02 March 2019
Teal Group Corporation's overall, cumulative military electronics Manufacturer Market Shares Forecast for the next ten years (FY18-FY27) shows 33.1% of the total market will be available for new primes (worth a whopping $161.0 billion), when considering that continuing production for most current programs is locked up by the incumbent. Note that a much higher share than this 33.1% will be available for subcontractors.
The Big Three (FY18-FY27)
Raytheon, Northrop Grumman, and Lockheed Martin will dominate the defense electronics market from FY18-FY27, together earning more than 43% of prime contract value of a total of $486.1 billion in our forecast.
Raytheon will lead by a substantial (and increasing) margin with $91.8 billion in total funding, number one in radar (by $18 billion over #2 Northrop...) and C4I (Command, Control, Communications, Computers and Intelligence), second in electro-optics (EO), and third in electronic warfare (EW) and sonar. Raytheon is strong in nearly all electronics markets across the board. And, as much of Lockheed and Northrop Grumman’s future strength is based on systems for the F-35 Joint Strike Fighter (JSF), including EO, radar, and other electronics, if JSF dies or production is seriously truncated Raytheon could increase its lead to even greater dominance.
Northrop Grumman fell to third in our forecast a few years ago, but then regained second in the defense electronics future and has been improving its position, now with $63.0 billion in prime funding forecast over the next decade. In 2016, Northrop fell to second in the future EW market, inched back up to #1 in 2017, but will now again just be beaten by the non-Big Three BAE Systems. Northrop has fallen to a close third behind Raytheon in EO, as our JSF forecast shrank a bit and Litening’s future became cloudy. Northrop and Raytheon together dominate the radar market: Northrop has fallen to an even more distant second though (again due in part to JSF decreases), with $32.7 billion compared to Raytheon’s whopping $51.3 billion. Outside these three major market areas, Northrop Grumman remains relatively weak in C4I (#4) and sonar (no major prime programs). Raytheon has a much broader strength in these markets.
Lockheed Martin is forecast to show third overall in defense electronics with $54.9 billion over the next ten years – almost the same as our ten-year forecast in 2017 – based on a dominant leading positions in EO – due to airborne fighter and attack helicopter targeting system markets – and in sonar due to the ubiquitous submarine A-RCI (Acoustic-Rapid COTS Insertion) system. But Lockheed’s former leadership in C4I has eroded, and it will now place a distant second to Raytheon. Lockheed will show a solid third, worth $12.2 billion in the radar market, again based on one dominant program, the naval AN/SPY-1 Aegis system, and will hold a stable 4th in EW, behind Northrop, BAE, and Raytheon. But Lockheed Martin’s efforts to diversify in electronics over the past decade have weakened, despite strengthening its future in many markets where it had previously been only a minor player.
BAE Systems will again follow the “Big Three” in fourth, with $20.1 billion of prime contracts in defense electronics – less than one-quarter of Raytheon’s total – due primarily to its #1 position in electronic warfare (EW), to be worth $16.5 billion.
Only two other primes will earn more than 1.5% of the total defense electronics market, with General Dynamics garnering $8.1 billion (1.7%) due almost entirely to its third place in the huge C4I market (to be worth $7.8 billion of GD’s total defense prime contracts). L-3 Communications, which has grown through acquisitions in the past decade, will round out the top six companies with $7.7 billion (1.6%). GD and L-3 have flip-flopped for 5th and 6th since our 2017 forecast.
Two more companies will be good for better than 1% of the market. Harris with $7.0 billion (1.4%), following its acquisition of ITT (Exelis) and others, added to its prior strength in tactical radios. Boeing will earn $6.3 billion (1.3%), due primarily to its strength in C4I ($4.7 billion).
Eight final companies, mostly dedicated defense electronics firms with a limited presence in just one or two market areas, will earn more than $1 billion in the next ten years, with between 0.3% and 0.7% of total prime market share.
The three that will do better than $2 billion include DRS Technologies, which will earn $3.4 billion in prime contracts based primarily on C4I and ground electro-optics. UTC Aerospace Systems (was Goodrich) has recently grown fast from a fighter tac recce legacy player to become the world market leader in specialized high-altitude EO/IR ISR systems, especially for the manned U-2 and now the
Global Hawk UAV. Its ten-year future forecast is up substantially this year to $2.6 billion, versus only $1.7 billion in our 2017 forecast. Thales divisions with US programs will earn $2.4 billion, mostly due to the Thales Raytheon Systems AN/MPQ-64 Sentinel ground-based radars.
Rounding out the final five major defense electronics prime contractors will be General Atomics with $1.6 billion, primarily due to the Lynx radar for its own UAVs. The once innovative but recently stunted defense markets of FLIR Systems, Inc. will also earn $1.6 billion, but FLIR will continue to languish in fifth place in EO behind Goodrich, ahead of DRS, BAE Systems, and L-3 WESCAM, but well behind the Big Three. Sparton Corp. (sonar) and Rockwell Collins (radios and C4I) will both be worth $1.5 billion. Finally, the shrinking Telephonics will soldier on to an uncertain future with its one-hit wonder, the Navy’s AN/APS-147 helicopter radar program and earn $1.4 billion.
Note that Teal Group’s Military Electronics Briefing manufacturer share funding for most programs is allocated in full to the prime contractor, not split between subcontractors, as this is usually difficult or impossible to break out. For really big, continuing programs, such as Aegis, we have sometimes allocated percentages to “Other” and “Available”. Uncontracted programs, as well as speculative programs in the out-years – and our new “Future” program forecasts – are allocated as “Available”. Out-years of forecasts may be slight underestimations; we do forecast “undetermined” future programs, but try to be conservative.
Thus, many companies, especially outside the Big Three, will earn considerable additional funding beyond what we have forecast above as subcontractors