Aerospace and Defense Industry: Market Research Reports, Statistics and Analysis

Key Market Segments

• The worldwide market for airborne intelligence, surveillance and reconnaissance (ISR) will be worth almost $17.5 billion in 2011, according to research from Visiongain. ISR is vital for military activities, and cutbacks affect defense budgets in many countries, though some areas spend more on defense. Despite budgetary restrictions, ISR typically still receives government funding.

• The global military rotorcraft market is forecast to show yearly growth of over 4% by 2021, according to ICD Research. The market is comprised of attack and rescue, reconnaissance observation and maritime helicopters, among others. The market’s strong growth to come is due partly to the updating of EU and US fleets following the wars in Iraq and Afghanistan.

• Reconnaissance, surveillance and target acquisition (RSTA) systems are necessary for all land-based military operations. Worldwide government spending on RSTA will reach over $3.35 billion in 2011, according to Visiongain. Widely used RSTA equipment includes counter-fire radar systems, surveillance sensors and night vision goggles.

• The global market for unmanned aerial vehicles (UAV) is expected to be worth almost $3 billion in 2011, according to research from Visiongain. The UAV market includes a range of products such as intelligence sensors, detection sensors, weaponry, infrared and lasers. Unmanned aircraft systems have also seen significant market growth over recent years as governments seek to acquire the best equipment to maximize their defense and attack systems. Companies operating in this market segment are according increasing amounts to research and development efforts to work on data links and ground control stations.

Growing Regional Market

India’s defense market is seeing rapid growth, with around $14 billion of the country’s 2010 administrative budget spent on acquiring military technology and hardware. India’s defense spending is forecast to grow at more than 6.5% a year in the five-year period ending 2015, to reach in excess of $42.5 billion, according to Eprobe. Factors driving the market in India include a perceived threat from surrounding countries, the need to update obsolete military hardware and technology, and domestic unrest. As the market looks set to continue growing, original equipment manufacturers are being drawn to India from abroad, while domestic private-sector companies also step up to meet demand.

Statistics of India Defence Budget, 2010-11 and 2011-12

Source: Institute for Defence Studies & Analyses

Market Outlook

Due to the high cost of specialized materials and intensive technological innovation necessary in the aerospace and defense industry, manufacturers need to bring down costs, boost productivity and cut the time it takes to get products to the market. The industry is becoming increasingly competitive on an international scale and is being hit by economic factors, which see governments trying to cut their budgets, including defense spending. Mergers and acquisitions are an attractive option for companies seeking to become more competitive. Collaboration can help partnering companies to speed up delivery of innovative products while keeping the total cost of ownership down.

International legislation regarding arms is a central factor for the aerospace and defense industry, obliged to comply with government regulations. The market is increasingly price sensitive, especially with regard to airlines forced to adapt to an unstable global economic climate. Defense companies are forced to respect fixed-price contracts to satisfy governments looking to cut defense costs to secure long-term contracts. The industry is a heavy consumer of biofuel, seeking to manufacture products while respecting environmental concerns.

It also needs to lead in terms of innovation, technology and highly specialized expertise. Production time is an increasingly important factor for the industry as it needs to get products to market faster and can incur heavy costs for not respecting deadlines. Original equipment manufacturers can face extended costs when backlogs run into extra production time. The industry is expected to grow at a rate of between 5% and 6% over the next couple of decades.

Leading Industry Associations

• National Defense Industrial Association www.ndia.org
• Aerospace Industries Association www.aia-aerospace.org
• Society of Manufacturing Engineers www.sme.org
• Aerospace, Defense & Securities Industry Trade Organization, UK www.adsgroup.org.uk
• American Institute of Aeronautics and Astronautics www.aiaa.org
• Aviation Distributors and Manufacturers Association www.adma.org
• General Aviation Manufacturers Association www.gama.aero
• National Association of Manufacturers www.nam.org