The US Defense Industry - Market Opportunities and Entry Strategies, Analyses and Forecasts to 2017

Product Synopsis

This report is the result of SDI’s extensive market and company research covering the US defense industry. It provides detailed analysis of both historic and forecast defense industry values including key growth stimulators, analysis of the leading companies in the industry, and key news.

Introduction and Landscape

Why was the report written?
The US defense Industry Market Opportunities and Entry Strategies, Analyses and Forecasts to 2017offers the reader an insight into the market opportunities and entry strategies adopted by foreign original equipment manufacturers (OEMs) to gain market share in the US defense industry.

What is the current market landscape and what is changing?
With the US defense budget for 2012 valued at US$645.7 billion, the nation has the largest defense market in the world. Due to its high levels of military spending, a large number of opportunities are available to companies keen to supply the nation with defense equipment. However, the US defense budget, which declined at a CAGR of -0.77% during the review period, is expected to record a CAGR of -0.12% over the forecast period, largely due to the financial constraints caused by the global financial crisis.

What are the key drivers behind recent market changes?
Threats from North Korea and Iran, modernization initiatives, an arms race with China and Russia, ongoing military operations, and the protection of allies are expected to drive the defense spending of the US. The US perceives a potential nuclear threat from Iran and North Korea, through their acquisition of long-range ballistic missiles. The tension between the US and North Korea further increased in November 2010, when the US criticized the attacks carried out by North Korea on South Korea.

What makes this report unique and essential to read?
The US Defense Industry Market Opportunities and Entry Strategies, Analyses and Forecasts to 2017provides detailed analysis of the current industry size and growth expectations from 2013to 2017, including highlights of key growth stimulators. It also benchmarks the industry against key global markets and provides a detailed understanding of emerging opportunities in specific areas

.Key Features and Benefits

The report provides detailed analysis of the current industry size and growth expectations from 2013to 2017, including highlights of key growth stimulators. It also benchmarks the industry against key global markets and provides a detailed understanding of emerging opportunities in specific areas.

The report includes trend analysis of imports and exports, together with their implications and impact on the US defense industry.

The report covers five forces analysis to identify various power centers in the industry and how these are expected to develop in the future.

The report allows readers to identify possible ways to enter the market, together with detailed descriptions of how existing companies have entered the market, including key contracts, alliances, and strategic initiatives.

The report helps the reader to understand the competitive landscape of the defense industry in the US. It provides an overview of key defense companies, both domestic and foreign, together with insights such as key alliances, strategic initiatives, and a brief financial analysis.

Key Market Issues

The US must modernize its aging fleet of equipment, such as fighter aircraft, helicopters, land defense systems, and maritime equipment; however, the rising unit cost of defense systems poses a challenge to procurement funding. The cost of military hardware is increasing due to technological advancements and a shortage of skilled labor in the design, engineering, and manufacturing sectors, coupled with the rising cost of input materials, such as metal. In addition, the per-unit overhead costs at production facilities increased due to a reduction in the number of units manufactured.

US defense expenditure is expected to decrease from 4.1% of GDP in 2012 to 3.1% of GDP by 2017, despite the engagement of the country’s troops in missions in Afghanistan and many other countries worldwide. Overall, the country’s defense expenditure is forecast to decrease from US$645.7 billion in 2012 to US$611.0 billion in 2017, leading to a reduction in procurement funding. Such a reduction has had a negative impact on a number of defense projects, and has resulted in delays and cancellations.

With the US aiming to reduce the defense expenditure by US$34.7 billion during 2012–2017, and rising personnel and health costs, the country’s capital expenditure on defense is anticipated to decrease. Furthermore, the government is encouraging companies throughout the defense market to increase the efficiency of the organizations and sell unprofitable units. As a result, defense companies will be compelled to take greater risks and accept lower profits on the limited number of available government contracts. Due to a combination of the above factors, unemployment is expected to increase, negotiations with suppliers and customers will become tense, and efforts to reduce expenses will increase across the board.

Key Highlights

The US defense budget declined at a CAGR of -0.77% during the review period, to reach a value of US$645.7 billion in 2012. However, defense expenditure is expected to register a marginal decline of -0.12% in CAGR over the forecast period, declining to US$611.0 billion by 2017. Indeed, the government has announced defense budget cuts over the next five years, which will be achieved by reducing capital expenditure.

The US homeland security budget is expected to value US$59.9 billion in 2012, and registered a CAGR of 6.25% during the review period. However, it is expected to register a CAGR of 1.91% over the forecast period and to reach US$63.7 billion in 2017. Expenditure on homeland security in the US will be driven by factors such as terrorism, organized crime, and illegal immigration. With the government focused on protecting the nation from both man-made and natural disasters, key growth opportunities are expected to emerge in the aviation and border security market, particularly equipment relating to critical infrastructure protection.

Despite the impact of the global financial crisis, which led to military budget cuts across the world, US defense exports continued to increase in 2011. As a consequence of its highly developed domestic defense industry, the country emerged as the largest arms exporter in the world. Furthermore, countries such as South Korea, Australia, and the UAE are dependent on the US for procuring advanced technology weapon systems such as fighter jets, missile defense systems, and armored vehicles. Over the forecast period the US will continue to be the largest arms exporter in the world, largely due to the increasing defense budgets of some of its major allies, such as South Korea, Israel, and Australia.