Market Overview
The global defense equipment market revenue was valued at USD 517.2 billion in 2023 and is projected to reach a value of USD 762.1 billion by 2032, registering a CAGR of 4.4% during the forecast period (2024-2032). The increase in global industry share during the forecast period is related to increased global security concerns, geopolitical tensions, and a growing emphasis on military modernization, which drives more lavish defense spending by governments worldwide. Europe boosts defense spending to record high, driven by regional concerns and NATO commitments. Collaboration efforts like Eurofighter Typhoon production and PESCO highlight joint efforts in the European defense sector.
Defense equipment encompasses various military gear, systems, and technologies developed and used for national defense and security goals. This includes a wide range of products such as weaponry (firearms, missiles), military vehicles (tanks, armored personnel carriers), aircraft (fighter jets, helicopters), naval vessels (warships, submarines), communication systems, surveillance equipment, cybersecurity solutions, and other specialized tools required by armed forces to maintain and improve their capabilities on land, at sea, and in cyberspace.
The global defense equipment market includes various products and systems designed for military use, including modern weaponry, military vehicles, and aerospace and naval systems. Geopolitical factors, national security concerns, and technology breakthroughs shape this sector, reflecting significant defense spending by governments worldwide. Current research and development efforts are centered on incorporating emerging technologies such as artificial intelligence and autonomous systems. Defense budgets, geopolitical tensions, and the need for modernization strongly influence the market, with major powers such as the United States, China, and Russia making significant contributions to global defense capabilities and commerce.
Top 2 Key Highlights
- High Mobility Vehicles account for the largest share of the market based on product type.
- The army influenced the market growth based on sales channels.
Market Dynamics
Global Defense Equipment Market Drivers
Geopolitical Tension
Geopolitical conflicts, such as those in the South China Sea, continue to substantially impact demand for defense equipment. Territorial disputes in the region have spurred countries such as China, the United States, and others to strengthen their military capabilities, resulting in increased purchases of advanced defensive equipment. Furthermore, the ongoing confrontation between Russia and Ukraine has fueled geopolitical tensions in Eastern Europe. Both countries have boosted military spending and improved defensive capabilities. This includes acquiring modern weaponry, deploying troops, and investing in military infrastructure along their respective borders.
Additionally, the current Israeli-Gaza conflict has heightened geopolitical tensions throughout the Middle East. The battle has far-reaching implications for international relations, the global economy, energy markets, and human rights. As of December 2023, Israel's military reaction had killed nearly 20,000 Palestinians and created a humanitarian crisis for the Gaza Strip's remaining 2.2 million citizens. During the three days of battle, both the Israeli army and Palestinian armed organizations appear to have committed war crimes.
Similarly, according to a 2023 SIPRI estimate, worldwide military spending in 2022 was USD 2,240 billion, up 3.7% from 2021. Military expenditures surged for the eighth consecutive year in 2022, with Europe's spending rising the most in 30 years. This increase in spending reflects the effect of geopolitical tensions on defense budgets and the resulting demand for defense equipment in the region. The trend persisted for consecutive years, underscoring the importance of geopolitical factors in driving the defense equipment market trend.
Global Defense Equipment Market Restraints
Budget Constraints
Budget limits have been a severe barrier to defense equipment purchase, particularly in countries confronting economic troubles. For example, European nations, notably those in the European Union (EU), have faced budget constraints that have hampered defense investment. Austerity measures adopted following the global financial crisis impacted defense budgets, reducing investment in new equipment and modernization initiatives. In 2022, the US government spent USD 136 billion on weapons and systems and USD 107 billion on R&D.
Furthermore, the Pentagon believes that the first phase of the NMD system will cost USD 5.4 billion to integrate, or nearly 30% of its projected cost of USD 18.6 billion. In 2022, the Missile Defense Advocacy Alliance (MDAA) claimed that the SM-2 costs USD 2.1 million per unit, the SM-6 costs USD 4.3 million, and the ESSM Sea Sparrows cost USD 1.7 million. According to the European Defense Agency (EDA), European NATO nations' defense spending decreased following the financial crisis. According to the EDA's annual report, EU member states' defense spending declined by 1.4% in real terms in 2010 and 2.5% in 2011. These decreases were primarily due to fiscal austerity measures and economic issues encountered by various European countries. Budget restrictions impacted defense procurement decisions as nations struggled to balance financial objectives and national security needs.
