Global defense electronics market was valued at $138.15 billion in 2022 and is projected to attain a valuation of $231.30 billion by 2031 at a CAGR of 6.07% during the forecast period 2023–2031. 

The defense electronics market refers to the market for electronic systems and components used in military and defense applications. This includes a wide range of products, such as communication systems, radar systems, electronic warfare systems, surveillance and monitoring systems, navigation systems, and many others. The market for defense electronics has been experiencing rapid growth in recent years, driven by a number of factors.

One of the main drivers of growth in the market is the increasing demand for military and defense technology in various parts of the world. As geopolitical tensions continue to rise and new conflicts emerge, countries are investing more heavily in their defense capabilities. This has led to increased demand for advanced military technology, including sophisticated electronic systems.

Rapid pace of technological innovation in another factor driving growth in the defense electronics market. Advances in fields such as artificial intelligence, machine learning, and big data analytics are leading to the development of new and more advanced defense electronics systems. These systems are designed to provide greater accuracy, faster response times, and increased situational awareness, which are critical in military and defense applications.

In addition to these factors, there are also a number of other trends contributing to the growth of the defense electronics market. One of these is the increasing use of unmanned aerial vehicles (UAVs) and other unmanned systems in military applications. These systems rely heavily on advanced electronics and communication systems, driving demand for new and innovative products in these areas.

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Market Dynamics 

Drivers 

Geopolitical Tensions and Rising Defense Spending

The global security landscape is changing rapidly, and geopolitical tensions are on the rise. As a result, many countries are increasing their defense spending to protect their interests and ensure their national security. This has led to a surge in demand for advanced military technology, including defense electronics systems.

In particular, emerging markets such as India, China, and Brazil have been increasing their military spending significantly in recent years. For instance, India increased its defense budget by 7.81% in 2021, reaching a total of USD 66.9 billion. Similarly, China has been ramping up its defense spending, with a budget of USD 209 billion in 2020, up from USD 174 billion in 2017.

The increase in defense spending in these countries has led to a surge in demand for advanced military technology, including sophisticated defense electronics systems. As a result, defense electronics companies are expanding their operations and investing heavily in research and development to meet this growing demand.

Increasing Adoption of Unmanned Systems

The increasing adoption of unmanned systems, such as unmanned aerial vehicles (UAVs) and unmanned ground vehicles (UGVs), is driving growth in the defense electronics market. These unmanned systems rely heavily on advanced electronics and communication systems to operate effectively and efficiently.

UAVs, for example, are used extensively for reconnaissance, surveillance, and strike operations. These systems require sophisticated sensors, communication systems, and navigation systems to operate effectively. Similarly, UGVs are used for a range of tasks, including mine clearance, reconnaissance, and logistics support. These systems require advanced sensors, communication systems, and control systems to operate effectively in the field.

As a result, the adoption of unmanned systems is driving demand for new and innovative defense electronics systems. Companies are investing heavily in research and development to create advanced sensors, communication systems, and other electronics components that are well-suited for unmanned systems.

Moreover, the adoption of unmanned systems is expected to grow in the coming years, driven by their ability to operate in hazardous and remote environments, as well as their potential to reduce the risk to human personnel. This is expected to fuel further growth in the defense electronics market as companies continue to develop new and innovative systems to support these unmanned platforms.

Restrain 

Stringent Regulatory Environment

The defense electronics market is subject to stringent regulatory requirements, which can act as a major restraint on growth in the industry. Defense electronics systems are subject to a range of international regulations, including export controls, technology transfer regulations, and sanctions. For instance, the US Department of State has implemented the International Traffic in Arms Regulations (ITAR), which restricts the export of defense articles and services to foreign countries. Similarly, the Wassenaar Arrangement is a multilateral export control regime that regulates the transfer of dual-use goods and technologies, including defense electronics systems.

Compliance with these regulations can be complex and time-consuming, requiring companies to invest significant resources in compliance programs and export control measures. Failure to comply with these regulations can lead to severe penalties and damage to a company's reputation.

Furthermore, the regulatory environment for defense electronics is constantly evolving, with new regulations and sanctions being implemented regularly. This can make it difficult for companies to keep up with changes and can lead to delays in product development and delivery.

Segmental Analysis 

By Component: Hardware to Dominate the Market with More than 76% Revenue Share

The component segment of the defense electronics market can be further segmented into hardware, software, and services. The hardware segment is expected to dominate the market with more than 76% revenue share in 2023. This is because hardware components, such as sensors, communication systems, and other electronic devices, are critical for the functioning of defense electronics systems.

Moreover, the increasing adoption of unmanned systems and the need for advanced sensors and communication systems are expected to drive growth in the hardware segment of the market. Companies are investing heavily in research and development to create new and innovative hardware components that are well-suited for defense applications.

