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EUROPEAN DEFENCE ELECTRONICS MARKETS SET TO JUMP

EUROPEAN DEFENCE ELECTRONICS MARKETS SET TO JUMP $1.5bn to $15bn in 2008
By Ben Moores, Senior Analyst, Documental Solutions

May 07. After five years of building a bottom up database, through analysis and examination of over 7000 European defence electronics program business opportunities, the true picture of the European C4ISR market has emerged. Documental Solutions’ bottom-up methodology, in by far the largest study ever conducted, has revealed the European Defence Electronics market (excluding all platforms and weapon systems) to be worth some $13.5bn in 2007, rising to over $15bn in 2008.

The $1.5bn increase between 2007 and 2008 can not be attributed too one single factor. Although there are a number of market segments that stand out, in particular electo-optical markets and vehicle mission systems. Between 2007 and 2008 there is a $400m increase in vehicle mission systems, primarily electro-optics. Whilst helicopter mission system markets will grow by $142m, a 17.6% increase and space and submarine mission systems will grow by 48.5% and 78.2% respectively. Geographically the growth in spending over the next year will be focused on Spain and the UK with 20.2% and 18.2% growth respectively. Electro-optical markets are expected to grow 22.9%, far more than any other area. Man portable electro-optics, vehicle electro-optics and electro-optic Electronic warfare equipment are the leading market segments. BAE Systems and SAFRAN will lead European growth between 2007 to 2008 with confirmed defence electronics growth 22.7% and 23.7% respectively and Thales-Raytheon systems can expect at least 19.9% growth. Of course, further program wins this year could further increase these figures.

The largest share of the 2007 market makes Thales the market leader with a $2bn turnover in defence electronics. Next largest is Finmeccanica with $1.3bn. Both have arguably succeeded because of their capture of domestic and UK markets. The following companies held leading market shares in the European defence electronics mission systems markets in 2006. EADS turned over $1.1bn, SAAB group turned over $560m, BAE Systems turned over $550m, Lockheed turned over $514m, SAFRAN turned over 480m (although strong growth coming) in 2007. Raytheon, ITT and Northrop Grumman turned over some $400m each in 2006. Beyond the larger contractors there are over 200 companies in the C4ISR market turning over $4bn per annum in over 3000 program business opportunities in the 2006-2016 period. These figures do not include joint operations without a leading partner.

The majority of the market segments are either mature or in decline, but the aggregate of all markets is growing at some 1% a year (Not including inflation). This is because those segments that are growing are growing at remarkably high rates. Examples of high growth areas are: vehicle protection systems, SATCOM on the move, tactical battle management, man portable electro-optics, and Wide Band Network Radios and Naval electro-optics. Some 1911 program business opportunities or more worth $2-3bn a year of European Unawarded defence electronics programs will be awarded from 2007 to 2016.

Unsurprisingly the biggest defence electronic spenders are France and the UK, both spending some $2.5bn each per annum on defence electronics from 2006. France will see a growth rate of around 3% from 2007 to 2016. Whilst Bulgaria is expected to see an 8% growth rate from 2007 to 2016. Switzerland and Finland are both expected to see declines of around 8% from 2007 to 2016 in defence electronics spending. However, it should be noted that the high cost of embedded mission systems in platforms can have a dramatic effect on smaller countries ability to spend in other areas.

Military aviation mission systems spending is expected to rise from $2.1bn in 2006 annually to $2.2bn in 2016. The UK, Netherlands and Norway are all expected to see significant growth. Whilst Germany, Sweden and Poland are set for a fal

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