The global aerospace engineering services outsourcing market size was valued at USD 94.34 billion in 2022. It is estimated to reach USD 739.11 billion by 2031, growing at a CAGR of 25.7% during the forecast period (2023–2031).
Engineering services outsourcing employs the finest available technology and services to provide cutting-edge engineering products at a competitive price. Many industries, including aircraft, automotive, construction, consumer electronics, semiconductor, pharmaceuticals, and telecom, use engineering services outsourcing. The design, development, testing, and production of airplanes, spacecraft, satellites, missiles, and related systems and equipment fall under the purview of aerospace engineering, commonly called aeronautical or astronautical engineering.
Aerospace engineering services use computer-aided design (CAD) technologies to quickly draft and modify designs and visualize finished parts and assemblies in three dimensions. It facilitates the creation and use of cutting-edge technology in aerospace vehicle systems for defense, transportation, communications, and exploration applications. Aerospace engineering services outsourcing (ESO) has become extremely popular in recent years because it helps manufacturers lower operational costs, enhance component quality, reduce errors, and speed up production.
The expanding partnerships between engineering services outsourcing providers and OEMs throughout the forecast period are anticipated to accelerate market expansion. OEMs use outsourcing services' benefits to raise product and service quality, reduce costs, and expand their skills and expertise. In order to be profitable and competitive, OEMs have increased the number of partnerships with specialized Engineering Services Outsourcing partners.
Furthermore, OEMs prefer collaborating with ESOs to incorporate advanced technologies like the Internet of Things (IoT), Machine-to-Machine (M2M) communications, embedded electronics, and other digital transformative solutions while upholding the requirement for product uniqueness. For instance, in March 2022, Airbus India awarded a multi-year contract to L&T Technology Services (LTTS), a provider of IT solutions for aerostructure and system design, manufacturing engineering, avionics and software development, aero-engine design, ATM solutions, airlines, and MRO solutions.
Research and development initiatives and significant financial investments are needed to create new and inventive technologies and solutions. In addition, the globalization of research and development has forced leading industry members to incorporate global delivery systems into their company strategies. This is one of the critical elements that will likely accelerate the market for engineering services outsourcing soon.
The main disadvantage of outsourcing engineering services is the risk of losing proprietary information. It is crucial to have flawless procedures and checks regarding data loss and confidentiality agreements when negotiating outsourced jobs. Therefore, the risk of disclosing private information would restrain the expansion of the engineering services outsourcing market over the forecast period. Digitization also makes hacks more dangerous.
Several end-user sectors and industry verticals communicate enormous volumes of data with service providers, OEMs, and customers about monitoring, load management, and quality assurance, which could be vulnerable to data theft and cybersecurity problems. Similarly, OEMs, suppliers, and service providers frequently trade private information on technology, performance, design, development, and support requirements. Thus, the risk of exposing sensitive data and the threat of cyberattacks hamper market growth.
The primary factors influencing the engineering services outsourcing market are the expanding demand for automation and the rising usage of integrated solutions for designing and analyzing. The industry is affected by the widespread use of engineering software, such as architecture, engineering, and construction (AEC) software, computer-aided engineering (CAE) software, computer-aided designing (CAD) software, and electronic design automation (EDA) software. Engineering services are becoming more necessary as a result of corporations moving their engineering operations to less expensive locations due to the rising cost of labor in industrialized nations.
Outsourcing lowers the cost of employees, operations, additional infrastructure, and office space maintenance. Even from faraway places, outsourcing services provide a platform for talented personnel and cutting-edge technologies. In addition, the rise of mobile devices, like smartphones, tablets, PCs, and others, makes these programs easier to use and more accessible. The development of cloud-based engineering software packages positively impacts the outsourcing market for engineering services. Additionally, the need for reliable operating platforms from the marine, shipbuilding and offshore sectors to overcome adverse weather conditions, remote locations, and physical space constraints increases the opportunity for profit for market participants during the forecast period.
The global aerospace engineering services outsourcing market is segmented by service, function, location, and component.
Based on service, the global aerospace engineering services outsourcing market is segmented into mechanical engineering, electric/ electronic engineering, embedded software engineering, and others.
The mechanical engineering segment owns the highest market share and is expected to grow at a CAGR of 24.7% over the forecast period. The mechanical engineering sector accounted for the most significant revenue share of the market, and it is anticipated that it would sustain its dominance over the forecast period. This is attributable to the significant demand for structural, system, and fluids and thermal engineering in the aerospace sector.
