Avionics is a combination of the words “aviation” and “electronics,” and that’s exactly what the word means. It entails all electronic systems used on any aircraft, whether commercial or military, fixed-wing or helicopter. Avionics encompasses communications, weather detection, collision avoidance, engine and fuel control displays – all the blinking lights that a pilot sees and must interpret in the cockpit.

Avionics as a term and as a distinct field didn’t take hold until the early 1970s, as an outgrowth of the increasingly sophisticated military aircraft developed to fight the Cold War. As is often the case, these military innovations spun off into the commercial sector. Until then, radios, radar, displays, and radio navigation aids were individual and often mechanical (that is to say, non-electronic) systems. The explosion of computer technology in the early 1970s made it possible to turn gauges and dials into electronic systems – hence, avionics.

According to G2 Solutions, an aerospace consulting firm based in Kirkland, Wash., avionics sales in the air transport market are projected to reach nearly $10 billion in 2010, representing an average annual growth rate compared to last year of +4.6%. The industry is expected to at least equal that rate of growth next year. G2 asserts that the avionics sector remains the most innovative in aviation, in terms of new technology adoption and experimentation.

Notable case in point: Harris Corporation (NYSE: HRS), an international communications and information technology company. Harris helps end-users contribute to product development by maintaining a transparent supply chain that fosters collaboration and integration. This “groupware” approach to its supply chain ensures that each of the vendors contributing to an avionics system produces standardized modules that can be easily integrated. Hence the company’s oft-repeated motto: “Right item, right supplier, the first time.”

By taking this approach, Melbourne, Fla.-based Harris provides greater avionics affordability and more frequent technology updates. It has made Harris a world leader in advanced avionics for military aircraft.

New avionics technologies envisioned by major aircraft manufacturers such as The Boeing Co. (NYSE: BA) are developing at an exponentially faster rate because of the efficiencies of the Internet-connected workspace.

As the avionics industry emerges from its slump this year, Harris is in a strong position to benefit. The company’s products include combat radios, fighter-jet cockpit communications and command-control systems for military planners.

The company has five divisions: microwave systems, broadcast communications, network support, radio communications, and government systems. What gives Harris a decided edge is that only half its sales are commercial, with the other half to government agencies including the FAA and the Pentagon. This dichotomy helped the company survive the brutal slowdown in commercial aviation, which is now finally showing signs of easing.

The continued growth of military spending in 2010 will boost military avionics, which is Harris’ forte. According to G2 Solutions, the world’s air forces are at various combat aircraft replacement and upgrade cycles, which is good news for the avionics market.

Most NATO countries are in an active replacement phase for their 1970s designed aircraft, while emerging nations such as India will evaluate entirely new aircraft sources in the near future. More than 5,000 combat aircraft will be entering service globally during the next decade, with a peak of 524 deliveries in 2014.

The military avionics market also will be fueled in 2010 by expanding airlift operations worldwide and the corresponding need for new communication, navigation and surveillance equipment that allow military aircraft to share airspace with commercial aircraft – again, Harris’ area of expertise and a market that it dominates.

The large number of smaller players in the avionics market makes it difficult to pinpoint exact market share, but Harris is most certainly a major player in the military avionics market. The company produces cockpit communications systems for the F-35 Joint Strike Fighter, F-22 Raptor stealth fighter and other big-ticket military aircraft programs. The military jet fighter market alone generates about $17 billion a year in avionics demand.

Harris earned $166 million, or $1.27 per share, in the third quarter ended April 2, compared with $136 million, or $1.02 a share, in the year-ago period. The company’s third-quarter bottom line was lifted by orders for the company’s radios and military cockpit technologies. Orders in the pipeline point to continued strong growth in the fiscal fourth quarter, and with a price-to-earnings ratio (P/E) of 18.6, the company remains reasonably priced compared with its peers.

Harris plows a considerable amount of its resources into R&D, maintaining a staff of 7,000 engineers and scientists, out of a total workforce of 15,000. Harris grew its total revenue by +9% to $5 billion in fiscal year 2009; not surprisingly, $738 million of that revenue came from new products. Harris’ investment in technology innovation will continue to pay off for the company and its investors, this year and beyond.