The Global Electronic Test Equipment Market in Aerospace & Defense is valued at US$ 3.51 Billion in 2019 and is projected to grow at a CAGR of 3.61% to reach a market size of US$ 4.19 Billion in 2024.
The market is mainly driven by factors such as increased Defense budgets by major economies, advancements in technology and growing focus on R&D activities.
- Definition / Scope
- Market Overview
- Market Risks
- Market Trends
- Industry Challenges
- Technology Trends
- Other Key Market Trends
- Market Size and Forecast
- Market Outlook
- Technology Roadmap
- Competitive Landscape
- Competitive Factors
- Key Market Players
- Strategic Conclusion
Definition / Scope
The aerospace and defense industries are one of the world’s largest and most expansive sectors in operation. The electronics and technology used in this industry must run at an efficiency level of 100 percent to ensure that the equipment is not malfunctioning and is damaged or less efficient than it would ideally be.
This is where electronic test equipment comes to the fore. what is fundamental here is that the electronics used, say, on a fighter jet or a combat vehicle are much more complex and advanced than those found on their civilian counterparts and the possible loss of this equipment would not only amount to millions and millions of dollars in taxes, but would also bear the heavy weight of the life-threatening risk of the valiant members of the aviation and Defense segment as a result of technological failure.
Electronic test equipment Market and measurement solutions have assisted the technological growth of military and aerospace users since World War II, but not without concerns and challenges.
Military applications have long been viewed as the backbone of the RF/microwave industry. With the development and growth of commercial wireless markets, has this industry benefitted from another market sector with the comparable economic size and strength as the military electronics market.
The A&D industry has seen renewed growth in recent times as national governments around the world have increased Defense spending and budget allocations.
The USA also posts the world’s largest military spending. U.S. spending on Defense is increasing again, after declining for many years. Defense budgets and future growth are driven by the increased focus of the Trump Government on strengthening the U.S. military.
In 2017, President Trump announced a $25 billion increase in Defense spending; another 10 per cent increase is planned for 2018.
According to the Stockholm International Peace Research Center, the US invested about $611bn in 2016, which is more than the next top eight countries combined. The estimated rise of $80 billion in military spending for 2018 would exceed every other country’s total annual military budget, except China.
In the Asia-Pacific region, tremendous growth opportunities are expected in the near future, particularly in China and India, along with higher spending on Defense in Japan and South Korea.
A similar trend is being observed in Europe, especially among the North Atlantic Treaty Organization (NATO) European member nations and Russia. As the A&D industry (both military and commercial) is once again experiencing growth, it is projected that the global demand for A&D electronic test equipment Market will report increasing annual sales growth from 2017 through 2022.
In 2019, the total demand for A&D electronic test equipment Market, which includes general purpose test equipment, automated test equipment (ATE), data acquisition (DAQ) test equipment, electrical testers, and environmental testers, exceeded $3.51bn.
In 2019, it increased by 3.6 per cent over the previous year. The segment is projected to achieve sustained single-digit growth, resulting in an annual compound growth rate ( CAGR) of 3.7 per cent between 2019 and 2024.
Applications for radar and electronic warfare (EW) hold the highest market share of 54.4%, followed by military communications (public security and private mobile radio); and applications for satellite and intelligence, surveillance and recognition (ISR) signals intelligence (SIGINT).
Antenna technology has been and remains a dominant field, with sophisticated radar systems becoming more penetrating than in the past. Testing such systems requires not only wider bandwidths, but also high resolution along with lower phase noise, lower pre-dynamic range, and greater fidelity to the signal.
Complex Supply Chain
The Global Electronic Test Equipment Market in A&D is witnessing complexity in supply chain mainly caused by the need to meet intensified delivery schedules, and the urge to grow their revenues in new and emerging markets.
As it is evident the complexity in Supply Chain could delay the delivery of the electronic test equipment Market or delivery of ETE that lacks quality which could further cause risks such as loss of revenue and reputational damage, to breach of contract, loss of market share and damage to stock price.
