The United States defense market is anticipated to register a CAGR of over 5% during the forecast period 2020 - 2025.
- The growth in the defense budget is expected to be a major driver for the US defense market.
- In the United States, military spending has been considered to be the second-largest item in the federal budget, after social security. The country spending on its defense is greather than that of the cumulative defense spending of countries, like China, Saudi Arabia, Russia, United Kingdom, India, France, Japan, Germany, and South Korea. For the year 2019, the US defense spending was USD 732 billion.
- Additionally, fight against terrorism, externally and internally, is also expected to support the growth of the defense market in the United States.
- The growing investments into procurement of cadvanced technology equipment to support the armed forces and replace the ageing equipment is expected to propel growth in the near future.
Key Market Trends
The Air Force Segment is Expected to Register the Highest Growth Rate During the Forecast Period
The air force segment is expected to experience the major growth in the US defense market during the forecast period, owing to various procurement plans for replacing aging combat aircraft, as well as procurement plans for new unmanned aerial vehicles. For the fiscal year 2020, the US Air Force has requested USD 165.5 billion, which may be used to fund new technology development. The increase in the amount may lead to funding for the next-generation fighter jets of the US Air Force. In October 2019, the US Department of Defense finalized an agreement to purchase additional Lockheed Martin F-35 Lightning II airplanes in a deal totaling USD 34 Billion. A new report published in 2018 by the Center for Strategic and Budgetary Assessments (CSBA), approved by the US Congress, stated that the US Air Force is in need of 386 operational squadrons, in order to counter any future threats posed by Russia and China. According to the study, there were shortfalls in the tanker, bomber, fighter, strike/reconnaissance drones, and command-and-control/intelligence, surveillance, and reconnaissance inventories. The CSBA in their study further also revealed that the Air Force is in need of 14 bomber squadrons, 62 fighter squadrons, 54 tanker squadrons, 27 strikes/reconnaissance drone squadrons, and 62 C2/ISR squadrons by 2030.
The US Air Force had increased the use of unmanned aerial systems over the years as with enhancement in advanced navigation and communication technologies and increase in military communications satellite bandwidth have made remote operations of Unmanned Aerial Systems (UAS) more practical. Unmanned systems provide a sophisticated stand-off capability that supports intelligence, command and control, targeting, and weapons delivery, and improve situational awareness of the armed forces. The US Department of Defense had increased the research and development funding of UAS, as they are inexpensive to produce and with integration of new technology into their miniaturization has accelerated the development of many UAS types. Thus, upcoming procurements and R&D developments will propel the growth of segment with high CAGR during forecast period.
The United States Defense Market is Expected to Experience a Steady Growth in the Next Few Years
In 2019, the United States military spending grew by 5.3%, thus reaching USD 732 billion from USD 649 billion in 2018. The United States is the largest military spending country in the world and accounted for 38% of the total global defense spending in 2019. For 2021, the US defense budget was USD 704.6 billion to improve military readiness and invest in the modernization of armed forces. The DoD (Department of Defense) has made investments into hypersonic missile technology, autonomy into military and military electronics such as sensors, integrated circuits, electronic warfare (EW), and power electronics, among others. The US armed forces have a 13,266 military aircraft fleet, 39,253 armed vehicles and 490 naval vessel fleet. In order to enhance its military technologies, the US is investing heavily in research and development of Artificial Intelligence (AI). The armed forces are integrating AI for ISR applications, command and control applications, enhancement of autonomy and improve the lethality of weapon stations among others. Various ongoing developments are expected to lead to the growth in the US defense market in the near future.
Various players, such as Lockheed Martin Corporation, The Boeing Company, Raytheon Technologies Corporation, General Dynamics Corporation, and Northrop Grumman Corporation, among others, hold significant market share during the forecast period in the US defense market. Various initiatives, as well as product innovations, are done by companies to strengthen their presence in the market. In 2019, Lockheed Martin Corporation announced that they have won a USD 879 million contract for sustainment and maintenance of parts of the Minuteman III intercontinental ballistic missile. Additionally, in 2018, Northrop Grumman Corporation announced that they have acquired a USD 3.6 billion air force contract for large aircraft infrared countermeasures equipment and support. The deal is expected to be completed by 2025. The provision of long-term contracts for the development of new military equipment and vehicles is anticipated propel the revenues of various companies from the US. Such as, in February 2019, Boeing unveiled an unmanned combat jet named Boeing Airpower Teaming System, which is designed to fly alongside manned aircraft in combat. The aircraft uses artificial intelligence to fly independently or in support of manned aircraft while maintaining a safe distance between other aircraft. The aircraft is scheduled to first fly in 2020.
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