Frost & Sullivan: Naval Segment Expenditure to Grow

Deteriorating international relations across the world have caused countries to sanction extensive naval modernization and re-armament programs in Asia-Pacific, the Middle East and Russia.

The Ukraine crisis, territorial disputes on the South China Sea and growing tensions in the Middle East have ensured that the market growth remains stable, although low.

New analysis from Frost & Sullivan, Global Military Naval Vessels Platforms Market Assessment, finds that the cumulative naval vessels new platforms segment’s expenditure is expected to reach $376.07 billion by 2023, at a compound annual growth rate (CAGR) of 1.0 percent. The military vessels’ modernisation/upgrade segment, estimated to be worth 59.26 billion from 2014 to 2023, is likely to generate the highest CAGR of 2.6 percent.

The market gained the most revenues from the procurement of multi-role frigates, which are becoming primary vessels in most of the navy fleets.

Frost & Sullivan Aerospace & Defence Industry Analyst Dominik Kimla said:

Military vessels based on the multi-mission modular vessel (MMMV) design will be more common and affordable for end users. Additionally, Frost & Sullivan expects more standardisation among various MMMV designs across naval companies. This will translate to long-term cost efficiency on the procurement and support-in-service of MMMV vessels.

North America is likely to retain its position as the top region in terms of military vessels spending during 2014-2023. Its share in global military naval vessels revenue is forecast to marginally grow from 34.4 percent in 2014 to 34.7 percent in 2023. This steady procurement spending is a result of ongoing projects; however, sequestration could impact procurement in in the next five to seven years.

The market is dominated by Western European, American, and Russian naval companies. However, shipyards in Asia-Pacific, particularly South Korea and Japan, will increase their market position in the naval domain due to intensifying competition among original equipment manufacturers (OEMs).

There is a clear trend across regions toward procuring indigenous naval capabilities. National navies award projects to domestic shipbuilders, giving a boost to in-country construction and technology transfer. Technology transfers and partnerships with local shipyards are important decisive factors for most naval end-users.

Kimla continued:

New models of acquiring naval capabilities, such as leasing or public-private partnerships, will be implemented to provide necessary military capabilities. Therefore, naval companies need to adopt a proactive approach to addressing customers’ needs and provide naval capabilities in the framework of leasing and private-partnership agreements.

Press release, Image: US Navy