The Global Electronic Test Equipment Market in A&D is highly consolidated and concentrated with 4 of the major players occupying 80% of the market share. The consolidated state of the market is a bane for the new entrants as it offers little to no market expansion.
In recent years, the market is witnessing a gradual consolidation as major players are acquiring other players to strengthen their product portfolio and expand their geographical reach.
For instance, in 2019, Astronics Corporation acquired Freedom Communication Technologies to strengthen its position in the radio test market. Similarly, in 2018; Viavi Solutions, Inc. acquired Cobham’s AvComm (Advanced Communication and connectivity) business unit to diversify its operation into military, public safety, and avionics test markets.
Top Market Opportunities
Growing Opportunities in Emerging Markets
There are significant growth opportunities for the market for electronic test equipment Market in Asia Pacific; especially China as there has been a proliferation of the A&D sector in this region in recent years including both civil and Defense aerospace.
Due to their advanced technical capability in aerospace, also the increase in Defense Budget by the Chinese Government is auguring well for the growth of the segment as it increased its Defense budget significantly by 6.6% to US$ 178.2 Billion in 2019.
It has also been observed that manufacturers are shifting focus in Asia-Pacific region due to government initiatives, availability of cheap labor and skilled employees.
Satellites are undergoing new patterns and evolution. NewSpace is an emerging area that has driven low-cost spacecraft, satellite launchers and smaller satellites to evolve. SpaceX is market leading initiative.
In March 2017 SpaceX successfully re-launched for the first time in history a previously flown orbital-class rocket (Falcon 9).
It is now raising another $507 million in a new funding round in 2018 which, as per Forbes, has raised its value to a record $25 billion. Companies like Blue Origin, Virgin Galactic and Deep Space Industries and a number of startups like OneWeb are creating demand for more accurate and cost-effective T&M equipment.
Thus, there are substantial opportunities for T&M vendors to offer A&D customers solutions that concentrate on reducing risk and efficient cost control.
Growing numbers of companies are focused on developing new commercial satellites, establishing a new research model for holding low costs and providing incentives for T&M vendors.
Increase in Defense Budget
Increasing Defense budget and the rise in expenditure on the aviation industry by governments of several nations across the globe is driving the growth of the segment.
Increasing tension in various parts of the world, particularly between the United States and China, is pushing countries to increase their Defense budget to further strengthen their Defense capabilities.
After several years of decline, the USA, the world’s largest military spending country, has been raising its military spending for the last two years.
As the US has increased its Defense budget by US$ 25 Billion in 2017 and is planning to increase it by another 10% in 2018. Other major economies, including China, India, and South Korea, are also raising their Defense budget, which impresses the demand for test and measuring equipment positively.
Technological advancements driving growth
The changing trends in the aviation test equipment industry and new technologies in traditional systems are causing the introduction of new test equipment, which will in turn drive market growth.
Additionally, technological advances in Defense aircraft are boosting demand for high-tech and sophisticated test equipment, which is expected to further boost market growth in Electronic Test Equipment Market in A&D.
Rise in R&D Activities
Enhanced focus on research and development (R&D) to develop more advanced variants of products is further driving growth in the industry. In addition, a positive outlook for the market is expected from the changing trends in the aviation sector, which often fuses innovations with traditional systems.
Service Life Program extension
Because of budget limitations and program delays, the military aviation sector continually anticipates updates and extends the life of its surviving aircrafts. Programs for service life extension hamper the aging platforms and support systems, including test equipment, and allied companies.
With the current budget constraints, weapons systems such as B-52 or A-10 [military aircraft] are commonly required to extend their anticipated lifetime.
This shifts focus away from investing in test solutions for new weapons systems toward investments for maintaining the aging fleet by solving the obsolescence issues on a much more frequent rate.