Based on function, the global aerospace engineering services outsourcing market is divided into design, simulation and digital validation, production process, and maintenance process.
The maintenance process segment is responsible for the substantial market share and is expected to grow at a CAGR of 24.6% over the forecast period. The maintenance process segment includes the after-market functionalities and security and certification functions in the aerospace industry. The segment is gaining prominence due to increasing awareness about safety and airworthiness. Regulatory bodies and governments across the globe are continually focusing on environmental welfare and imposing stringent norms on the aerospace industry to safeguard the same.
Digitization and many connected devices have augmented the need for information assurance and cyber resilience. This has made it mandatory for the aerospace industry to ensure data security against cyber threats. Functions such as product support, predictive maintenance, and asset tracking and management have seen a surge in the aerospace sector. The increasing outsourcing of Maintenance, Repair, and Overhaul (MRO) processes will likely encourage the maintenance process segment to retain its dominance over the forecast period.
Based on location, the global aerospace engineering services outsourcing market is bifurcated into onshore and offshore outsourcing activities.
The onshore segment owns the highest market share and is anticipated to grow at a CAGR of 26.0% during the forecast period. The onshore outsourcing activity in the aerospace industry is developing rapidly owing to the security and authenticity promised. The onshore activity enables aerospace OEMs to partner with the ESP in their time zone and work in the same lawful jurisdiction. This allows easy and better-streamlined communication between the two firms, increasing the efficiency of outsourced services. In addition, the aerospace and defense sector is witnessing a Manufacturing-as-a-Service (MaaS) trend to diversify their supply chains. Onshoring MaaS can reduce delay possibilities and shipping outlays and ensure more competent designs. There has been an increase in onshoring of aerospace engineering services, especially in the Middle East and Africa region, to meet the growing demand for a reduction in transportation delays and costs.
Based on components, the global aerospace engineering services outsourcing market is divided into hardware and software.
The hardware segment is the highest contributor to the market and is projected to grow at a CAGR of 25.5% over the forecast period. The hardware segment comprising raw materials, forgings, castings, extrusions, parts, components, subassemblies, aero-structure, aero-engine, avionics, aircraft interiors, and all hardware modules required to build the aircraft and spacecraft, possesses the greatest market share and is anticipated to rule the market during the forecast period. The hardware component segment will likely hold the leading position over the forecast period owing to the rapid growth in electro-mechanical systems used in the aerospace industry.
North America Dominates the Global Market
Based on region, the global aerospace engineering services outsourcing market is bifurcated into North America, Europe, Asia-Pacific, Latin America, and the Middle East and Africa.
North America is the most significant shareholder in the global aerospace engineering services outsourcing market and is anticipated to grow at a CAGR of 24.5% during the forecast period. The region is expected to dominate the industry, owing to the proliferation of new technologies at a higher rate and the vital presence of aerospace OEMs. The U.S. accounted for the most significant market share of the software segment in the component category due to continuous innovations in the IT sector and increasing deployment of IT services, data center systems, enterprise software, and communication systems in the region. In addition, the aggressive race in the aerospace ESO market of the U.S. and Canada will combine to generate a consistent revenue trend throughout the forecast period. Honeywell International Inc. and Altair Engineering, Inc. are the most dominant regional players accounting for most of the region's revenue share.
Europe is estimated to grow at a CAGR of 25.3% over the forecast period. Demand for aerospace ESO in European countries is anticipated to be sluggish because of market saturation, ferocious competition, and challenging economic conditions. Market saturation, intense competition, and challenging economic circumstances are to blame for this poor growth rate. In addition, Germany is anticipated to see significant growth within Europe during the projection period. In Europe, imminent markets for aerospace ESO such as Spain and Italy, are expected to grow considerably during the forecast period.
The Asia-Pacific region is expected to witness a significant CAGR during the projection period due to the increasing number of collaborations between aerospace OEMs and service providers, which are predicted to increase significantly due to the availability of a low-cost, highly skilled workforce. Within Asia-Pacific, China showcases the most significant market share. In contrast, India, followed by Japan, is anticipated to witness higher CAGR over the forecast period, despite the ongoing pricing pressures, due to heightened competitive intensity.
LAMEA is expected to grow steadily over the forecast period. The active competition presently seen in the Middle East and Africa and Latin America regions are expected to be the growth factor for the aerospace ESO sector. The areas are anticipated to outperform over the forecast period compared to other matured markets.
|Report Coverage||Revenue Forecast, Competitive Landscape, Growth Factors, Environment & Regulatory Landscape and Trends|