Outlook for defense, aerospace and sercurity: Steady as it goes

We can expect reasonable growth over the next five years in the market for aerospace, defense, and homeland security electronics, according to new research from Technology Forecasters Inc.

“Electronics in Aerospace, Defense and Homeland Security: Repositioning for the Future,” a Quarterly Forum Report released this week, also concludes that significant opportunities exist for suppliers to serve customers in these segments as they increase their reliance on outsourcing.

TFI estimates the total available market for this sector will grow from $112 billion in 2006 to $152 billion by 2011, a 6.3 percent compound annual growth rate (CAGR). EMS revenue from the sector will increase at a 9.3 percent CAGR, from $2.8 billion in 2006 to $4.4 billion in 2011. EMS penetration will remain relatively low in the 3 percent range.

The research conclusions are based on in-depth telephone interviews and an online survey directed at management and senior technical personnel. We also conducted secondary research in the appropriate markets.

In choosing OEMs, these customers focus primarily on quality, dependable delivery, a competitive price, technical capability, and adherence to regulatory standards. Flexibility, responsiveness, and customer service also are critical issues for customers.

The aerospace/defense electronics industry is attractive to suppliers because of growth potential and portfolio diversification. However, the report flags several cautions:

-Contractual requirements can prove to be challenging.

-Demonstrated experience in the government and aerospace contracting arena are critical for selection as a partner.

-Government contracting moves at a much slower pace than the commercial world. Up-front investment may take years to recover. Project cancellations can occur.

-Margin pressure in aerospace/defense business is not as critical as the commercial world, but cost management is still an issue.

How do these match your company’s experience in aerospace, defense and homeland security? We’d like to hear from you.

Posted by Bill Roberts, September 7th, 2007