Most military and aerospace programs run for years, and companies must keep the technology inside of them fresh so that they can add new capabilities plus address the obsolescence issues and hence restraints the growth of the segment.
Limited Life span of Avionics Module
The increasing pace of technology change, system complexity, and changing standards and regulations are limiting the life span of Avionics Modules particularly the Electronic test and equipment for A&D segment.
The increasing pace of technology change requires frequent upgradation and updation of the electronic test equipment Market to keep pace with them
The specific mechanisms that occur with aging are often quite unintuitive, and this can sometimes lead to bizarre and unexpected system operation and hence requires frequent upgradation of the electronic test equipment Market.
Increased complexity of aerospace and Defense systems
Customers face challenges in the testing, validation and verification of these modern devices with the increased complexity of aerospace and Defense systems. This trend is changing the face of test and speeding up the need for flexible and scalable test solutions. Aerospace and security companies also put greater focus on research.
The need for reliable and efficient research is felt in the end-to-end aerospace and Defense supply chain today. This trend is due to the increased pace of change in technology, complexity of the system and changing standards and regulations.
Maintenance of Legacy Platforms
Budget constraints and delays in the delivery of the aircraft have led to the development of extended-life aircraft, which has resulted in the need to maintain legacy aircraft systems and hence this service life extension will restrict the growth of the support system including the size of the market for aircraft test equipment.
The advancement in technology and the changing standards and regulations has limited the scope for maintenance of legacy systems as the technology keeps evolving and there is a dire need for frequent updating and upgradation of the Electronic Test Equipment Market in A&D.
In the A&D industry, the general trend is to have more technically capable and smaller vehicles, and military systems. The most critical test equipment specifications are complete capture of higher bandwidth signals, wideband capability, compatibility of architecture with multifunction antenna systems, more software content, and greater ease of use.
Some of the latest technologies buzzing in the Global Electronic Test Equipment Market in A&D include:
Ultraband radars are constantly being implemented, and GHz bandwidth would be a crucial necessity for signal intelligence and control of spectrums. There is growing research for special purpose radars and other equipment on millimeter-wave frequencies up from 30 GHz.
While trends towards millimeter wave frequencies and higher modulation bandwidths have an impact on the spectrum and signal analyzers market in manufacturing applications, their impact on market revenue for these instruments is delayed as compared to R&D due to the need for cost-effective solutions.
Therefore, one of the major challenges as well as opportunities is to enable the cost-effective testing of bandwidth-rich millimeter-wave frequencies in mass production.
With the arrival of 5G, along with A&D applications pushing signal and spectrum analyzer requirements, new multi-channel applications will directly affect bandwidth usage and frequency ranges.
Drastic shifts are expected in the segments of the electronic test and measurement market in R&D as well as manufacturing applications in signal generators, signal and spectrum analyzers, network analysers and power meters by 2020.
Portable or handheld solutions have significant potential in the aerospace and Defense market, because end users are willing to invest in new technologies.
The accuracy of these devices, however, still does not meet the needs of this business. This is an unmet consumer need, and therefore an incentive for research vendors to manufacture more reliable portable test equipment.
The recent advances in technology have dramatically reduced the cost and time of producing semiconductor IC and improved profit margin for the companies.
The ATE manufacturing companies are actively investing in R&D activities to expand their product range and match in with the new semiconductor technology innovations.
Increased complexities in the manufacturing of semiconductor chips require considerable test costs and time. Semiconductor companies are concentrating on reducing testing costs and considering outsourced testing process equipment as opposed to in-house production, which is one of the primary drivers of growth.
Other Key Market Trends
One of the significant trends evolving in the Global Electronic Test Equipment Market in A&D is the adoption of Modular Solutions which has positively impacted the performance of the test equipment on several metrics such as scalability, flexibility, upgradability, interoperability, and total cost of ownership.
Today, the challenges faced by most research organizations in the A&D industry include managing obsolescence, increasingly growing RF requirements and rising importance of test design (DFT).
