Aerospace Products & Parts Manufacturing
Description
Companies in this industry develop and manufacture aircraft, aircraft components, and missiles and space vehicles. Major companies include US-based Boeing, General Dynamics, Lockheed Martin, Northrop Grumman, Raytheon Technologies, and SpaceX, as well as Airbus (the Netherlands), BAE Systems (the UK), Bombardier (Canada), and Leonardo (Italy). Many companies work primarily as subcontractors to the largest manufacturers.
The top countries with the highest aerospace exports in 2023 were the US, France, Germany, the UK, and Canada, according to Statista. The US contributed nearly $125 billion in 2023, making it the leading country in terms of aerospace exports. The US, China, India, Russia, India, and Saudi Arabia accounting for about 60% of expenditure, according to the Stockholm International Peace Research Institute (SIPRI).
The US aerospace products and parts manufacturing industry includes about 1,800 establishments (single-location companies and units of multi-location companies) with combined annual revenue of about $250 billion.
COMPETITIVE LANDSCAPE
Demand is driven by military budgets and the overall economic climate, which affects airline traffic and demand for new commercial aircraft. The profitability of individual companies depends on technical expertise and the ability to accurately price long-term contracts. Large companies enjoy economies of scale in design, manufacturing, and purchasing. Small companies can compete effectively by concentrating on selected components and parts manufacturing for particular prime contractors. Increasingly, small companies are developing system integration capabilities as large firms outsource more aspects of contracts. The US industry is highly concentrated: the 50 largest firms account for about 95% of industry revenue.
About 55% of all US aerospace industry production is exported. The countries receiving the largest amounts of US exports include China, France, the UK, Canada, and Germany. Imports account for over 30% of the US aerospace products and parts market and come largely from France, Canada, Japan, Germany, and the UK. The US aerospace manufacturing industry faces increasing competition in global markets from state-supported firms.
Competitive Advantages:
Risk Sharing - Aerospace parts manufacturers can better compete by forging collaborative relationships with prime contractors. Aircraft manufacturers want suppliers to share in the costs and risks inherent in developing new products. To increase their bargaining power with aircraft makers, suppliers may also pursue acquisitions that enhance their position in the supply chain.
Additive Manufacturing - Aerospace companies are making significant investments in additive manufacturing to reduce development and production costs and to improve product design and quality.
Global Reach - Aerospace and defense manufacturers are investing in global networks of maintenance, repair, and overhaul (MRO) facilities to service their products and enhance product life cycle revenue. Asia, particularly China and India, is a key focus of MRO operation expansion. Amid rising defense spending by US allies, especially for missile defense systems, defense contractors are increasingly focused on markets outside the US.
Data Analytics - Aircraft and parts manufacturers are improving efficiency and adding value by leveraging machine learning and advanced analytics. Sensors built into components collect data that can be used to anticipate repairs earlier in the maintenance cycle, which decreases airline customer downtime and provides additional product life cycle revenues for manufacturers.
Companies to Watch:
Airbus is Europe's largest aerospace company and with rival Boeing dominates the global market for large commercial aircraft. Other operations include transport tankers and combat aircraft, civil and military helicopters, satellites and launch systems, missile systems, radar, defense electronics, and unmanned aerial systems.
BAE Systems is a leading military contractor and major foreign player in the US defense market. The company's offerings include electro-optical sensors, flight controls, commercial and financial security, ship repair and modernization, and aircraft. North America is BAE's biggest market.
Boeing is one of the world's largest aerospace companies. In addition to its commercial jet aircraft, the company serves the military, science, and space and sea exploration sectors. Major customers include the US Department of Defense and NASA. Additionally, Boeing provides airplane financing and leasing services to both commercial and military customers.
Lockheed Martin serves the civil and commercial sectors, but it is firmly on the defense/government side of the aerospace industry. Major products include combat aircraft and UAVs, satellites, space vehicles, air and missile defense systems, and ship and submarine combat technology.
Space Exploration Technologies, also known as SpaceX, had their Falcon Heavy rocket which successfully launched a test payload in 2018. SpaceX and other upstart space ventures represent a potential disruption of the decades-old launch services market dominated by traditional aerospace firms.
Raytheon Technologies (RTX) operates aerospace businesses that include commercial and military aircraft engine maker Pratt & Whitney and Aerospace Systems, a producer of engine controls and flight systems for military and commercial clients. In a major move to bolster its aerospace operations and give it more bargaining leverage with customers, RTX purchased aircraft parts manufacturer Rockwell Collins in 2018.
PRODUCTS, OPERATIONS & TECHNOLOGY
Manufacturing of civilian aircraft accounts for about 50% of US industry revenue; manufacturing of military aircraft accounts for more than 20%. Other products include aircraft assemblies, civilian aircraft engines, and parts and accessories.
Boeing is the only US manufacturer for commercial aircraft; however, the company outsources portions of its business to numerous subcontractors. Private and business aircraft are made by companies such as General Dynamics, through its Gulfstream subsidiary, and Cessna, a subsidiary of Textron. Subcontractors specialize in producing assemblies for various systems, such as engines, fuselages, interiors, rotors, electronic and hydraulic control systems, avionics, and guidance systems.
The manufacturing process involves forming, forging, metal fabricating, painting, and finishing activities. These activities require greater precision than in general manufacturing. Aerospace products also require high grade materials; raw materials include aluminum, titanium, carbon fiber, and special steel alloys. Assemblies and systems are manufactured according to designs specified by the prime contractor, and often developed in tandem by the prime and subcontractor. Small contractors generally work for a specific prime contractor.
