Multiple pager and walkie-talkie explosions in Lebanon have heightened tensions across the Middle East, fueling a surge in global military expenditures. As conflicts flare up in various regions, defense tech manufacturers like Transcom Technology are witnessing rising demand. The power amplifier (PA) producer, which specializes in defense-related applications, reports an uptick in government defense contracts and increasing international shipments.
The Russia-Ukraine war, now in its third year, shows no signs of resolution, prompting customers in the Middle East to push for shorter delivery times and larger order volumes, according to supply chain sources.
This pattern mirrors a broader global trend, with military spending in 2023 hitting a record US$2.4 trillion, according to the Stockholm International Peace Research Institute (SIPRI). The most significant increases came from China, the Middle East, and Europe.
Industry veterans note a familiar cycle: when conflicts in the Middle East intensify, Israeli defense orders spike. This phenomenon, observed during numerous flare-ups, typically leads to increased demand for communication equipment, military electronics, and other technical products.
Taiwan's compound semiconductor supply chain, which includes major players like Win Semiconductors, Advanced Wireless Semiconductor Company, and IntelliEPI, remains a key part of the defense ecosystem. However, few focus specifically on military and defense PAs. Transcom, a niche integrated device manufacturer (IDM), has seen its revenue grow steadily due to geopolitical factors, recently securing several defense contracts.
Currently, Transcom is the only Taiwanese company to independently develop and manufacture solid-state power amplifiers (SSPAs). In August 2024, the company posted revenues of NT$118 million (approx. US$3.7 million), an 8.27% month-on-month increase and up 18.31% from the previous year. Cumulatively, revenues for the first eight months of 2024 totaled NT$869 million (US$27.2 million), marking a 13.05% increase year-over-year.
The company's growth is largely driven by an increasing volume of high-end, military-grade power amplifiers. Transcom noted strong demand for high-frequency, high-power SSPA modules, driven by the progress of ongoing government defense contracts.
Taiwan's government recently approved the 2025 central budget, increasing defense spending by 7.7% to NT$647 billion, roughly 2.45% of GDP. Transcom expects shipments of defense-related SSPAs and subsystems to grow quarter-over-quarter in the latter half of 2024, with further growth projected for 2025 as defense contract deliveries continue to expand.
On the international front, Transcom has made significant headway in the electronic defense sector, securing orders from major European military clients. The company has already begun deliveries, with products targeting high-power radar for ground-based early warning systems, communication systems for military drones, drone jamming systems, and wideband electronic warfare countermeasure radar.
Looking ahead, Transcom anticipates 2025 will see international military product shipments surpass 2024 levels. The company also aims to bring its new electronic defense systems into Taiwan, supporting the nation's broader defense and electronic warfare capabilities.
On the commercial side, Transcom is targeting the low-Earth orbit (LEO) satellite market. Its X-band kilowatt-level power amplifier for synthetic aperture radar (SAR) on LEO satellites is slated for engineering verification by the third quarter of 2024, aligning with Taiwan's space industry development timeline. The company is also preparing to ramp up production of high-frequency, multi-channel PA MMIC chips for LEO communications satellites, with mass shipments scheduled to begin in the third quarter of 2024.