The test requirements of A&D customers are turning rack-and-stack box instruments and closed-architecture automated test equipment (ATE) systems into smarter test systems that are built on a flexible framework that scales to meet current and future needs.
Although it takes time to change the T&M industry, especially in A&D, due to the long service life of test systems, the A&D market is seeing replacement and conversion of test program sets (TPS) from legacy systems to modular test solutions.
Market Size and Forecast
The Global Electronic test equipment Market (including general purpose test equipment, ATE and DAQ test equipment) for A&D reached US$ 3.51 Billion in 2019 and is poised to grow at a CAGR of 3.61% to reach a market size of US$ 4.19 Billion in 2024.
Market Size based on Product
The Electronic test equipment Market based on Product Categories includes General Purpose Test equipment, Avionics Automated Test equipment, Data Acquisition Test equipment, Electrical Test equipment and Environmental Test equipment.
Of this the General Purpose Test Equipment holds the major market share holding a market share of 34% and recording a market size of US$ 1.19 Billion in 2019 and is poised to grow at a CAGR of 3.4% to reach a market size of US$ 1.41 Billion in 2024
Electrical Test Equipment is the fastest growing segment in the Global Electronic Test Equipment Market in A&D growing at 5.2% and constitutes a market share of 23% and recording a market size of US$ 807.3 Million in 2019 and projected to reach a market size of US$ 1.04 Billion in 2024.
Data Acquisition (DAQ) test equipment constitutes a market share of 12% recording a market size of US$ 421.2 Million in 2019 and is expected to grow at a CAGR of 3.7% to reach a market size of US$ 505.11 Million in 2024.
Avionics Automated Test Equipment (ATE) holds a market share of 14% and a market size of US$ 491.4 Million in 2019 and is projected to grow at a CAGR of 4.1% to reach a market size of US$ 600.74 Million in 2024.
Environmental Test Equipment segment constitutes a market share of 17% and market size of US$ 596.7 Million in 2019 and is poised to grow at a CAGR of 3.5% to reach a market size of US$ 708.7 Million in 2024.
Market size based on Application
Radar and electronic warfare (EW) applications hold the highest market share of 54.4% and generating revenues to the tune of US$ 1.9 Billion in 2019 and is projected to grow at a CAGR of 3.5% to reach a market size of US$ 2.26 Billion in 2024.
Military communications (public safety and private mobile radio) applications is the second largest segment based on Application constituting market share of 14% and market size of US$ 491.4 Million in 2019 and is expected to grow at a CAGR of 3.7% to reach a market size of US$ 589.3 Million in 2024.
Satellite Applications is the buzzing segment with a CAGR of 4.1% constituting a market share of 10.6% and market size of US$ 372 Million in 2019 and is poised to reach a market size of US$ 454.8 Million in 2024
Intelligence, surveillance, and reconnaissance (ISR) signals intelligence (SIGINT) application recorded a CAGR of 4.4% and holding a market share of 8% generating revenues of US$ 280.8 Million in 2019 and expected to reach a market size of US$ 348.3 Million in 2024.
Aerospace electronics and avionics keep progressing at a rapid pace, with few signs of slowing down. Compute-intensive, high-speed, and high-bandwidth avionics and electronics drive the market for advanced test solutions.
It constitutes a market share of 13% and market size of US$ 456.3 Million in 2019 and is expected to grow at a CAGR of 4.8% to reach a market size of US$ 578.8 Million in 2024.
Market size based on Region
North America dominates the segment holding a market share of 34% and generated revenues to the level of US$ 1.19 Billion in 2019 and is poised to grow at a CAGR of 4.2% to reach a market size of US$ 1.46 Billion in 2024.
South America is witnessing tepid growth due to the reduction of Defense budget in the region, the region is expected to grow at a CAGR of 3.6% and generated revenue to the level of US$ 351 Million in 2019 and is expected to reach a market size of US$ 418 Million in 2024.
