REPUBLIC FORGE ECHJAY INDUSTRIES WALCHANDNAGAR

INDUSTRIESOF TRICHY LAXMI MACHINE TOOLS

TECHNOLOGIES / PRODUCTSAIRFRAME PROPELLANT TANKSWINGS NOSECONES ROCKET MOTORS LAUNCHERSRADARS PROPELLANTSWARHEADS DATA LINKS

• HMX, RDX, OCTOL EXPLOSIVES• LP ENGINE COMPONENTS• HYDRAULIC / PNEUMATIC ACTUATION SYSTEMS• INERTIAL SENSORS• INERTIAL NAVIGATION SYSTEMS• ON-BOARD COMPUTERSTECHNOLOGIES / PRODUCTS

FACILITIES

4/5 Axis Machining Centres Automatic Welding Equipment Magnesium Casting Facility Process Shop – Surface Treatments Vacuum Brazing Precision M/c Shop NDT Facilities for Propellants HIP, CIP, Spinning, Flow Forming Investment Casting; Powder Metallurgy products like Tungston

AEROSPACE MATERIAL PROCESSING Alluminium Alloys Magnesium Maraging Steel, 15 CDV6 Titanium Ni based super alloys Tungston Glass Fibre & Carbon Fibre

COMBAT AIRCRAFTS

AERONAUTICS

AEROSTAT UAV NISHANT

MICRO UAV TECHNOLOGIES

GRADUATION OF INDUSTRY

TECHNOLOGY TRANSFER

DESIGN & BUILD –

STRATEGIC PARTNER TO R&D

EVOLVE PROCESS &

MFG.

GR

OW

TH

• Process for Fab.• Eqpt. & Trg.• KOP

(L&T, BEL & OF)

L&T, Tata & BEML

DRDO INITIATED PROGRAMMES

1950-70 1980 1990 2000 2010

• Design by DRDO

• Build to Design

IGMDP, EW

T-72,BMP-II

MCP

MAL

• Build to Specification

INDUSTRY PARTNERSHIPINDUSTRY PARTNERSHIP

TataMTARGodrejL&TKCPCELASTRASEC ind. High Energy BatteriesAjay SensorsMACMETPEL

.

.

Tata L&T Deepti VEM Astra Ananth Tech Data Pattern ZetatechMACMETDynamatic TechnologiesDynalogAlpha DesgnApollo Micro SystemsRAP

.

.

.

...

Value addition

by industry

System Design specs

1970 1980 1990 2010

50

200

500

2000

100

Fabricator

Fabrication & Testing

Subsystem, Design, Fabrication & Testing

LRSAMDRDO+ Israel+ Indian

Industries

BrahmosDRDO+ Russia+ Godrej

SRSAMDRDO+ MBDA

Aero EngineGTRE + CIAM

GTRE + SNECMA

I2MCUncooled

FPA, MEMS

.

.

GlobalCollaboration

2020

FUTURE SYSTEMS & OPPORTUNITIES

Indian Aerospace Industry – an attractive opportunity

India’s presence in all segments of Aerospace Value Chain

Major global aerospace companies present in India in some way or the other

• India – one of the fastest-growing aerospace markets in the world• Mostly due to defence spending and growing commercial aviation market• Expected to add ~ 4000 military and commercial aircrafts in next 15 yrs • MRO segment estimated to grow at 10% and reach USD 2.6 bn by 2020

This would require significant investment in capacity building

17

India is expected to be the third largest Aerospace market after U.S. and China by 2020

Development Programs:•Aeronautics, Armaments, Combat vehicles• Electronics, Missiles, Materials•Medium Multi Role Combat Aircraft (MMRCA) •Fifth Generation Fighter Aircraft (FGFA) •Multirole Transport Aircraft (MTA) •Medium Lift Helicopters (MLH) •Light Utility Helicopters (LUH)• Hypersonic vehicles

Development Programs:•Satellite Launch Vehicles•PSLV , GSLV •Satellites•INSAT , IRS

Intensive technology and safety requirements mandate significant investments in R&D and quality control

