Sea Change in Naval Radar Market: Raytheon to Surpass Lockheed

Teal Group’s Naval Surface Ship Radar & C4I Systems funding forecast for major large-ship radar programs will truly be huge for military electronics programs – even compared to F-35 Joint Strike Fighter (JSF) programs. Teal Group forecasts the naval radar market for large ships – one of the biggest electronics markets ever – to be worth $31.1 billion for Raytheon’s AN/SPY-6(V) AMDR & EASR & DBR Radar & C4I Systems over the next ten years, and $24.4 billion for Lockheed Martin’s AN/SPY-1(V) & SPY-7(V) & Aegis BMD Systems, with Teal Group’s new and still undetermined Future SPY-1 Replacement/Upgrade program to be worth another $5.0 billion (and forecast to ramp up all decade and still be increasing in 2030).

Our funding forecast for the much smaller US Navy Littoral Combat Ship (LCS) will be worth only $1.9 billion over the next ten years, for the Airbus Defense and Space TRS-3D/16-ES and active electronically-scanned array antenna (AESA) TRS-4D systems (designated AN/SPS-80(V) on US Navy [LCS-1] Freedom class LCSs), and the smaller Saab Sensis Sea Giraffe AMB and AESA Sea Giraffe 4A systems (designated AN/SPS-77(V) on US Navy [LCS-2] Independence class LCSs).

Regarding the players, Lockheed Martin will continue to garner hundreds of millions of dollars annually for Aegis upgrades and support. There are c.100 ships currently in service with Aegis, and in late 2021 still not a single AMDR/EASR production radar in service. But with billions of procurement dollars to be spent annually for AMDR/EASR, very soon Raytheon will surpass Lockheed Martin as the world’s leading naval radar producer.

According to our forecasts, assuming AMDR/EASR goes ahead relatively on schedule, Raytheon’s total funding for DBR/AMDR/EASR will exceed Lockheed Martin’s total funding for SPY-1/SPY-7/Aegis for the first time in FY23 – with $2.41 billion versus $1.75 billion. – and Raytheon will then hold the lead for at least a decade. From FY23 on, according to our forecasts, Raytheon will earn about $0.5-1.5 billion more in funding than Lockheed every year until at least the end of this decade.

However, though it is unlikely Lockheed will vault back ahead of Raytheon, our new speculative forecasts for the US Navy’s Future SPY-1 Replacement/Upgrade – upgrades or replacement radars for pre-Flight III Arleigh Burke destroyers – will determine whether Raytheon dominates or merely leads Lockheed Martin. This Future forecast is worth $5.0 billion in our forecast period – meaning the difference between Raytheon leading Lockheed by $6.7 billion or $1.7 billion. If Lockheed wins this follow-on program for its own SPY-1, we may suddenly see a genuine two-horse race in the world’s naval radar market. And this competition can only be good for the US and the US radar industry.