Europe is the second largest region in the global Electronic Test Equipment Market in A&D constituting a market share of 26% and market size of US$ 912.6 Million in 2019 and is projected to grow at a CAGR of 3.9% to reach a market size of US$ 1.1 Billion in 2024
Asia-Pacific is the fastest growing region in the market, recording a CAGR of 5.4% and generating revenues to the tune of US$ 772.2 Million in 2019 and is expected to reach a market size of US$ 994.97 Million in 2024
Middle-East & Africa is growing steadily at a CAGR of 4.1% and constituting a market share of 8%, generating revenue to the tune of US$ 280.8 Million in 2019 and is poised to reach a market size of US$ 343.3 Million in 2024.
The Global Electronic Test Equipment Market in Aerospace & Defense is valued at US$ 3.51 Billion in 2019 and is poised to grow at a CAGR of 3.61% to reach a market size of US$ 4.19 Billion in 2024.
The market is driven by increasing Defense budgets, growth in R&D activities and technological advancements.
During the forecast period (2019 to 2024) North America is expected to remain the largest market for Electronic Test Equipment Market in A&D. The US is the region’s market growth engine, and has one of the world’s largest commercial and military aircraft fleets.
Increasing Defense budget over the past three years (2016-2018) coupled with rising demand for F-35 and KC-46 Pegasus aircraft is the pitch behind the country’s growing demand for test and measuring equipment. Mexico, a diminutive market in front of the giant US, is also expected to expand at a healthy pace over the next five years, driven by the country’s greater proximity to the US.
Asia-Pacific is likely to witness the highest market growth in the forecast, driven by a host of factors including increased demand for increased Defense budgets for key economies, and growing military tensions among major countries in the region.
With the introduction of emerging technology and changing consumer expectations, the global demand for A&D electronic testing equipment will experience a major transition over the next 5 to 8 years. Leading A&D vendors are moving towards higher frequencies, greater availability of bandwidth, and multi-channel solutions and adding functionality to their current systems.
Adopting new technologies such as IIoT or Industry 4.0 and changing customer requirements will lead to test and measurement vendors adopting new business models.
The Industrial Internet of Things ( IIoT) or Industry 4.0 and the changing customer requirements will lead to test and measurement vendors adopting new business models. A&D companies are ready to support the latest technological developments with substantial investment in R&D, as the order of the day is the adoption of new technologies and migration.
A&D has always been an early adopter of innovative technologies, with substantial government investments in programs specifically designed for industry-catering research and development activities.
Keeping pace with these developments, the changing technological and business landscape remains critical for T&M vendors who are catering for the A&D industry to introduce new products or capabilities in line with technological evolution.
Distribution Chain Analysis
The supply chain of this market comprises of avionics and radio test equipment suppliers, avionics and radio system manufacturers, distributors/part brokers, and end-users.
The major players in the Global Electronic Test Equipment Market in A&D are Astronics Corp., Freedom Communication Technologies, Keysight Technologies, Rohde & Schwarz, Lockheed Martin, Boeing, National Instruments, and Cobham AvComm (now a part of Viavi Solutions).
A greater stream of product releases, effective promotional / marketing campaigns, software development, SDR focus, penetration of ATE solutions, and continuous focus on improving functionality in each of the A&D segments (radar, satellite, military, SIGINT avionics, etc.) have elevated the image of electronic testing in aerospace and Defense.
Keysight Technologies is the industry leader in the general-purpose research segment with a market share of around 45 per cent. Rohde & Schwarz, Lockheed Martin, Boeing, National Instruments, and Cobham AvComm (now a part of Viavi Solutions) are other leading participants.
Recent Market Developments
In 2019, CCX Technologies launched a new product: T-RX avionics radio tester. It is designed in such a manner to test 16 different systems and will conduct more than 100 different tests, which will include Instrument Landing System (ILS), Very High Frequency Omni-directional Radio (VOR), Distance Measuring Equipment (DME) Test, High Frequency Comm Generation, Transponder Mode A/C, Transponder Mode S, SELCAL Tone Generation, TCAS, and others.
