Market Environment and Business Development in January–December 2021
Defense & Security Business
Cooperation with the Finnish Defence Forces continued closely during 2021. Deliveries of products required for tactical communication continued, however, the shortage of components delayed the delivery schedule. Despite the challenging availability of components in the fourth quarter, a significant number of products were delivered to the customers, which was reflected in fourth-quarter revenue growth in Defense and Security products.
Deliveries of the first phase of the Bittium Tough SDR™ handheld and vehicle radios and related accessories, agreed under the purchase agreement between the Finish Defence Forces and Bittium, published in December 2018, were almost completed. The poor availability of components needed in production slowed down the final deliveries. The Finnish Defence Forces launched the Field Radio 2020 project, which serves the testing and operational implementation of Bittium Tough SDR products and their waveforms and is preparing the purchase of the next batch of products to expand the Defence Forces´ testing activities and preparations for the commissioning of radios. Current understanding is that the annual order volumes stated in the letter of intent to acquire new tactical radios, published in August 2017, will be reached from 2024 onwards. The Defence Forces have been involved in defining the Bittium Tough SDR ™ system from the beginning of the project and believe to achieve a significant performance improvement through the system. Alongside the testing and introduction of the radios, the development of the waveforms used in the radios continued as planned.
The development of the Bittium Tactical Wireless IP Network™ software defined radio system continued in cooperation with the Finnish Defense Forces as planned. In March, the Defense Forces ordered products from the TAC WIN system and Bittium Tough Comnode™ products based on the existing framework agreements for the purchase of the products. The share of TAC WIN products was approximately EUR 8.5 million and the share of Bittium Tough Comnode was approximately EUR 1.7 million. All products have been delivered to the Defence Forces during 2021.
Cooperation with the Estonian Defense Forces continued closely in the supply of tactical communication products and systems, which complement the tactical communication system already delivered for the customer. The product deliveries are based on a framework agreement between Bittium´s Estonian partner Telegrupp AS and the Estonian Defense Forces, and it covers the years 2021–2025. The deliveries, integration work and testing of tactical communication system products were also continued with the Austrian Defense Forces.
In November, a4ESSOR, a multinational joint venture developing secure European software defined radio technology, launched a new ESSOR New Capabilities (ENC) project to develop new ESSOR waveforms interoperable with partner countries´ radios and to improve the existing system to enable the waveforms portability to the national radios. The new project aims to improve the interoperability and security of ground-to-ground, air-to-ground and satellite-based tactical data transmission. In this project, Bittium will focus on the development of ground-to-ground and air-to-ground waveforms. Earlier in May, a4ESSOR received official approval for its ESSOR High Data Rate Base Waveform.
The importance of mobile security in communications has increased and the demand for the secure Bittium Tough Mobile™ 2 smartphones grew steadily over the past year. The security classification of the phone and its related system plays a key role, especially in the governmental market. Bittium actively applies for security classification certificates in various countries together with its customers. The customer experience of the Secure Call communication application, launched on the Tough Mobile 2 phone at the beginning of the year, has been positive and the delivery volumes of the Secure Call application increased.
Deliveries of Mexsat satellite phones designed for the Mexican state´s Mexsat satellite communications system continued. The resale cooperation with the Mexican telecommunications solutions provider Inmosat has worked well and the products of the first order related to the distributor agreement have been delivered to the customer. The product deliveries to Mexico are expected to continue this year.
Medical Technologies Business
During 2021, the medical technology market clearly began to recover from the downturn caused by the coronavirus pandemic. Demand from the service providers recovered, which was also clearly reflected in the development of net sales. During the past year, the medical remote diagnostics market was consolidated as major service providers merged, which might lead to higher device sales volumes, thus creating growth opportunities for device manufacturers.
The importance of remote care and remote monitoring has increased during the coronavirus pandemic due to insufficient medical resources and cost pressures. Remote monitoring and remote diagnostics solutions alleviate these problems, which was also reflected in increased sales of Bittium´s medical remote diagnostics solutions. Component shortages limited the growth during the past year and component shortages are expected to continue at least until 2022. All of Bittium´s cardiology and neurophysiology solutions operate on the cloud-based MedicalSuite service platform, enabling service operators to further digitize their remote diagnostic service processes. Along with an aging population, the coronavirus pandemic has provided a strong incentive to streamline and digitize primary care and specialist care. Together, these factors are driving demand for the device and total service solutions in the medical technology market.