• India projected as 5th largest buyer of passenger aircrafts

• Commercial aircraft projected to grow at 6% CAGR

• Business jets to grow at 11% CAGR

• Modernization underway:• Airports• Communications • Radars

• Facilities for MRO

• 10th biggest spender in defense. FY 13 budget – USD 35bn

• Expected to spend USD 100 bn in next decade

• Military expected to add 1000 rotary & 1200 fixed wing aircrafts

18

WEAPON SYSTEM DEVELOPMENT – NEXT 30 YEARS WEAPON SYSTEM DEVELOPMENT – NEXT 30 YEARS Missiles

• Hypersonic and sub-sonic cruise missiles

• Long range ballistic missiles with MIRV

( multi-platform – land, air, under-water)

• Ballistic & cruise missile defence

systems with space segment

• Multi-platform tactical missiles &

missile based PGM’s

Naval Systems

• Torpedoes with thermal engines

Aeronautics

• UAV, UCAU, aerostats, airships with

multiuse payloads

• Multi role stealth combat aircraft

EW Systems

• Multi-platform EW systems

• Cyber warfare systems

Armaments & Combat Systems

• Next generation MBT, APC

• Remotely piloted reconnaissance ground

vehicles

• Low cost guided multi-barrel rockets with

PGM’s

• Self propelled guns with PGM’s.

New Concept Weapons

• Directed Energy

- Lasers, micro-wave, particle beams

• Kinetic Energy

- EM cannons, kinetic kill vehicle

• Non-Anti Personnel

- Chemical energy-losing agents,

Low energy-laser blinding weapons,

Omni directional irradiation weapons

19

TECHNOLOGIESMISSILES•MEMS based actuators, sensors• RF seekers – Electronically steered arrays, Power source, klystrons, MPM, signal processing, ATR• Gel propulsion systems• Navigation sensors - RLG, FOG, DTG, HPM, Navigation on chipELECTRONICS • IIR Seekers – focal plane arrays, bolometers, CCD’s, adaptive optics, IR domes• Laser seekers• Network centric warfare technologies• Active phased array radars• Space based IR sensors, SAR• Secured multi-layer high speed communication network• Mini & micro Satellites• VLF, ELF, blue-green laser • SDRMATERIALS• Ceramic radomes• High temperature materials• Stealth materials

AERONAUTICS • Airborne (AEWS, ESM, ECCM Systems)• Gas turbine engines• Stealth technologies • Robotics & unmanned vehicles

ARMAMENT & COMBAT TECHNOLOGIES• High energy solid propellants (ADN) • Pulse detonation engines• Thermobaric warheads• Automated, composite, bridging systems• Soldier as a system• Low intensity conflict technologies

LIFE SCIENCES• NBC defence Technologies

NANO TECHNOLOGIES• NANO materials, nano sensors, • NANO structures, nano electronics

WARGAMING• Wargaming, modelling & simulation of defence systems

TECHNOLOGY DEVELOPMENT – NEXT 30 YEARS TECHNOLOGY DEVELOPMENT – NEXT 30 YEARS

20

EMERGING DEFENCE & AEROSPACE MARKET (2010-2025)

• IMPORT PRODUCTS (BUY-Make) approximate estimates– MMRCA Rs.42,000 Cr

– Guns Rs.8000 Cr

– C-17 Aircrafts Rs.25,000 Cr

– MIRAGE Upgrade Rs.10,000 Cr

– Helicopters Rs.10,000 Cr

– Missiles Rs.7,000 Cr

• INDIGENEOUS PRODUCTS (Make India)– Missiles Rs.1,03,600 Cr

– Aircrafts• Light Combat Aircraft Rs.57,000 Cr• FGFA Rs.30,000 Cr• AEW&C Rs.2000 Cr• AWACS Rs.6000 Cr• UAV’s Rs.2000 Cr

EMERGING DEFENCE & AEROSPACE MARKET (2010-2025) contd

• INDIGENEOUS PRODUCTS (Make India)• Rockets Rs.1100 Cr

• Tanks Rs.3000 Cr

• EW Systems Rs.1500 Cr

• Radars Rs.7000 Cr

• Naval Systems Rs.1200 Cr

• Field Gun Rs.2000 Cr

• Electro Optical Systems Rs.1000 Cr

• Helicopters• ALH Rs.8000 Cr• LCH Rs.5000 Cr

05/03/23 DRDO - An Overview 23

GLOBAL TECHNOLOGY GROWTH

AEROSPACE & DEFENCE MANUFACTURINGCHARACTERIZED BY

• COMPLEX DESIGNS AND LONG PROJECT CYCLE

• LARGE R&D INVESTMENTS

• LARGE INVESTMENTS IN MANUFACTURING & TEST EQUIPMENT

• MATERIALS OF UNIQUE SPECIFICATIONS

• ADVANCED MANUFACTURING TECHNIQUES

• PHYSICAL SIZES RANGING FROM MMS TO FEW METERS.

