FAIRFAX, Va., Nov. 4, 2022 -- The dynamic growth in Civil Unmanned Aerial Systems (UAS) over the next decade will create significant rewards for smart investment as nations open their airspace, commercial applications take off, and civil governments adopt systems for new roles in border security and public safety. At the same time, some sectors of the market are reaching maturity faster than anticipated, requiring caution and careful research from investors and potential market entrants.
"UAS has been a boom market with possibilities that appeared limitless. It’s now increasingly clear that the roads are diverging – some paths will lead to great reward, but on others, the cliff’s edge is in sight," said Jeremiah Gertler, Teal Group's senior analyst and author of the study. "Today’s heady growth will cool in some sectors after middle to late adopters finally come in. In much of the world, that will mean growth markets turn to commodity replacement markets where producers compete with the local used drone lot.”
By contrast, the United States market is expected to grow when other global markets are already beginning to level off. “That’s the one upside of a late start,” Gertler said. “You’re running hard when everybody else is already in the showers.”
Although the U.S. has made significant strides in closing the regulatory gap with other countries, the lack of a regulatory regime for beyond visual line of sight operations continues to hold the U.S. market back. The Teal study projects that the U.S. will integrate unmanned systems into its national airspace sometime within the next decade, but there is no clarity as to which year that will occur.
Teal Group's 2022/2023 World Civil UAS Market Profile and Forecast forecasts that non-military UAS production will jump from $7.2 billion a year to $19.8 billion by 2031, a 9.1% compound annual growth rate in constant dollars. Total civil UAS purchases will reach $139 billion over that decade. The study includes annual forecasts of commercial, consumer and civil government systems and individual submarkets. Teal Group, an independent aerospace and defense research and analysis company, has provided support for the FAA in the preparation of past annual commercial UAS forecasts.
UAS have already proven their worth in numerous commercial applications. Yet a lagging regulatory environment has stifled demand, keeping UAS out of valuable roles as nations struggle to figure out how to incorporate unpiloted aircraft into their air traffic management systems. The results are a high level of unsatisfied demand for UAS capabilities, especially at the higher end.
At the same time, economic challenges in several customer sectors led to slashed capital spending, creating opportunities for services businesses to step in where industries are reluctant to make the upfront capital investment necessary to operate their own systems.
Commercial use will drive the market as consumer drone purchases slow and government purchases remain a small but growing portion of the market. "Major corporations have been the early movers in optimizing UAS use and are best positioned to take advantage when regulations finally lock in," said Gertler. "At the same time, the consumer market skipped right through adolescence to maturity, leading UAS manufacturers to search upmarket for their next big opportunity. That means more focus on more sophisticated, higher-value units, but also more competition in narrower niches," Gertler added.
The greatest potential appears to be the delivery market, which has the possibility of touching every household in the world. However, Teal now projects that growth opportunities will not be spread evenly across that market. Teal finds the best delivery market opportunities will be in middle-mile (e.g., factory to warehouse) transportation, rather than in the last-mile deliveries that are most frequently discussed. Last-mile delivery will have to operate in the most complicated regulatory environment, with not just national bodies but localities and even homeowners' associations having a say in whether and when delivery drones appear in neighborhoods, while much of the regulatory framework for middle-mile transportation is already in place. Delivery is expected to be the leading sector in the United States by 2030.
Agriculture will be the leading sector overseas by 2030 thanks to heavy Chinese investment in subsidizing agricultural drone spraying and increasingly capable but more affordable UAS moving into the sector, particularly for smaller farms.
Industrial inspection has emerged as a major commercial drone market over the next decade. Construction will be the largest portion of that industrial inspection market, according to the Teal study. All 10 of the largest worldwide construction firms are deploying or experimenting with systems and will be able to quickly deploy fleets worldwide. Industrial inspection also includes other major segments such as energy, mining and railroads. Other important commercial UAS segments include general photography, communications, insurance, and entertainment.
Civil governments are deploying an increasing number of unmanned systems. The United States and European governments have growing programs to deploy systems to protect land and sea borders. The United Nations and other peacekeepers are deploying systems to provide protection. Use by law enforcement, particularly in the United States, is soaring.
As unmanned systems proliferate, venture funding has flowed into UAS-adjacent efforts like analytical software to handle the data coming from unmanned systems and control networks. US start-ups have received a majority of the funding over the last 10 years, enabling them to take the lead in developing drone analytics. Chinese firms, which have received much less investment, are focusing on consolidating their lead in hardware, moving from consumer to commercial systems. Major Chinese players are adapting to a new reality as they move upmarket, as they are trying to enter markets already controlled by established players rather than creating and dominating new sectors as in the past, while also having to deal with increasing market restrictions from governments wary of Chinese drones’ operational security.
Teal Group is an aerospace and defense market analysis firm based in Fairfax, Virginia, USA. It provides competitive intelligence to industry and governments worldwide.
Contacts: Jeremiah “JJ” Gertler, This email address is being protected from spambots. You need JavaScript enabled to view it., Thomas J. Zoretich, This email address is being protected from spambots. You need JavaScript enabled to view it.,; Doug Cornell, This email address is being protected from spambots. You need JavaScript enabled to view it., +1-703-573-5374.