Mergers and Acquisitions, Launch of new and advanced products, Strategic Partnerships are some of the strategies adopted by the market players in the Global Electronic Test Equipment Market in Aerospace & Defense.
In recent years, the market is witnessing a gradual consolidation as major players are acquiring other players to strengthen their product portfolio and expand their geographical reach. For instance, in 2019, Astronics Corporation acquired Freedom Communication Technologies to strengthen its position in the radio test market.
Similarly, in 2018; Viavi Solutions, Inc. acquired Cobham’s AvComm (Advanced Communication and connectivity) business unit to diversify its operation into military, public safety, and avionics test markets.
Key Market Players
Astronics Corporation (USA) is a aerospace electronics corporation founded in 1968, headquartered in East Aurora, New York. It designs, manufactures, and markets specialized lighting, control systems, and electronics for the cockpit, cabin, and exteriors of military, commercial jet, and general aviation aircraft.
Keysight Technologies, or Keysight (USA), manufactures electronics test and measurement equipment and software. In 2014, Keysight was spun off from Agilent Technologies, taking with it the product lines focused on electronics and radio, leaving Agilent with the chemical and bio-analytical products.
Rohde & Schwarz GmbH & Co KG (Germany) is an international electronics group specializing in the fields of electronic test equipment, broadcast & media, cybersecurity, radiomonitoring and radiolocation, and radiocommunication. The company provides products for the wireless communications, broadcast & media, cybersecurity and electronics industry, aerospace and Defense, homeland security and critical infrastructures.
Lockheed Martin Corporation (USA) is an aerospace, Defense, arms, security, and advanced technologies company with worldwide interests. It was formed by the merger of Lockheed Corporation with Martin Marietta in March 1995. Lockheed Martin is one of the largest companies in the aerospace, military support, security, and technologies industry. It is the world’s largest Defense contractor, based on revenue for fiscal year 2014.
The Boeing Company (USA) is a multinational corporation that designs, manufactures, and sells airplanes, rotorcraft, rockets, satellites, telecommunications equipment, and missiles worldwide. The company also provides leasing and product support services. Boeing is among the largest global aerospace manufacturers; it is the second-largest Defense contractor in the world based on 2018 revenue.
National Instruments Corporation, or NI (USA), is a multinational company with international operation. Headquartered in Austin, Texas, it is a producer of automated test equipment and virtual instrumentation software. Common applications include data acquisition, instrument control and machine vision.
Viavi Solutions (USA), formerly part of JDS Uniphase (JDSU), is a network test, measurement and assurance technology company based in San Jose, California. The company manufactures testing and monitoring equipment for networks. It also develops optical technology used for a range of applications including material quality control, currency anti-counterfeiting and 3D motion sensing.
The Global Electronic Test Equipment Market in Aerospace & Defense segment is witnessing buoyant growth in recent years mainly driven by factors such as increased Defense budgets, advancements in technology and growing focus on R&D activities. The market is set to top valuation of US$ 4.19 Billion in 2024, still having room for growth potential.
Some of the major obstacles for new entrants are need for high capital investments and consolidated state of the market. Though growth bottlenecks exist, the segment shows promising potential for future growth. The industry has to come a long way to normalize in terms of technological advancements in the segment.
- SMEs – Small & Medium Enterprises
- A&D – Aerospace & Defense
- T&M – Test & Measurement
- NATO – North Atlantic Treaty Organization
- ATE – Automated Test Equipment
- DAQ – Data Acquisition Test Equipment
- EW – Electronic Warfare
- ISR – Intelligence, Surveillance and Recognition
- SIGINT – Signals Intelligence
- TPS – Test Program Sets
- IIoT – Industrial Internet of Things