Researchmoz presents this most up-to-date research on"Future of the US Defense Industry - Market Attractiveness, Competitive Landscape and Forecasts to 2018".The report focuses primarily on quantitative market metrics in order to characterize the growth and evolution of the Remote Patient Monitoring Market.
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This report is the result of SDI's extensive market and company research covering the US defense industry, and 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 Future of the US Defense Industry - Market Attractiveness, Competitive Landscape and Forecasts to 2018 offers 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?
The US is the world's leading defense market, with a defense budget of US$613.9 billion in 2013, and is expected to remain at the top defense spenders table over the forecast period. Although funding for overseas operations is estimated to decrease, the country's base military expenditure is expected to increase at a CAGR of 1.93% over the forecast period. Plans for acquisition of advanced defense equipment coupled with replacement of old and obsolete equipment are projected to drive the country's capital expenditure presenting growth opportunities for the defense equipment and technology suppliers, despite looming threat of budget cuts and sequestration. Sequestration will not terminate or affect the existing contracts, but only affect the DoD's future contracts and the number of equipment to be procured under these contracts. Still, the US market is estimated to retain its attractiveness for foreign defense companies and new entrants, which can enter the market through joint development or strategic alliance with or acquisition of domestic players. The US government's encouragement of foreign direct investment (FDI) in defense sector will also help foreign companies in entering the market. The homeland security market of the US is expected to be driven by missions such as preventing terrorism and enhance security; securing and manage borders; enforcing and administering immigration laws; safeguarding and securing cyberspace; as well as ensuring disaster resilience. During the forecast period, the US is expected to invest in homeland security products such as surveillance equipment, and cutters and patrol vessels, and the budget of the US is expected to increase from US$60.7 billion in 2013 to US$65.3 billion in 2018, registering a CAGR growth of 2.15%.
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What are the key drivers behind recent market changes?
Rebalancing of Asia- Pacific, turbulent Middle East, modernization and replacement of obsolete equipment, are expected to drive defense spending
What makes this report unique and essential to read?
The Future of the US Defense Industry - Market Attractiveness, Competitive Landscape and Forecasts to 2018 provides detailed analysis of the current industry size and growth expectations from 2014 to 2018, 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 2014 to 2018, including highlights of key growth stimulators, and 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
- 2011 Budget Control Act (BCA) has set a cap on total national defense budget funding, starting with US$546 billion in 2013 and reduced it by US$54.3 billion each subsequent year. BCA necessitated the US Department of Defense (DoD) to take-up US$487 billion of reductions in its expenditure over the period of 10 years. Sequestration, if allowed to go into effect, would alter virtually every aspect of DoD's planning. It would force a uniform reduction in budget authority of approximately 10.3% across all accounts other than military personnel. Sequestration does not affect defense budget funding that has already been obliged, but only affects DoD's ability to award new contracts and exercise option on existing contracts. While sequestration will reduce funding for nearly all acquisition programs across DoD, it will not directly terminate programs. An across-the-board reduction will force DoD to renegotiate many contracts to be able to buy in smaller quantities since less funding will be available.
- 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; for example, in the shipbuilding industry the cost of constructing ships has been increasing 1.4% per year faster than the price of final goods and services in the US economy. The US government has reduced the amount of military hardware to be procured, resulting in a reduction in the number of units to be produced, a loss in profits, and increasing unemployment in such sectors.
- With the US aiming to reduce the country's defense expenditure by US$60 billion during 2013-2018, and rising personnel and health costs, the country's capital expenditure on defense is anticipated to decrease. Furthermore, the government encourages companies throughout the defense market to increase the efficiency of the organizations and sell unprofitable units. In addition, reverse engineering by countries like China and Iran will enable the defense companies of these countries to offer defense equipment at lower price, posing a challenge to the domestic defense companies of the US. According to SDI's Defense Industry Business Outlook 2013-2014 survey, 43% of respondents from the North American region agree that the reverse engineering from countries is the biggest concern for the defense industry in the coming five years, and 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. Companies such as Lockheed Martin and Northrop Grumman have already taken strategic steps, such as the sale of unprofitable units and redundancy packages for senior managers, in order to reduce executive payrolls.
- Rebalancing of Asia-Pacific: Post decade-long wars in Afghanistan and Iraq the US shifted its defense strategic focus towards the region with potential to pose threat to its economy and superpower status. Growing might of Chinese military and its assertiveness in regional disputes in the recent years have grabbed the attention of the US. The US considers China to possess the capability of affecting its superpower status both economically and militarily. Chinese investments in fifth generation aircraft, cyber warfare, anti-aircraft and anti-ship weaponry, aircraft carriers, submarines, and ballistic missiles pose a potential threat to US power projection capabilities in the Pacific. Another potential threat for the US is North Korea, which is perceived to be trying to achieve nuclear capability. The country also believes that North Korea is actively pursuing the development of thermonuclear weapons such as hydrogen bombs in which plutonium and uranium are combined for a higher energy yield.
- Following the 9/11 attacks, the US reorganized and integrated its federal agencies and created the Department of Homeland Security (DHS) for the purpose of building a strengthened homeland security enterprise and to be equipped to counter a range of threats. The DHS's expenditure is expected to driven by the mission areas such as preventing terrorism and enhancing security, securing and managing its borders, and safeguarding and securing Cyberspace. Preventing Terrorism and enhancing security: DHS's top priority mission area is preventing terrorism on its land and enhancing the security. DHS's counterterrorism responsibilities focus on preventing the unauthorized acquisition, importation, movement, or use of chemical, biological, radiological, and nuclear materials and capabilities within the United States; and reducing the vulnerability of critical U.S. infrastructure and key resources, essential leadership, and major events to terrorist attacks and other hazards. Recent Boston Marathon bombings have re-imposed the need of counter terrorism measures and the country is expected increase fund allocations for this purpose.
- The US has a highly developed defense industry that is capable of fulfilling the majority of domestic military requirements, and the nation is also the largest global exporter of defense equipment due to its highly advanced defense industrial base. Despite this, the US has become increasingly open to importing arms goods from foreign defense equipment suppliers in the UK and Canada, and consequently, arms imports registered a steady increase during the review period; the majority of imports consist of subsystems and components for aircraft and armored vehicles. Although global military expenditure registered a decline in 2009 due to the global economic slowdown, US defense exports continued to grow that year; the largest consumers of US defense goods during 2008-2012 were South Korea, Australia, and the UAE. While the country exports all types of defense equipment, the majority consists of fighter aircraft, missile defense systems, armored vehicles, engines, and sensors.
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