By Equipment Type: Avionics to Dominate the Market with More than 36% Revenue Share

The equipment type segment of the defense electronics market can be further segmented into avionics, communication, command and control, and others. The avionics segment is expected to dominate the market with more than 36% revenue share in 2023. Avionics systems, such as flight control systems, navigation systems, and communication systems, are critical for the functioning of military aircraft and UAVs.

Moreover, the increasing adoption of UAVs and the need for advanced avionics systems to support these platforms are expected to drive growth in the avionics segment of the market. Companies are investing heavily in research and development to create new and innovative avionics systems that are well-suited for defense applications.

By Usage: Air to Dominate Market with 37% Revenue Share

The usage segment of the defense electronics market can be further segmented into air, land, and naval. The air segment is expected to dominate the market with 37% revenue share in 2023. This is because air-based defense electronics systems, such as aircraft, helicopters, and UAVs, are critical for military operations, including reconnaissance, surveillance, and strike operations.

Moreover, the increasing adoption of UAVs and the need for advanced air-based defense electronics systems to support these platforms are expected to drive growth in the air segment of the market. Companies are investing heavily in research and development to create new and innovative air-based defense electronics systems that are well-suited for defense applications.

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By Application: C2/BM to Remain Second Largest with Over 16% Revenue Share

The application segment of the defense electronics market can be further segmented into command and control (C2), electronic warfare, surveillance and monitoring, navigation, and others. The C2/BM (command and control/ballistic missile defense) segment is expected to remain the second largest segment of the market with over 16% revenue share in 2023. C2/BM systems are critical for military operations, including command and control, as well as ballistic missile defense.

Moreover, the increasing adoption of unmanned systems and the need for advanced C2/BM systems to support these platforms are expected to drive growth in the C2/BM segment of the market. Companies are investing heavily in research and development to create new and innovative C2/BM systems that are well-suited for defense applications.

Regional Analysis 

North America is the largest electronics defense market in the world, and it is expected to continue its dominance in the coming years. The region is projected to generate over 55% revenue of the global market by 2031. 

North America defense electronics market is home to some of the largest defense spenders in the world, including the United States and Canada. These countries invest heavily in their defense capabilities to protect their national security interests and to maintain their global military dominance. For example, the United States has the largest defense budget in the world, which is expected to reach $740.5 billion in 2021. This strong defense spending creates a significant demand for advanced defense electronics systems, driving growth in the market.

North America is also home to some of the leading defense electronics companies in the world, including Lockheed Martin, Raytheon, and Northrop Grumman. These companies are at the forefront of technological innovation and are constantly developing new and advanced defense electronics systems. The presence of these companies in the region creates a strong ecosystem for the development and deployment of advanced defense electronics systems.

North America is a hub for technological innovation, particularly in the fields of artificial intelligence, big data analytics, and machine learning. These technologies are critical for the development of advanced defense electronics systems, and North America's strong innovation ecosystem creates an environment for the rapid advancement of these technologies.

The governments in North America provide significant support to the defense industry, including funding for research and development of new defense electronics systems. The governments also support the deployment of these systems through defense contracts and procurement programs, which create a stable defense electronics market for companies to operate in.

List of Key Companies Profiled:

• BAE Systems plc
• Bharat Electronics Limited
• Boeing
• General Dynamics
• Hensoldt AG
• Honeywell International Inc.
• Indra Sistemas SA
• L3Harris Technologies Inc
• Leonardo S.p.A.
• Lockheed Martin
• Northrop Grumman Corporation
• Raytheon
• Thales Group
• Other Prominent Players

Market Segmentation Overview:

By Component

• Hardware
• Software
• Services

By Equipment Type

• C4ISR Systems
• Weapon Systems
• Electro-Optical and Infrared (EO/IR) Systems
• Military Simulators
• Radar Systems
• Sonar Systems
• Avionics
• Electronic Warfare
• Others

By Usage

• Land
• Air
• Naval
• Space

By Application

• Acoustics
• Avionics
• C2/BM
• Communication
• Optronics
• Radar
• EW
• Others

By Region

• North America
  • The U.S.
  • Canada
  • Mexico
• Europe
  • Western Europe
    • The UK
    • Germany
    • France
    • Italy
    • Spain
    • Rest of Western Europe
  • Eastern Europe
    • Poland
    • Russia
    • Rest of Eastern Europe
• Asia Pacific
  • China
  • India
  • Japan
  • Australia & New Zealand
  • South Korea
  • ASEAN
  • Rest of Asia Pacific
• Middle East & Africa (MEA)
  • Saudi Arabia
  • South Africa
  • UAE
  • Rest of MEA
• South America
  • Argentina
  • Brazil
  • Rest of South America