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60 The PCB Magazine • May 2014 by John Vaughan cIrcuIt solutIons llc Pentagon Budget Aftershocks c o l u m n Mil/aero Markets There is a striking similarity between earth- quakes and military budgets. An earthquake is the result of a sudden release of energy in the earth's crust that creates seismic waves. The Pentagon budget is the result of fiscal realities, protracted negotiations and balancing priori- ties, combined with a good dose of lobbying and politics, that culminates in a sudden release of program funding data that creates seismic waves in the military electronics business com- munity. Welcome to the aftershock. Presented with a two-year forward DoD budget in mid-March, we now at last have firm funding guidance and are in a position to eval- uate the aftershocks of the appropriation deci- sions and apply that reality to our businesses and formulate a game plan moving forward. To state the obvious, in this post-war and post-sequestration era, the defense industry is in the midst of a major reshaping with federal defense spending far below recent levels. This is a huge consideration for defense contractors such as Northrop Grumman, Lockheed Martin, BAE Systems, Boeing, and Raytheon (any of your customers in that list?). Most of these mili- tary prime contractors derive 70–90% of their annual revenue from federal contracts. Fewer contracts at the prime contractor level results in less electronics manufacturing at the PCB and contract electronics manufacturing levels. Clearly, the military electronics market is still a very large market, but it would be pru- dent for each of us—on both the business de- velopment and senior management sides of the equation— to take a few moments to reflect on the customers and programs we have been

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