• LOW BATCH SIZES – OFTEN ONE OFF.

• FAST TECHNOLOGICAL OBSOLESCENCE

• DIVERSE TECHNOLOGIES

• INTENSIVE TECHNICAL, QUALITY AND SAFETY REQUIREMENTS

• STRINGENT REGULATORY ENIVRONMENT

• SUPPLY CHAIN MANAGEMENT

FRAMEWORK OF ADVANCED MANUFACTURING TECHNOLOGY

Source: IDA Report 2012, Emerging Global Trends in Advanced Manufacturing

FRAME WORK OF ADVANCED MANUFACTURING TECHNOLOGY

ADVANCED PRODUCTS

• Technologically Complex• Use New Materials• Highly Sophisticated designs• Innovative products

SMART MANUFACTURING ENTERPRISE CONCEPTS

• Manufacturing goes beyond the factory floor• Paradigms of “Manufacturing as Eco- System” have emerged• Smart Enterprises create and use data and information throughout he product life cycle• Create Flexible Manufacturing processes to cater for changes in demand at low cost without damage to environment• Product design to facilitate efficient production and re-cyclability

ADVANCED PROCESSES & TECHNOLOGIES

• Advanced Manufacturing consisting of ‘Know How’ of production with focus on Advanced Processes & Technologies

BUILDING BLOCKS (DRIVERS)

• Breakthroughs in Physics, Chemistry, Material Science & Biology• Convergence of Physics, Chemistry, Material Science & Biology• Advances in computational modelling & prediction along with computational power

Water Jet Machining Hexapod Machining Multi Tasking Machines Role Extrusion for Missile cases Single Crystal based Super Alloys for Gas Turbines Engines (BLISK) Integral Fuselage Design & Manufacture (Welded structures) – Extrusions, Laser Beam Welding, Friction Stir Welding Near Net Shape Manufacturing Advanced Aluminum Alloys & Fabrication technologies for Space Transportation Systems – Near Net Extrusion

ADVANCED AEROSPACE & DEFENCE MANUFACTURING TECHNOLOGIES 2005 & BEYOND

Roll Forging Cryogenic Tanks Shear Forging Adaptor Rings Spin Forming for Tank Domes Friction Stir Welding Internally Stiffened Extrusions High Voltage electron Beam Welding

- Reactive Material Ti-6Al-4V Alloy- Multiple Tier Welding, Multi-thickness welding

Friction Stir Welding Laser Consolidation Processing Laser Engineered Net shaping Vacuum Plasma Sprays Photo Chemical Machining

ADVANCED AEROSPACE & DEFENCE MANUFACTURING TECHNOLOGIES 2005 & BEYOND (CONTD)

MESO / Micro Mechanical Manufacturing (M4) Micro EDM Focused Ion Beam Machining (FIB) Feinto – Second Lasers Micro USM Micro Turning

Thermal Barrier Coating Processes Near Net Shape manufacturing of Advanced Ceramics – Gel Cast Ceramic Radome Surface Micro Machining & Bulk Micro Machining processes for Sensors, Actuators Nano Technology

ADVANCED AEROSPACE & DEFENCE MANUFACTURING TECHNOLOGIES 2005 & BEYOND (CONTD)

Metallic Materials Aerospace Grade Shape ApplicationAluminum Alloys

2xxx (Al-Cu-Mg)7xxx (Al-Zn-Mg-Cu-Zr)6xxx (Al-Mg-Si)

SheetPlateExtrusionForgings

Aircrafts, Missiles, Launch Vehicles, UAVs, Bridges

Lithium – Aluminum Alloys

- do - Aircraft Structures

Titanium Alloys Ti-6Al-4vTi-10V-2Fe-Al

- do - Aircrafts, Missiles, Tanks, Rockets, Armaments, Engg Eqpt

High TemperatureMaterials

Titanium AlloysNimonic AlloysNiobium Alloys

- do -Metallic Honey Comb & Foams

Missiles, Aero-Engines, Launch Vehicles, Scramjet, Hypersonic Aircrafts and Missiles