Manufacturing costs are dominated by the costs of materials and supplies, especially aluminum, titanium, and carbon and boron composites. Some materials are available from only a few suppliers. As such, the timing and pricing of some materials and commodities can fluctuate widely.
The top countries with the highest aerospace exports in 2023 were the US, France, Germany, the UK, and Canada, according to Statista. The US contributed nearly $125 billion in 2023, making it the leading country in terms of aerospace exports. The US, China, India, Russia, India, and Saudi Arabia accounting for about 60% of expenditure, according to the Stockholm International Peace Research Institute (SIPRI).
The US aerospace products and parts manufacturing industry includes about 1,800 establishments (single-location companies and units of multi-location companies) with combined annual revenue of about $250 billion.
COMPETITIVE LANDSCAPE
Demand is driven by military budgets and the overall economic climate, which affects airline traffic and demand for new commercial aircraft. The profitability of individual companies depends on technical expertise and the ability to accurately price long-term contracts. Large companies enjoy economies of scale in design, manufacturing, and purchasing. Small companies can compete effectively by concentrating on selected components and parts manufacturing for particular prime contractors. Increasingly, small companies are developing system integration capabilities as large firms outsource more aspects of contracts. The US industry is highly concentrated: the 50 largest firms account for about 95% of industry revenue.
About 55% of all US aerospace industry production is exported. The countries receiving the largest amounts of US exports include China, France, the UK, Canada, and Germany. Imports account for over 30% of the US aerospace products and parts market and come largely from France, Canada, Japan, Germany, and the UK. The US aerospace manufacturing industry faces increasing competition in global markets from state-supported firms.
Competitive Advantages:
Risk Sharing - Aerospace parts manufacturers can better compete by forging collaborative relationships with prime contractors. Aircraft manufacturers want suppliers to share in the costs and risks inherent in developing new products. To increase their bargaining power with aircraft makers, suppliers may also pursue acquisitions that enhance their position in the supply chain.
Additive Manufacturing - Aerospace companies are making significant investments in additive manufacturing to reduce development and production costs and to improve product design and quality.
Global Reach - Aerospace and defense manufacturers are investing in global networks of maintenance, repair, and overhaul (MRO) facilities to service their products and enhance product life cycle revenue. Asia, particularly China and India, is a key focus of MRO operation expansion. Amid rising defense spending by US allies, especially for missile defense systems, defense contractors are increasingly focused on markets outside the US.
Data Analytics - Aircraft and parts manufacturers are improving efficiency and adding value by leveraging machine learning and advanced analytics. Sensors built into components collect data that can be used to anticipate repairs earlier in the maintenance cycle, which decreases airline customer downtime and provides additional product life cycle revenues for manufacturers.
Companies to Watch:
Airbus is Europe's largest aerospace company and with rival Boeing dominates the global market for large commercial aircraft. Other operations include transport tankers and combat aircraft, civil and military helicopters, satellites and launch systems, missile systems, radar, defense electronics, and unmanned aerial systems.
BAE Systems is a leading military contractor and major foreign player in the US defense market. The company's offerings include electro-optical sensors, flight controls, commercial and financial security, ship repair and modernization, and aircraft. North America is BAE's biggest market.
Boeing is one of the world's largest aerospace companies. In addition to its commercial jet aircraft, the company serves the military, science, and space and sea exploration sectors. Major customers include the US Department of Defense and NASA. Additionally, Boeing provides airplane financing and leasing services to both commercial and military customers.
Lockheed Martin serves the civil and commercial sectors, but it is firmly on the defense/government side of the aerospace industry. Major products include combat aircraft and UAVs, satellites, space vehicles, air and missile defense systems, and ship and submarine combat technology.
Space Exploration Technologies, also known as SpaceX, had their Falcon Heavy rocket which successfully launched a test payload in 2018. SpaceX and other upstart space ventures represent a potential disruption of the decades-old launch services market dominated by traditional aerospace firms.
Raytheon Technologies (RTX) operates aerospace businesses that include commercial and military aircraft engine maker Pratt & Whitney and Aerospace Systems, a producer of engine controls and flight systems for military and commercial clients. In a major move to bolster its aerospace operations and give it more bargaining leverage with customers, RTX purchased aircraft parts manufacturer Rockwell Collins in 2018.
PRODUCTS, OPERATIONS & TECHNOLOGY
Manufacturing of civilian aircraft accounts for about 50% of US industry revenue; manufacturing of military aircraft accounts for more than 20%. Other products include aircraft assemblies, civilian aircraft engines, and parts and accessories.
Boeing is the only US manufacturer for commercial aircraft; however, the company outsources portions of its business to numerous subcontractors. Private and business aircraft are made by companies such as General Dynamics, through its Gulfstream subsidiary, and Cessna, a subsidiary of Textron. Subcontractors specialize in producing assemblies for various systems, such as engines, fuselages, interiors, rotors, electronic and hydraulic control systems, avionics, and guidance systems.
The manufacturing process involves forming, forging, metal fabricating, painting, and finishing activities. These activities require greater precision than in general manufacturing. Aerospace products also require high grade materials; raw materials include aluminum, titanium, carbon fiber, and special steel alloys. Assemblies and systems are manufactured according to designs specified by the prime contractor, and often developed in tandem by the prime and subcontractor. Small contractors generally work for a specific prime contractor.
Manufacturing costs are dominated by the costs of materials and supplies, especially aluminum, titanium, and carbon and boron composites. Some materials are available from only a few suppliers. As such, the timing and pricing of some materials and commodities can fluctuate widely.
Table of Contents
- Industry Overview
- Quarterly Industry Update
- Business Challenges
- Business Trends
- Industry Opportunities
- Call Preparation Questions
- Financial Information
- Industry Forecast
- Web Links and Acronyms
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