02 March 2020
Few industries are as potentially lucrative - or as potentially uncertain - as the aerospace and defense industry. For investors, these are often high-risk/high-reward propositions, especially during times of global unrest and political upheaval.
2020 is looking to be an exceptionally interesting year for the defense industry, with numerous new challenges already shaking up the status quo. At Visiongain, we are consistently compiling new defense industry reports to try to keep up. As of writing (March 2020), these are some of the most important factors shaping the defense industry.
4 Major Challenges and Trends for The Defense Industry In 2020
1. Stronger Focus in the Asia-Pacific Region
One of the major game changers this year in the defense industry is that there will be more of a focus in the Asia-Pacific region. Many nations in the area are reassessing their defense capabilities and governments are expanding industrial solutions to keep up with growing economic and safety concerns. For this reason, there’s been an increase in design, research, commercial production and other defense manufacturer support networks.
2. Military spending is up globally
Governments around the world are spending more on defense, both purchasing new hardware, as well as upgrading their infrastructure. Current estimates show an overall predicted CAGR of roughly 3% between 2020-2023, and overall global spending will be approximately $2.1 trillion by the end of that timeframe. The US, China, Russia, India, and many others will all be contributing to this.
3. Mergers & Acquisitions will continue apace
M&A have been major drivers in the defense space for several years, and there is little reason to expect a change. Consolidation will help simplify increasingly complex supply chain and scaling issues, while also potentially offering avenues to bypass bureaucratic hurdles or obtain access to new technologies.
4. Steady Implementation of More-Electric Aircraft (MEA)
There is an increasing demand for more fuel-efficient aircraft in the aerospace and defense sectors. This is due, in large part, to the drive to minimize acquisition and ownership costs. Although there remains obstacles preventing a full move toward All-Electric Aircraft (AEA) technology, such as safety and efficiency concerns, those in the defense industry will certainly see a notable push to implement MEA solutions.
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