Frost & Sullivan: Naval & Maritime: A Global & APAC Perspective
Naval & Maritime MarketsA Global & APAC Perspective 2011
Table of Contents Recession Analysis Global & APAC Sectors for Growth in Defence Naval & Maritime APAC Overview Outlook Conclusions and Recommendations .2.
Economic difficulty has had limited impact on globaldefence spending – other factors have greater influence US$1.65 US$1.4 Trillion Defence Budgets (Global), 2007-2016 Trillion 1,800 4% 1,600 10% 1,400 3% 1,200 Billion $ 7% 1,000 800 30% 21% 600 400 200 0 23% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 22% NORTH AMERICA EUROPE ASIA PACIFIC MIDDLE EAST ROW 2009-2012 2013-2016 46% Strong Growth Driven by Market stabilises as forces begin withdrawing 34% Afghanistan & Iraq conflict from Afghanistan (such as Canada and The Netherlands) Significant spend on UORs Market increasingly driven by Asia-Pac 2007 Market unpredictable and 2016 driven by events Unclear how futureUS-PRC rivalry will impact Global Defence Spending is expected to continue to grow at a steady rate over the next decade, with major growth centred in the Asia-Pacific region, much of which as a result of China’s incredible rise in spending .3.
Economic difficulty has had limited impact on globaldefence spending Top Defence Importers 2003-2011 *Source: UK DESO Netherlands Counter Trend – Most Japan European companies are looking to develop a domestic Australia foothold in the US Market Greece USA Do WE have strategy and Turkey plans in place to take advantage of major India spending growth and S Korea defence imports? China Saudi Arabia 0 10 20 30 40 50 60 US$ Billion 2003-2007 2007-2011 • Traditional importers are increasingly looking to develop and support local industry through offset • Asia-Pacific is a major importer of defence technology, but local competition are set to become significant competitors on export markets • Intra-European sales have ensured the market is a key export market for European companies, but governments tend to be protectionist • Oil prices volatility will have a significant impact on defence imports, especially in the Middle East .4.
Growth in Global Defence Spending is largely driven by growth in APAC, including China & South Asia US$1.4 Trillion US$1.65 Trillion Top 20 Defence Budgets (excluding USA), 2008 vs 2018 300 2008 2018 250 1.5% 200 Billion $ 150 2.9% 2.5% 1.6% 100 3.7% 50 2.5%1.8% 0 3.4% 2% 4% CHINA UK UK RUSSIA FRANCE FRANCE JAPAN GERMANY SAUDI ARABIA SAUDI ARABIA SOUTH KOREA INDIA INDIA ITALY AUSTRALIA SPAIN SPAIN BRAZIL TURKEY TURKEY CANADA ISRAEL NETHERLANDS NETHERLANDS INDONESIA TAIWAN TAIWAN GREECE 2.9% 3.1% 3.6% 4.3% 4.5% 4.1% 4.6% 4.6% 17% 10% CHINA UK RUSSIA FRANCE JAPAN GERMANY SAUDI ARABIA SOUTH KOREA INDIA ITALY 2009 2018 Strong budgetary growth in markets like South Korea, India, Brazil and Turkey highlight where business opportunities will emerge and continue to drive and support the wider market growth .5.
Key Issues Impacting Industry Today • Top line growth facing headwinds, Commercial aerospace and Defense cycles peaking • Change of US administration and shifting defense procurement priorities across US and NATO • Asian growth drives need for exposure across entire industry • PMA and MRO models evolving • Increasing industry consolidation, European firms building presence in US defense market, Asian firms expanding globally • Maintaining earnings growth as cycles slow, managing costs and margins • Effective position in homeland security market to maximize opportunities .6.
