Business Watch
02/15/2010
Putting Its Fortune on Wheels
Singapore Firm Sees New Markets in Europe, India
By Wendell Minnick
SINGAPORE - ST Engineering is moving beyond its regular product lines of small arms and ammunition, pushing into the armored vehicle market and further developing its integrated systems capabilities, said Patrick Choy, the company's executive vice president for international marketing.
The company is integrating the capabilities of its component parts into a single package for the customer, Choy said. ST Engineering is divided into four sectors: ST Aerospace, ST Electronics, ST Land Systems (also called ST Kinetics) and ST Marine.
"The customer wants integrated system solutions," he said. "We approach the market by harmonizing all of our business sectors."
The company has made new inroads into the European market with its armored vehicle line. ST Engineering secured its first armored vehicle sale from a NATO country in December 2008, when ST Kinetics won a $250 million contract with the British military for 100 Warthog tracked infantry fighting vehicles.
Also dubbed "the Beast," the U.K. vehicle is a variant of ST Kinetics' Bronco person-nel carrier. It was chosen in response to an urgent operational requirement from the U.K. Ministry of Defence (MoD) for British military forces in Afghanistan.
Europe has a long history of buying ammunition from ST Engineering, but this was the first major purchase by a NATO member of a military vehicle from an Asian nation.
"We've had our first success with a vehicle sale to the U.K,," Choy said. "Traditionally, NATO countries have never bought any major hardware, especially armored vehicles, from Asia. So this has become a good reference point as to where we are as a company."
However, ST Engineering could experience difficulties in breaking into the military vehicle market.
"Both armored and 'B' class are already crowded, and virtually all major countries have their own domestic suppliers," said Tim Huxley, executive director of the International Institute for Strategic Studies (IISS-Asia), based here.
"It is hard for their governments to justify buying from ST Engineering or other relatively new entrants to the market, even if there is a price advantage," said Huxley, who wrote the book "Defending the Lion City: The Armed Forces of Singapore."
However, there is still hope for the company to break into the U.S. market with a strategy that leverages its involvement in coalition efforts in Afghanistan, he said.
"I wonder if it might be possible in the future for 'Singapore Inc.' to leverage its militarily minor, but still politically significant, involvement in Afghanistan, alongside the [Singapore Armed Forces'] massive procurement of U.S. defense equipment to improve the chances of sales," Huxley said.
PROSPECTS IN INDIA
Beyond the U.S. market, ST Engineering is making a new effort to enter the howitzer market in India, Choy said. The company has entered the Indian competition with the FH 2000 155mm 52-caliber towed howitzer for the Army's towed gun requirement, and the Pegasus 155mm 39-caliber lightweight howitzer for the country's ultra-lightweight howitzer competition. ST Kinetics also is exploring the sale of its SAR 21 assault rifle to India.
"We did an analysis of where the defense market is going, and there are some conclusions we've drawn," Choy said. "The first one is in some of the major markets, we see capital buys decreasing," such as for warships, fighter aircraft or large numbers of tanks or missiles.
"A lot of countries are not making huge capital buys," he said. "For one, the threat has changed; two, the budgets have been cut; and number three, they feel that equipment they have is good enough."
Many countries are moving away from large capital procurements because potential military threats are more asymmetrical and require "more boots on the ground," Choy said.
There will continue to be a need for conventional weapons, he said, but in many countries, there is a lot more upgrading and retrofitting of older gear taking place to save costs as defense budgets decline.
"They want more bang for the buck," Choy said. "This is an area that ST Engineering is looking at closely."
Connectivity and integration also have become important, but "capital buys will continue to drop," he said, and ST Engineering will offer new smart solutions to meet customer requirements.
ST Engineering also is looking at multitasking for vehicles and other platforms. In many countries, the military is not just involved in traditional combat, Choy said. Military operations other than war - such as peacekeeping, humanitarian missions, civil defense and disaster relief - are becoming more common.
"So how do we enhance the war fighter's capability in that environment?" Choy asked. For example, "the Bronco is not just for combat operations," he said. "It can easily be reconfigured for disaster relief."
At the Singapore Airshow earlier this month, the company displayed for the first time both the Warthog and the eight-wheel-drive Terrex armored infantry fighting vehicles. The Trailblazer countermine vehicle also made its debut.
The company also showed off its unmanned aerial vehicle systems, including the FanTail and Skyblade.
In addition, Choy said ST Engineering has developed the 40mm Soldier Parachute Aerial Reconnaissance Camera System, a camera round for grenade launchers that allows troops to survey their immediate area in conflict zones.
ST Engineering announced Feb. 1 that ST Kinetics won a $41.6 million contract for the demilitarization of ammunition for an unidentified country in Africa.
"The contract involves the supply of specialized equipment and related services, such as training and operations assistance," said a company news release issued at the air show. "The first delivery is scheduled to be completed in the second half of 2010, with the final delivery expected within the first half of 2012."
Demilitarization entails the destruction of ammunition through a series of processes such as disassembly, size reduction, melt-out of explosives and incineration of nonrecyclable explosives.
"This is an important endorsement of our demilitarization services," said Sew Chee Jhuen, the president of ST Kinetics.
