The global defence market is gaining momentum as military hardware reaching the end of its service life forces investment in new equipment and maintenance, repair and overhaul. Defence procurement spending stood at $600 billion in 2013 and is expected to reach $660 billion in 2018, according to a new report.
Frost & Sullivan’s Global Defence Outlook said that market participants should target countries such as India, Turkey, Poland, Taiwan, Japan, South Korea and Brazil, which can now afford to routinely purchase and co-produce state-of-the-art platforms and replace older Cold war era equipment.
Command, control, communications, computers, intelligence, surveillance and reconnaissance (C4ISR) contributed the most to market revenues in 2013 due to the high demand for radars, optical sensors, sonars, and secure flexible networks, Frost & Sullivan said.
“Market participants have adequate opportunities for growth, with Saudi Arabia, Germany and other countries expanding and upgrading their military capabilities to counter the threat posed by the increased number, range, accuracy, and lethality of land-based missile systems, naval power projection, and basing in North Korea, China, Russia and Iran,” said Frost & Sullivan Aerospace & Defense Senior Industry Analyst Brad Curran.
However, economic uncertainty, particularly in Western nations, has lowered national budgets, causing intense competition for budget share between defence and domestic programmes. This is suppressing the demand for military equipment.
“Not surprisingly, market participants are facing a situation of overcapacity, which is forcing the industry to consolidate or enter joint ventures and engage in technology transfer,” noted Curran. “Market participants are also adopting a long-term perspective, maintaining smaller margins, and forging partnerships with commercial providers.”
To prevent further overcapacity, vendors must focus on unmet customer needs, which include submarines, unmanned vehicles, and networked sensors and communications. Strong customer relationships and robust support services are also necessary to strengthen presence in the market.