Defence Electronics Market worth cumulative US$ 314Billion over the next decade Market Revenues by Segment (Global), 2007-2016 US$ 27 Billion US$ 35 Billion 40000 35000 30000 5% 25000 8% Million $ 5% 20000 8% 15000 16% 10% 10000 5000 8% 17% 0 10% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 12% C2 Land Communications Land ISR Air ISR UAS Air T&S Land T&S 29% 23% 5% 8% 25% 14% 25% 25% 2007 12% 2016 25% 11% Major growth opportunities exist in C2, Communications and UAS segments .8.
Despite widespread procurement of new air platforms over the next decade, the total number of platforms in service will reduce significantly. Legacy systems will not be replaced on a 1 to 1 basis Military Aircraft Procurement by Region (2008-2012) Aircraft Market Share by Company, 2008-2012 Lockheed will400 continue to 1% 4%350 1% 7% 13% dominate, but300 11% consolidation250 is a key dynamic200150 30% 11%100 1% 6% 15%50 Boeing Lockheed Martin Eurofighter Gmbh Dassault 0 SAAB Sukhoi EADS Alenia 2008 2009 2010 2011 2012 BAE Systems Pilatus KAI Europe North-America Middle East Asia-Pacific Air Platform Inventory (Europe), 2008-2017 12000 10000 8000 Units 10652 6000 9234 4000 Air Platforms Air Platforms 2000 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 F/A F/W Other Rotary Reducing numbers of air platforms combined with higher-tempo operations highlights the importance of through-life management of defence platforms .9.
Soldier Modernisation programmes and increasing use of electronics equipmentcould offer significant revenue potential in the form of support contracts andthrough life capability management 9, 449, 400 8, 943, 998 Personnel Asia-Pacific Middle East Personnel A trend towards increased Middle-Eastern states will 10000000 professionalism in major generally be increasing in modernising Asia-Pacific size in response to significant nations will see a strong geo-political threats in the decrease in force numbers in region. Israel is an exception 8000000 order to increase spend on in that it is expected to equipment. reduce in size. 6000000 - + 4000000 Europe North America European Countries are Both the US and Canada are 2000000 tending to downsize their looking to significantly militaries as part of plans to increase the number of modernise the force structure military personnel they have 2008 and take advantage of next in response to shortages 2017 generation technology and observed as a result of high outsourcing opportunities to operational commitments. save money and maintain or Spending per Soldier ratio increase capability will likely suffer, however. 2007 2016 USA CHINA UK RUSSIA FRANCE JAPAN GERMANY SAUDI ARABIA SOUTH KOREA INDIA ITALY AUSTRALIA SPAIN BRAZIL TURKEY CANADA ISRAEL NETHERLANDS INDONESIA TAIWAN Top spenders on defence are reducing their force numbers to enable higher spend on equipment programmes, whilst a trend towards increased professionalism has meant a downturn in conscription levels in developing countries . 10 .
Continued Penetration of Tactical communications into lower force echelons will see the market grow at a rapid rate Tactical Communications Installed Base, 2005 2000 Global Tactical Communications Unit Breakdown 2% 3% 1,000,000 30% 900,000 48% 800,000 700,000 17% 600,000 Units 500,000 Tactical Communications Installed Base, 2020 400,000 2% 3% 19% 300,000 36% 200,000 15% 100,000 - 25% 2000 2005 2020Europe North America Latin America Africa M.East Asia Pac Vehicular Manpack Handheld Soldier Radio Airborne LOS Comms . 11 .
Global Unmanned Aerial Systems Market US$2.8 Billion UAS Market Revenues (Global), 2007-2016 US$5.5 Billion 6000 5000 18% 4000 Million $ 3000 21% 2000 1000 22% 0 16% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 US Europe Asia-Pac 61% 18% 62% 21% 61% 2007 2016 Experience on operations will enable significant growth in the UAS market, with total spend of US$44.5 Billion over the next 10 years . 12 .