The transitional periods for the application of the European Medical Device Safety Regulation (MDR) (EU 2017/745) expired and entered into force in full on May 26, 2021. The regulation harmonises European health legislation and replaces the old MDD and AIMD directives on medical and implantable devices. The change has caused a backlog of quality system audits and product approvals and thus a significant delay in application lead times. Bittium has several medical device approvals underway in several countries.
Early in the year, Bittium launched a new home sleep apnea testing solution, Bittium Respiro™. MDR approval of the solution is still pending due to lead time delays. Based on current information, approval is expected in the second half of this year. The device, designed for home use, has received positive feedback, especially due to its compact size and ease of use. Deliveries of the product variant of the device that is targeted at the Finnish market, began during the autumn of 2021, and demand developed positively.
The temporary overload in intensive care units by the patients with coronavirus infection affected the ability of intensive care units to promote the introduction of new technologies and solutions. This slowed down the demand for Bittium´s EEG devices designed for intensive care. Bittium BrainStatus™ EEG measuring devices were delivered to customers for pilot use, but the overload of patients with coronavirus slowed down the progress of the pilots.
Demand for Bittium Faros™ ECG measuring devices increased during the past year. The majority of product deliveries were made to Preventice, a provider of remote monitoring services in the U.S. ECG market. The global shortage of components declined the amount of product deliveries. Demand for disposable Bittium OmegaSnap™ patch electrodes designed for Faros devices for long-term ECG measurement increased and deliveries progressed well.
During the last year, Bittium launched new products and software versions and they have been very well received. Product management, product development and production organizations were strengthened, and the quality system and operating processes were developed in accordance with the new MDR requirements. To further increase the international sales, the sales organization was strengthened, and the international distribution network expanded.
In September, Bittium announced to have signed an agreement under which Bittium planned to buy a 25 percent stake in Technomed, a British provider of ECG diagnostic services. Since the technical conditions required for the share purchase were not met, Bittium canceled the agreement. However, the cooperation between Bittium and Technomed will continue in the measurement and monitoring of biosignals and the development of analysis software, and the companies signed a distributor agreement for Bittium Faros™ ECG measuring devices and Bittium Respiro™ home sleep apnea measuring devices and software. The agreement sets out the distribution rights for both devices. Technomed is granted an exclusive right to use Bittium Faros™ ECG devices to provide cardiology diagnostic services in the UK. In other respects, the agreement does not define exclusive rights related to sales rights. Under the agreement, Technomed will commit to minimum purchases of both devices for the period 2022–2024.
Connectivity Solutions Business
Bittium provides R&D services in the areas of wireless telecommunications, medical technology, automotive and manufacturing industries. Outsourcing R&D services, in whole or in part, brings customers cost savings and enables the scaling of their product development volume to meet their current needs. Bittium has extensive expertise in the areas of wireless connectivity, information security, and various communication technologies (such as 5G).
The delivery of R&D services and connectivity solutions for the customers continued and the demand for Bittium´s R&D services remained stable during 2021. The market for Open Radio Access Network (O-RAN) architecture developed further and the demand for O-RAN know-how increased. During the last year, Bittium has been investing in the development, sales and marketing of its own O-RAN business. New demand also arose in wireless satellite technology. The growth of these areas has provided the company with new international customers.
The coronavirus pandemic slowed down the start of new R&D service projects in the manufacturing industry and automotive markets, and the demand clearly declined. The demand for medical technology solutions remained stable despite the slowdown in the lead times of the new medical device approvals caused by the new European Medical Device Safety Regulation (MDR).
The exceptional circumstances caused by the pandemic strengthened the remote work practices with existing customers. However, despite the virtual meetings and events becoming more and more common, acquiring new customers was challenging. Also, the availability of professional workforce on the market weakened, and, in particular, there is an insufficient amount of software engineers available compared to the demand. The competition for the workforce also increased labor mobility.