Forecast International: Strong Growth Forecast for U.S. Defense Electronics Market

Press Release

Contact: Richard Sterk, Electronics Group Leader & Sr. Defense Analyst

Phone: (203) 426-0800

Fax: (203) 270-8919

E-mail: Richard.Sterk@forecast1.com

Forecast International, Inc., 22 Commerce Rd. Newtown, CT 06470 USA

Strong Growth Forecast for U.S. Defense Electronics Market

NEWTOWN, Conn. [February 2, 2004] ― The U.S. defense electronics market should continue to enjoy strong growth and sales over the next 10 years (2004-2013). Forecast International's "U.S. Defense Electronics Market Overview" projects an impressive US$174.83 billion in sales of the programs and systems covered in the analysis. The next three years (2004-2007) in particular are expected to see extremely high R&D and manufacturing growth as many systems in development actually begin to be produced. However, just how quickly current programs progress from development to production to operational field use remains a major determining factor in overall market growth.

While some fluctuation can be expected over the next 10 years, the market looks quite good at this time. Starting off with a predicted US$17.597 billion in anticipated sales in 2004, the U.S. defense electronics market is forecast to reach its peak in the year 2007 at US$19.309 billion in sales of the programs and systems examined in the analysis.

"As it stands, the market still appears to be focusing heavily on the submarkets of Command, Control, Communications, Computers, and Intelligence (C⁴I) and electro-optical systems," said Richard Sterk, Electronics Group Leader and Senior Defense Analyst at Forecast International. He added, "One can expect funding to be available in the next few years for the procurement of new night vision, IR, and thermal imagery equipment. Additionally, the development of many reconnaissance and surveillance systems will likely be accelerated."

According to Sterk, Homeland Security efforts are just now starting to impact the market, with nuclear, biological, and chemical (NBC) detection devices starting to surface on a large scale. "In the beginning, most of the Homeland Security funding appeared to be directed at operational costs such as manpower (and much of it still is), but now funding is starting to trickle down to states and cities," said Sterk. He nevertheless cautioned that this segment should not be viewed as a market goldmine, as even with federal funding, many municipalities simply do not have the resources to equip themselves on par with the armed forces.

"Given the budget problems in many American cities and towns, few taxpayers will stand for spending much needed operating money to tell them their town is under chemical attack by terrorists while local roads that would prove critical to an evacuation effort go unrepaired. Unless the federal government fully buys the equipment needed by communities, which is unlikely, most of the Homeland Security grants will go toward paying the overtime costs of emergency services," Sterk said. "The big ‘boom' manufacturers were hoping for in the civil market is likely to only be a small ‘pop'."

The following companies, listed in rank order, represent the top five companies in the U.S. defense electronics market as projected for the next 10 years based on forecast sales volume and percentage of market share using the criteria identified in the study. Raytheon Co, with 10.73 percent of anticipated 10-year market share, valued at $18.8 billion, will be the leading U.S. defense electronics firm. Northrop Grumman will be number two with 7.3 percent anticipated market share, or $12.8 billion. Lockheed Martin Corp is third with an expected market share of 7 percent, representing $12.2 billion in value. BAE Systems ranks fourth with a predicted 5.2 percent hold on the U.S. defense electronics market, representing a 10-year sales total of $9.1 billion. Rounding out this survey at number five is The Boeing Company, which is predicted to garner 4.8 percent of the market and be worth approximately $8.3 billion over the next 10 years.

Forecast International, Inc., is a leading provider of Market Intelligence and Analyses in the areas of aerospace, defense, power systems and military electronics. Based in Newtown, CT, USA, Forecast International specializes in long-range industry forecasts and innovative marketing presentations, including regular 10-year forecasts. To arrange an interview with Forecast International's analysts, please contact Monty Nebinger (203-426-0800, monty.nebinger@forecast1.com).