Key hot-topics in Defence • Despite being on the chopping block for the last two years, programs such as the Navy’s Littoral Combat Ship (LCS) will have some support from President Obama in 2009 and beyond • It is expected however that the U.S. Navy’s acquisition system will change and this will have an impact on not only ship programs Ships but other naval acquisitions programs as well Unmanned • Increased focus on unmanned systems capabilities and less focus on the platform (Sensors, Data Links, Navigation, GCSs) • Companies are looking to expand their Unmanned Systems product offerings through partnering and acquisition • The UAS industry in the U.S. is increasingly becoming consolidated with approximately 80 percent of the market held by four Systems companies Weapons • Significant budget resources will be allocated to upgrade programs for fire control systems • Missiles will have improvements to the seeker and control technology and will have “re-pours” or new propulsion packages procured Systems Ground • Army vehicle reset is having a profound impact on the U.S. Defense vehicle industry for both manufacturers and suppliers • Reset and refurbishment will positively impact vehicle procurement for the next 3-5 years • The Joint Light Tactical Vehicle program could face setbacks however since the U.S. Army is consistently placing orders for new Vehicles HMMWVs Military • Parts Manufacturing Authority (PMA) parts manufacturers are increasingly be challenged by original equipment manufacturers in the military aircraft MRO space • High aircraft engine cost in an emerging challenge for the military aircraft MRO market MRO • The aging military aircraft fleet however is increasing the potential for MRO revenue over the next 5-10 years Training • Budget constraints and an inability to sustain funding sources for T&S programs has been restraining the market • As resources are pulled to support ongoing conflicts in Iraq and Afghanistan, training and simulation has become less of a priority Simulation • The growth in popularity of unmanned systems is helping to spur T&S for this market area, particularly in the UAS market segment • Reequipping and expanding the ground forces and SOF will be key in 2009 • Technology focuses will be on communications, Intelligence, and Surveillance • Possible funding shifts from the AF and the Navy to help rebuild the Army and the USMC C4ISR • Programs facing cutbacks in 2009 and beyond: FCS, TSAT, JTRS, and Manned Airborne ISR . 13 .
Asia/Pacific: Defence Budget Trends US$ 75.86 US$ 103.54 Billion Defence Budgets in selected Asia / Pacific Markets, 2009-2014 Billion 120 100 80 Billion US$ 60 40 20 0 2009 2010 2011 2012 2013 2014 2009 2014 Australia India S Korea Malaysia Pakistan Singapore Asia/Pacific: Spending ratios 2010-2014 Even smaller The region is dominated countries in the by large-budget countries 8% 13% 7% Solid growth in the region willsuch as India, South Korea 6% Indian defence contribute to the and Australia budget – from $22 strong expected growth Billion to $36 Billion 34% from 2007-2014 32% . 14 .
The global recession will have an impact on defence, but other factorsare likely to be more influential to the way the market will develop 1. The economic recession had less impact on security and defence markets 2.This is particularly the case in defence where budgets are committed to long-term programmes. However, there are potential problems emerging: • Introduction of new competitive forces to the market – If a country is reliant on IMF bailouts, defence programmes are likely to be delayed significantly • Long-term contradictions within under-funded defence equipment plans are presenting acute problems in highly active military forces • Wider economic slowdown and resulting fall in GDP will be a limiting factor on defence allocations and potentially on wider related defence programme opportunities • Prime contractors will have to consolidate their supply chains in critical areas to reduce the risk of a key supplier failing 3. To overcome these challenges, and disrupt the opposition, it is more important than ever to: • Look to expand in emerging markets such as India –Asia-Pacific will continue to grow at a relatively high level • Focus on after-market opportunities to access sustained revenue streams through PLC support • Manage and look after the supply chain • Match customer needs with innovative business models and solutions After-market support and services are an attractive long-term recurring revenue stream to be addressed across the defence market and limit the impact of delayed procurement . 27 .
Speaker’s Details Thank You Ratan Shrivastava Director, Aerospace & Defence Practice Hand Phone (Singapore) . +65 9175 1640 Hand Phone (India) Tel. + 91 98105 84849 Email: email@example.com . 28 .