The global smart weapons market was valued at $3.621 billion last year and is expected to register a compound annual growth rate (CAGR) of 8.06% to reach $5.3 billion by 2018, according to a new report.
The change in the nature of warfare has resulted in the demand for smart weapons, with the market being highly competitive with a host of industry participants vying for contracts; and the fiscal deficit in most western countries is expected to increase competition, according to the Global Smart Weapons Market 2013-2018 report by Research and Markets.
High-growth sectors in the global market include Saudi Arabia with a CAGR of 21.67%, followed by Japan with a CAGR of 14.48%. The Middle East has a CAGR of 15.21% followed by Latin America and Asia.
The stand-off weapons segment is expected to have the highest demand in this market. Budget cuts in most western countries are anticipated to have minimal impact on the market.
The U.S. is expected to procure smart weapons worth $2 billion by 2018, according to the report, which notes that the industry is fragmented and most of the tier-1 players are from U.S. and Europe.
The United States has around a third of the global smart weapons market, from anti-armour weapons to guided rockets and stand-off missiles. The Middle East is the second-largest market and its value is expected to increase from $350.9 million in 2013 to $712.1 million in 2018.
According to the report, rising tensions, sectarian violence, unrest in the Arab world, oil revenue and rising GDPs have severely influenced defence spending. Military spending in the Middle East increased by 8% over the last two years. Saudi Arabia, the UAE, Israel, Qatar and Iran are the major defence spenders in the region.
Spending on guided munitions alone in the Middle East is forecast to reach $267.5 million in 2014 and peak at $344.2 million in 2016 before dropping to $198.5 in 2018.
Spending on standoff missiles is set to jump sevenfold, from $23 million in 2014 to $173.3 in 2015, and peak at $208 million in 2018.
According to the report, US contractors and European firms are positioned to win significant smart weapons contracts during the forecast period, with the US remaining as a key ally to Israel, Jordan, Saudi Arabia and the UAE, while countries such as France and the UK maintain a good relationship with the Middle East.