Market Environment and Business Development in January–December 2023
Defense & Security Business
The world’s political situation changed significantly in February 2022 as Russia attacked Ukraine. The outbreak of war caused several countries to increase their defense budgets, which has had an increasing effect on the demand for defense sector products and services. The interest in modernizing the states tactical communication systems to meet the needs of modern warfare has also grown.
Interest in Bittium’s tactical communication solutions has remained on a high level, and the ongoing international customer pilots have progressed well. Bittium is involved in several tenders regarding tactical communication products and systems, which may take several years, depending on the scope of each project. The feedback on Bittium’s products in the field tests has been positive, and we expect the results of the ongoing tenders during the current year.
Close cooperation with the Finnish Defense Forces continued. Bittium’s tactical backbone network and the related products and radios are used by all defense branches of the Defense Forces, supporting the modern way of fighting, where the mobility and management of the forces on the move and effective communication are essential. In 2023, product delivery volumes remained low compared to the corresponding time of the previous year caused by the slow progress in several customer projects during last year. This is typical in multi-year customer projects, where the annual delivery quantities vary between the different phases of the project.
On November 14, 2023, Bittium and Finnish Defense Forces signed a new framework agreement for the purchase of products intended for tactical communication. The contract concerns the purchase of Bittium Tactical Wireless IP Network™ (TAC WIN) software radio system products and Bittium Tough Comnode™ communication equipment and related accessories during the years 2023–2028. The Framework Agreement has a maximum value of EUR 51.6 million, and based on the Agreement, the Finnish Defence Forces will issue separate purchase orders in several batches during the validity period of the Agreement. The first order based on this Framework Agreement was placed on December 21, 2023, with a value of EUR 3.7 million. The delivery of the ordered products started in 2023.
The deployment of Bittium Tough SDR™ software-defined radios has progressed according to the plans of the Defence Forces, with the aim of ensuring the performance of the equipment during 2024 to start a wider deployment of the radios. The waveform development of the radios and the development of new functionalities for the customer continued as planned.
In December, the Finnish Defense Forces ordered development work from Bittium for a new software-based router intended for tactical communication. The software router enables the formation of even larger network entities for the tactical communication needs of the mobile forces. The value of the order was approximately EUR 4.4 million, and the development work will be carried out during the years 2024 and 2025.
In Austria, the deployment of Bittium’s tactical communication systems by the local army continued and the delivery of system products and the integration and testing of products and systems continued.
The discussions about cooperation with international companies developing air defense and sensor systems progressed.
In November, NATO approved the ESSOR High Data Rate Waveform, developed by the a4ESSOR consortium, as a standard for tactical communication interoperability (STANAG 5651). Bittium has been one of the partners of the industrial a4ESSOR consortium since its foundation. With the ratification of the standard, the waveform will be available to all NATO member countries, thus enabling faster and more secure data transfer in both national and coalition forces’ operations. Bittium provides the waveform to its customers together with Bittium Tough SDR™ product family radios.
With Finland’s NATO membership, interest in Bittium’s products has increased, and the membership is expected to strengthen the company’s competitive position, especially in tenders for NATO countries. The membership also enables Bittium to implement NATO waveforms and encryption solutions, if necessary, and offers the opportunity to participate in the research programs of NATO countries.
Bittium has applied for a NATO information security listing for its secure Bittium Tough Mobile™ 2 C solution. The solution meets the criteria required for information security listing, but the listing is delayed due to the work backlog of the authorities updating the listing. Bittium has currently no information on the progress of the list update. Entering the list of NATO-approved devices is expected to have a positive effect on the sales of the solution.
Interest in secure Bittium Tough Mobile™ mobile phones and information security-related software has increased due to numerous data security attacks. The sales volume of the devices increased during 2023. Phones, their background systems, and software were delivered to several European countries for authorities’ usage. The Bittium Tough Mobile™ 2 Tactical solution developed for military use has also aroused interest among the defense administration authorities of different countries, and several system pilots started during 2023.
Medical Business
The A component shortage significantly slowed down the manufacturing and deliveries of medical technology products at the beginning of the year, and the production of Bittium Faros™ ECG devices was very limited for several months. In April–May, production volumes were increased, and the manufacturing of products continued with better capacity in May–June. The deliveries continued in the second quarter as planned, and the shortage of components eased towards the end of the year, as expected. In the second half of the year, the sales of medical technology devices outside of US market developed slower than estimated. The development of sales is affected by the insurance policies related to treatment reimbursement, which vary between different countries affecting the development pave of remote diagnostics market. In addition, entering new markets is affected by obtaining the medical device regulatory approvals, that may take up to more than a year depending on the approval.
Most product deliveries of Faros ECG devices were still made to the US customer Boston Scientific Cardiac Diagnostics (CDx) (previously known as Preventice). CDx is one of the leading providers of ECG measurement services in the US.
In the neurophysiology market, the piloting of Bittium BrainStatus™ EEG measuring devices in intensive care units continued in Finland and abroad. The change in recommendations for intensive care regarding EEG measurement is expected to have a positive effect on the demand for BrainStatus.
Product deliveries of the home sleep apnea test and measurement solution Bittium Respiro™ continued in Europe, and the feedback from our customers’ clinical trials has been positive. Respiro’s sales are expected to strengthen during the current year and form one significant growth driver in the Medical Business Segment in the future. In November, Bittium and ResMed started a collaboration regarding the distribution of Bittium Respiro to hospitals and treatment centers. The signed distributor agreement concerns the Bittium Respiro™ measuring device and its accessories as well as the Bittium Respiro Analyst™ analysis software and service platform, giving ResMed the right to resell them. The agreement does not include exclusive rights and it covers the right to resell the solution in Great Britain, Ireland, Switzerland, Finland, Norway, and Sweden. ResMed is a leading provider of cloud-based medical devices whose solutions are transforming the care of people with sleep apnea, COPD, and other chronic respiratory diseases.
Bittium is applying for a sales license for Respiro for the US market from the Food and Drug Administration (FDA). The current estimate of the amount of work and the time needed for it is at least one year. The requirements of the FDA authority have grown and become stricter in recent years. The overall duration of the sales license process is affected by the authority’s further interpretation of possible additional material needs.
Bittium is undergoing regulatory approval processes for its medical devices in several different countries. As necessary, the company will apply for a new European medical device approval (MDR) for its medical technology products already in production, which are approved according to the current standard (MDD). Decisions on applying for MDR approvals for existing products will be made on a business basis, or if significant changes are made to the products that require a new approval process.
Engineering Services Business (Previously Connectivity Solutions)
Despite the prevailing cost-saving pressure in the markets among our customers, Bittium’s R&D services sales grew during 2023. The accelerating digitalization in various industries increased the need for design services. Especially in the Industrial IoT technology market, the growing need for cloud communication creates a need for companies to add wireless connectivity to their products. The increase of European companies focusing their R&D geographically on Europe, has also had a positive effect on the sales growth of Bittium’s R&D services, especially of the device design.
Cooperation with customers continued well. Several customer projects were successfully completed, and the company’s customer portfolio expanded during the past year with several new customers in the transport, traffic, and professional tool markets, among others. Customer projects include, for example, the designing of a remotely controlled system and its connectivity solution, designing of connectivity parts for a traffic control system, and designing of measuring devices and their connectivity solutions intended for professional use.