Avionics is a mod for your Railjack, and it comes in three versions.
Avionics is where you upgrade and modify your Railjack to survive the trials to come. Like mods, they're related to health boosts (hull, in the case of Railjack), turret damage, heat management, and damage mitigation. Without the avionics equipped, even the best components and weaponry will prove worthless against the ever-increasing might of your enemies.
Avionics comes in three categories, and each mod can fall from one of three houses / variants on offer (Lavan, Vidar, Zetki). Built-in mods are your base system mods such as health, armor, shields, and damage. Tactical mods are abilities that can be used in the Logistics menu (L on PC), and they provide utility (like putting out fires in your ship when it's activated, allowing your crew to focus on others. more urgent issues). Combat avionics is an attack or special ability that can be used from the pilot's seat or gunner's nests, and it can range from a mob controlling the black hole to a swarm of sky-wiping missiles.
Each Avionic will have an installation cost (indicated next to the Avionic by a little icon that I can describe as a spear), which is subtracted from your total Avionics capacity when it is installed. Hit zero and you can't install other Avionics, or upgrade installed ones without removing them. The only way to increase your Avionics heading is through your engine, which can be found in the components page. Your Railjack will start with a base ability of 30, but can reach a maximum of 130 with a +100 reactor. If you want to increase your capacity, you need to focus on acquiring a better reactor against falling wreckage.
There is a way to get around the cap though, and that's through the Grid tab at the bottom of the Avionics screen. When you select Grid, you'll be presented with a user interface of all of your Avionics locations, and you'll see three empty symbols below each. Upgrading a slot allows that slot to add a +1, +2, and optionally +3 passive to the avionics placed in that slot. This allows you to get free pips (IE boost) from the Avionic in this slot.
There is a cost to this, and that cost is in the form of Dirac - Endo Railjack. Dirac can be earned either by removing wrecks, removing avionics (via the scrap option at the bottom right of the avionics page), or as a rare drop in Railjack missions, or as an end-of-mission reward. It's not hard to store, but upgrading an Avionic slot should be done with consideration.
The price increases with each improvement, from 200 Dirac for the first pip, to 600 and 1800 Dirac for the second and third respectively. This means that you will need 2600 Dirac for max one slot, and with 15 slots you are considering 39 Dirac for all max. So, yeah, prioritize critical stats like hull health and weapon damage.
Outside of the grid, avionics can be upgraded with Dirac like regular mods. Click on the Avionics tab next to Grid and you'll see a list of all your equipped mods. As long as they have an open pip they can be upgraded, but the cost increases with each additional upgrade, just like mods.
A word for the wise: Zetki Avionics are almost all the best universally and the rarest to find. All avionics drop in Railjack missions, with a yellow aura around them. They can fall into one of three categories (although Integrated is the most common in the long run), and they can roll from any of the three houses. Zetki is precisely the rarest.
While the other two houses may start with a higher stat increase offered, Zetki mods have the most upgrade pips (and therefore the highest avionics cost, even at their base level). Use Lavan and Vidar Avionics to get around your capacity limits at first, but you'll want to keep all of your Zetki Avionics (they have the dashes surrounding the portrait, unlike Lavan and Vidar with their dots and triangles).
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