Metal-Metal composites based on Nb, Ti, Polymer and SiC

C-CC-SiCSiC-SiCTaC / Ta2CMo-Si-BNB-Si-CMo-Si-BTi-AlPt-Al

Investment opportunities in Aerospace & Defence MaterialsCharacteristics : High Quality – Low Volume – Technology Denied

Metallic Materials Aerospace Grade Shape ApplicationSuper Alloys

Nickel basedTitanium based

Thermal Protection Coatings

ZirconYiltrium stblised ZrSi3N4

Special Steels 11-10 PH SteelMaraging Steel 350/250Ultra High Strength Steels (AB2/AB3)

Ship, Submarine, Rocket Engines, Aero Engines, Engg.Structures, Armaments

Investment opportunities in Aerospace & Defence Materials - contd

Metallic Materials Shape ApplicationSiliconGallium ArsenideGermaniumCadmium Zinc TellurideMercury Cadmium TellurideGallium NitrideSi Carbide

Bulk CrystalsWafersEpitaxial Layers (nm - µm

Sensors, Lasers / Detectors, VLSI, MEMS, MMIC, Optical Components

Functional Materials

Characteristics : Ultra High Purity R/M 7 N to 9N

EMERGING SCENARIO IN INDIAAND

TRANSFORMATION STRATEGY FOR MEETING THE CHALLENGES

Emerging Eco System 2000 +Emerging Eco System 2000 +

Emerging Eco System 2000 +Emerging Eco System 2000 +

New Collaboration Models

TYPE SYSTEM PARTNERSJOINT DEVELOPMENT - LR SAM – LONG RANGE

SURFAVCE TO AIR MISSILE- INDIA (DRDO)- ISRAEL (IMI)

JOINT VENTURE - BRAHMOS - INDIA (DRDO)- RUSSIA

EXCHANGE OF SCIENTISTS - BMD PROGRAMME - INDIA - BELARUS

COLLABORATIVE RESEARCH - GYRO & NAVIGATION SENSORS DEVELOPMENT- PGM DEVELOPMENT

- INDIAN UNIVERSITIES / RESEARCH INSTITUTIONS - GLOBAL PARTNERS

Royalty Model (Outright sale off of mature technologies )

Total Risk-Revenue Partnership Sharing Model ( Partnership from the stage of Conceptualization)

Partial Risk-Revenue Sharing Partnership Model ( Partnership from certain level of Maturity)

Models for Public Private Partnership

Micro financing in Indian Defence Sector • Promoting Micro financing in Indian Defence Sector, specifically, in

Sensitive & Strategic areas is essential to achieve sustainability in defence supplies to services.

• Initially, High cost investment vs Low volume turn over in defence sector.

• Raising FDI limit with certain overriding protection clauses to safeguard Industry / Self Reliance Interest.

• Indian Private industry must be promoted & supported by micro financing to ensure Indian defence sector commercially competitive.

• Modes of Micro Financing to Private Industry.– Micro financing by Govt. – Micro financing by Private institutions – Availability of subsidized loans. – Operation of facilities on GOCO basis

Creation of a National Aerospace and Defence Technology Commission to Coordinate, Review, Prioritize and take decisions on investment, collaborations, Export and joint ventures & give direction to aerospace & defence production for improving countries self reliance, GDP and finding the right place as developed nation in the aerospace sector against global competition.

Strategy for Accelerated Technology Strategy for Accelerated Technology UpgradationUpgradation

Strategies for Improved Industry Participation in

Defence & Aerospace Sectors

Collaboration and Synergy with indigenous R&D System to strengthen “Know-How” and “Know-Why” aspects of technology development and production. It will provide

High Performance Cost Effectiveness Availability on Demand Product Life-Cycle Support Software Upgradation Concurrency of Development and Productionisation

and augmentation of production infrastructure and Technology Transfer and Absorption Shorter time from Concept to Delivery to market

Aerospace & Defence Industry Complex

Aerospace Industrial Complex- Comprehensive solution for Space & Defence Sectors

• Proposed Aeroparks can become Industrial Complexes• Existing skills of Auto Industry will complement the Aviation in utilizing the highly skilled & qualified manpower• UAVs, Civil Aircraft – Production and Maintenance opportunities• Existing IT skills can be utilised for CAD/CAM• Deposits of titanium Ore – highly used in aerospace industry• World Class research facilities to be tapped for industrial application