The targeting pods market is anticipated to grow at a CAGR of over 4% during the forecast period.
- The global military expenditure has experienced solid growth over the last decade to reach USD 1.92 trillion in 2019. A large portion of the enhanced defense expenditure is directed towards the procurement of new generation military combat aircraft and other aerial assets, thereby encouraging research and development (R&D) to enhance the current capabilities of the integrated targeting pods to attain tactical superiority over hostile forces by enabling long-range precision engagement.
- Unanticipated economic fluctuations, such as the ongoing COVID-19 crisis, are anticipated to deter defense budget sanctions during the upcoming period to divert resources for vital medical infrastructure development. Such disruptions may restrict the growth of the market.
- Furthermore, the development of long-range radars that can even detect stealth-enabled fifth-generation aircraft can effectively limit the scope of their application.
Key Market Trends
Combat Aircraft Segment to Dominate the Market During the Forecast Period
Combat aircraft are vital for protection against aerial threats as they can engage in both aerial warfare and ground-support missions. Global military powerhouses such as the US, the UK, China, France, and Japan are vying to achieve a profound reconceptualization of modern aerial warfare techniques by fostering the indigenous development of fifth-generation and the envisioned sixth-generation combat aircraft. Unlike the F-35 program, the F-16 production line has experienced minimal supply chain disruption due to the COVID-19 pandemic. The F-16 is one of the most successful combat aircraft designed by Lockheed Martin, owing to its versatile performance to effectively address the requirements of the end-user forces for a variety of missions. The demand for F-16s is majorly driven by the countries from Africa, Latin America, and Asia-Pacific which is currently incapable of purchasing an F-35. In April 2018, the US State Department approved the sale of 14 F-16 Viper aircraft to Slovakia at an estimated cost of USD 2.91 billion. The F-16 features the LITENING advanced targeting pod that features high definition (HD) video, forward-looking infrared sensors, laser imaging sensors, and multiple plug-and-play data link options. In January 2019, the US Air Force (USAF) awarded a USD 1.3 billion contract to Northrop Grumman for the upgrade and sustainment of the LITENING targeting pods integrated onboard the USAF and the US Marine Corps (USMC) fleet of McDonnell Douglas AV-8B Harrier II, Fairchild Republic A-10 Thunderbolt II, Boeing B-52 Stratofortress, Lockheed Martin C-130 Hercules, Boeing F-15E Strike Eagle, Lockheed Martin F-16 Fighting Falcon, and Boeing F/A-18 Super Hornet aircraft. Similar long-term contracts have been awarded recently which are scheduled to be completed during the forecast period and are envisioned to drive the market in focus during the forecast period.
North America to Continue its Dominance in the Market
The United States, one of the leading defense spenders, globally, is focusing on increasing its defense expenditure every year. Currently, it spends about 3.2% of its GDP on defense. In July 2018, the US government instructed the NATO leaders to increase their defense spending, to meet 2% of the country's economic output, and further increase it up to 4%, higher than the group's goal of 2%. Following this, in November 2019, NATO announced that in 2019, the defense spending across European Allies and Canada increased in real terms by 4.6%, marking the fifth consecutive year of growth. To retain its aerial dominance, the US defense forces have awarded several contracts to equip its aerial combat fleet with sophisticated targeting pods and maintain their operational capabilities as per required mission specifications. For instance, in July 2018, the USAF awarded an indefinite-delivery/definite-quantity contract for Low Altitude Navigation and Targeting Infrared for Night (LANTIRN) LM-STAR support equipment production and sustainment to Lockheed Martin Corporation worth USD 99 million. The LANTIRN system features a terrain-following technology that adjusts the flight path and elevation of the aircraft according to low and high points in the terrain to maintain a pre-programmed distance between the aircraft and the ground. This helps the aircraft to overcome low altitudes and poor weather conditions to hit assigned targets. Similar developments are envisioned to drive the North America segment of the market in focus during the forecast period.
The targeting pods market is highly competitive and is marked by the presence of many prominent players, such as Lockheed Martin Corporation, ASELSAN A.S., Raytheon Technologies Corporation, Northrop Grumman Corporation, and FLIR Systems, Inc. The advancement in radar detection technologies has necessitated long-range engagement, hence bolstering the need to integrate futuristic technologies, such as infrared technologies, thermally cooled infrared devices, and forward-looking infrared (FLIR) technology. Product innovation is envisioned to offer new growth opportunities for market players. However, stringent safety and regulatory policies in the defense sector are expected to restrict the entry of new players. Furthermore, the market is primarily influenced by the prevalent economic conditions in dominant markets like the US. Hence, during an economic downturn, contracts may be subjected to deferral or cancelation and lead to a relatively slower growth rate, which, in turn, can adversely affect the market dynamics and expose the players to financial duress.
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