"The next 10 years are definitely the decade of production and procurement for the U.S. defense electronics market," said Richard Sterk, Senior Military Electronics Analyst for Forecast International/DMS. "Based on current production alone, defense electronics is predicted to generate nearly $128 billion in forecast sales, averaging about $12 billion a year."
In its annual "Overview of the U.S. Defense Electronics Market" (available March 1), Forecast International/DMS presents an overview of the U.S. defense electronics market and its major segments. The overview examines a number of lead products and systems in each field and identifies market trends.
It is designed to be used by market planners to gain insight into how the U.S. defense electronics market has been developing in recent years, and what factors will play important roles in the coming years.
"With platforms (aircraft, ships, and vehicles) too expensive to simply replace, more and more emphasis will be placed on upgrading existing systems on platforms to extend their operational use," said Sterk.
To illustrate this upgrade trend, Sterk compared defense electronics to the personal computer: "When a PC starts to get outdated, it usually is quicker and cheaper to upgrade key components than to go out and buy a whole new system. It is the same for military equipment."
According to Forecast International's study, many of the "next-generation" defense electronics systems developed in the late 1990s are now being built and deployed.
This latest production run is expected to continue until at least 2015, making the U.S. defense electronics market the healthiest and most profitable segment within the overall U.S. defense industry - especially compared to the platform and weapons segments.
"Over the next 10-year period a frenzy of electronic equipment procurement, upgrades, and modernization is forecast," said Sterk.
Procurement is predicted to surge in 2005 to the tune of $13.9 billion as the newest versions of military electronics equipment begin to take to the field.
The following two years (2006 and 2007) appear to be the peak. From 2008 onward, a slight drop is expected, culminating in a predicted market of about $10.9 billion in 2010.
For the next 10 years, production lines will be running at full speed, producing the latest high-tech (and beyond) equipment.
However, at the end of this particular 10-year forecast period, this market should begin to decrease as money is once again pumped back into research and development for even newer "future technology" systems. Such an up and down cycle is a way of life in the defense industry.
"To be successful, defense electronics products in the next 10 years must satisfy a number of requirements, not the least of which will be high performance at a good cost," said Sterk.
"The U.S. Department of Defense will require systems that can be tailored to its own particular needs and environment, making COTS technology important for quick development but by no means a 'get rich quick' scheme for companies.
"Systems and products will need to be modular and easily adapted to different wants and changing requirements, and upgrades a matter of months, not years," Sterk said. Adding that while these products will be technologically advanced, they will not be so sophisticated that training military personnel in their use is too expensive and time consuming, or requires too high a level of education. In this respect, simulation technology will be increasingly important as a way of keeping training costs down.
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