A U.S. Air Force MQ-9 Reaper awaits maintenance Dec. 8, 2016, at Creech Air Force Base, Nev. The MQ-1 Predator has provided many years of service and the time has come for the Air Force to transition to the more capable MQ-9 exclusively, and retire the MQ-1 in early 2018 to keep up with the continuously evolving battlespace environment. (U.S. Air Force photo by Senior Airman Christian Clausen)

Unmanned Aerial Vehicles (UAVs) will be the most dynamic growth sector of the world aerospace industry this decade, more than tripling in the next decade, report Teal analysts in their latest market analysis. Worldwide military adoption of UAVs and soaring demand for the next generation of unmanned combat aerial vehicles (UCAVs) are driving the market’s rapid growth.

Teal Group’s 2017 market study estimates that UAV production will increase from current worldwide UAV production of $4.2 billion annually in 2017 to $10.3 billion in 2026, totaling $80.5 billion in the next ten years. Military UAV research spending would add another $26 billion over the decade.

“The UAV market continues to soar,” said Philip Finnegan, Teal Group’s director of corporate analysis and an author of the study. “Increasing trade in costly high-altitude, long-endurance systems, demand for armed UAVs, the development of the next generation of unmanned combat systems, and potential new applications such as missile defense continue to drive the market.”

“The Teal Group study predicts that the US will account for 57% of total military worldwide RDT&E spending on UAV technology over the next decade, and about 31% of the military procurement,” said Teal Group senior analyst Steve Zaloga, another author of the study. The larger, higher value systems procured by the United States help drive the relative strength of the US market over the decade, but other areas such as Asia-Pacific are growing more rapidly.

The 13th edition of the sector study, World Military Unmanned Aerial Vehicle Systems, Market Profile and Forecast 2017, examines the worldwide requirements for UAVs, including UAV payloads and companies, and provides ten-year forecasts by country, region, and classes of UAVs.

Teal Group analysts already cover the UAV market in their World Missiles and UAV Briefing, which examines the UAV market on a program-by-program basis. Sensor payloads are also treated in detail in Teal’s Military Electronics Briefing. The sector study examines the UAV market from a complementary perspective, namely national requirements, and includes both a comprehensive analysis of UAV system payloads and key UAV manufacturers.

UAV Payloads
The 2017 study provides forecasts for a wide range of UAV payloads, including Electro-Optic/Infrared Sensors (EO/IR), Synthetic Aperture Radars (SARs), SIGINT and EW Systems, and C4I Systems, forecast to more than double in overall value from $3.6 billion in FY17 to $7.5 billion in FY26. Steady growth will occur in the “default sensor” EO/IR market, following up and-down funding in recent years as several legacy endurance UAV sensor programs ended.

Teal forecasts a near-term rise from $1.17 billion in FY17 to $2.0 billion in FY22, led by funding for adding U-2 sensors to Global Hawk, by HD upgrade programs for Reapers and Gray Eagles, and by new production for classified UCAVs and mini/nano-UAVs.

New in the study is a more comprehensive treatment of classified and future follow-on sensor programs. According to Dr. David L. Rockwell, Teal’s lead electronics analyst, “it is vitally important to forecast these programs, as they make up more and more of the available market, even though they are in none of the documents or online sources.”

He notes that, “Speculative ‘available’ forecasts – totaling more than $30 billion for payloads through FY26 – are intended to give early warning of programs that are not yet in DoD budgets or under public discussion or announced by international customers – to allow Teal’s clients to plan ahead before the RFPs are out.” Dr. Rockwell concludes that, “This $30 billion will make up more than half the UAV sensor market; we’ve put this together through my 23 years at Teal Group, and it’s just not available online.”

Along with EO/IR, comprehensive coverage of the sea change in the radio frequency (RF) market also is included, with UAV radars forecast to grow from $825 million in FY17 to $2.1 billion in FY26, and SIGINT and Electronic Attack (EA) markets to grow from $750 million to $1.7 billion (with a 27.7% EA CAGR from FY17 to FY22 to begin major UCAV systems). The emphasis on – and funding for – different sensor types is already changing as geopolitics evolve back to A2/AD threats and near-peer opponents in Asia and Eastern Europe, according to Teal’s study.

UAV Companies
The study also includes a UAV Manufacturers Market Overview that reflects the worldwide UAV market “again continuing as one of the prime areas of growth for defense and aerospace companies,” said Finnegan. “They continue to build up their position by organic growth, acquisitions and teaming.”

The study reflects the rapid growth of interest in the UAV business by covering almost 60 U.S., European, Asia-Pacific, and Israeli companies, and reveals the fundamental reshaping of the industrial environment as UAV technology proliferates worldwide.

As prime contractors and small companies compete in the dynamic UAV market, they are adopting widely different strategies. “Our overview tracks the widely varying approaches being taken by these key companies, ranging from outright acquisitions to teaming arrangements and internal development of new UAV systems,” said Finnegan.

This year’s military study has a companion volume on civil government, commercial and consumer UAVs. The rapid growth in those markets required a new study analyzing the varying dynamics of those markets.

The 2017 edition includes UAV market forecast spreadsheets, permitting data manipulation and offering a powerful strategic planning mechanism.