"Many U.S. companies have pumped huge amounts of money into research and development of next-generation of equipment." said Senior Electronics Analyst Richard Sterk. "Much of this equipment is now entering the market. I would expect to see an emphasis on quality over quantity."

The defense electronics segment is one of America's strongpoints, with U.S. military planners viewing information technology systems as "must-have" equipment.

This trend is witnessed by the number of international joint military and peacekeeping operations over the past several years where the difficulty in getting these multi-national coalitions to operate as a cohesive tactical unit have been seen."

Defense electronics manufacturers have noted this need for communication inter-operating and are pursuing network and communications systems and equipment contracts with the same intensity as traditional military programs.

Sterk points out that one particular niche in the marketplace coincides with the growth of the Internet as a tool for the exchange of information.

"Most military computer systems operate as stand-alone networks, although a growing number are connecting to the Internet highway; which provides both benefits and risks," said Sterk.

"Cyberwarfare is already an issue in many war-rooms, so expect both offensive and defensive measures to grow this in segment of the market."

In examining some 60 leading U.S. defense electronics companies, the top five U.S. defense electronics leaders over the next 10 years are expected to be:

• Raytheon (13.5 percent anticipated market share, or $17 billion);
• Lockheed Martin (11.8 percent share, or $14.8 billion;
• TRW (4.8 percent, or $6 billion);
• The Boeing Company (3.6 percent market share, $4.5 billion);
• Northrop Grumman (3.4 percent, $4.2 billion).

Given the current emphasis on modernization and digitization, the electronics component of the U.S. defense industry will be a hot market. Many systems, especially those in the avionics area, are in the throes of massive upgrades.

The next-generation systems that have been in development in recent years are finally making their way to the battlefield. Over the next 10-years a frenzy of electronic equipment procurement, upgrades, and modernization is anticipated.

"Those companies best able to feed the need will do well over the next ten years," Sterk concluded.