Global Defense Equipment Market Opportunity
Military Modernization Programs
The global trend of military modernization presents enormous prospects for defense equipment providers. Countries like India have launched ambitious modernization efforts to strengthen their defense capabilities. SIPRI estimates that the United States will be the world's most lavish military spender in 2023, with a defense expenditure of USD 877 billion. The United States accounts for 41% of global military spending and 70% of NATO budget. The Indian government's "Make in India" plan includes significant investments in defense manufacturing, technological transfer, and cutting-edge weaponry and equipment acquisition. The emphasis on modernization is seen in India's procurement plans, which include the purchase of advanced fighter jets, submarines, artillery weapons, and surveillance technologies. For example, acquiring Rafale fighter jets from France is part of India's efforts to modernize its air force.
Similarly, several countries, particularly those in the Middle East and Southeast Asia, have set aside significant funds for military development. Saudi Arabia, for example, has announced the Saudi Vision 2030, which includes ambitions to develop a local defense sector and improve the capabilities of its armed forces by acquiring new defense equipment.
Regional Analysis
The global defense equipment market analysis is conducted in North America, Europe, Asia-Pacific, the Middle East, Africa and Latin America.
North America's Defense Equipment industry share is estimated to grow at a CAGR of 4.2% over the forecast period. In recent years, massive spending on defense equipment acquisition, training programs, and R&D division operations in the United States has helped North America emerge as a market leader. The United States' investment in weapons procurement and R&D operations alone was set to exceed the Republic of China's entire defense budget. North America also extended the gap between Europe's defense equipment market, with US defense investments four times more than the European Union's total expenditure. This rise in North America is attributable to an increase in defense spending by the United States, which wishes to develop quickly.
Similarly, security agreements and treaties with various nations worldwide have necessitated significant investments in the procurement of defense equipment by the United States. Furthermore, security agreements and close bilateral relationships with the governments of various nations raised the need for U.S. armed soldiers, which can help to encourage regional growth.
Asia-Pacific is anticipated to exhibit a CAGR of 4.8% over the forecast period. Asia-Pacific is expected to increase due to significant investments by countries such as China and India. Sensitive international borders and escalating disputes between countries in these regions are driving up the procurement and deployment of defense equipment. For example, India has always faced hostile and challenging situations near the line of control, necessitating military developments.
Additionally, the increasing rise of defense equipment manufacturers based in China is boosting the region's adoption and use of performance parts. China's defense sector has traditionally prioritized mass manufacture over high-end weaponry. China's defense budget in 2023 is USD 230.3 billion. The region's predisposition for effective vehicle customization to ensure improved fuel efficiency and engine performance is boosting defense equipment sales.
The European defense equipment market is an integral part of the global defense sector, with European countries investing in defense capabilities to handle regional security issues and meet NATO commitments. One famous example is the Eurofighter Typhoon, a multi-role fighter aircraft produced by European countries, including the United Kingdom, Germany, Italy, and Spain. The Eurofighter Typhoon is a collaborative effort in the European military sector, and it is an essential component of the air forces of the participating countries. World military spending reaches a new high as European investment increases. Stockholm, April 24, 2023. Moreover, total global military expenditure climbed by 3.7% in real terms in 2022, reaching a new high of USD 2240 billion. Military spending in Europe increased unprecedentedly in the last 30 years. The European Defense Agency (EDA) promotes collaboration and capabilities development among EU member states. The EU's Permanent Structured Cooperation (PESCO) strategy seeks to strengthen security cooperation among EU members by facilitating cooperative initiatives and investments in defense capabilities.
The Middle East and Africa is projected to account for a sizable portion due to the enormous geopolitical tension between Israel and Gaza. Israel's military industry is in good shape in 2023, with exports hitting USD 12.5 billion in 2022, a 20% rise from the previous year. As of 2023, Israel has more than 150 active defense enterprises, accounting for 2.3% of global arms exports. In 2023, Israel's government will invest another NIS 30 billion in defense expenses, accounting for approximately 5.7% of its GDP. The Finance Ministry has also stated that Israel may need to increase defense spending by at least 30 billion shekels (USD 8.3 billion) next year as the fight against Hamas continues.
Segmental Analysis
The global defense equipment market is segmented based on product type and sales channel.
By product type, the market is further segmented into High Mobility Vehicles, Small Arms and Rifles, Heavy Arms and Missiles, Unmanned Vehicles, Communication Systems, Naval fleets, Aircraft and Aero Engines, Submarines, Training and Simulation.
High Mobility Vehicles account for the largest share of the market. High Mobility Vehicles are military transport vehicles that can move quickly across various terrains. These include armored personnel carriers, infantry fighting vehicles, and light utility vehicles. Military operations require high mobility, which allows troops to quickly deploy, maneuver, and adapt to complex battlefield circumstances. These vehicles frequently use modern suspension systems, strong armor, and off-road capabilities to negotiate rugged terrain, providing tactical advantages in offensive and defensive operations.
Small arms and rifles are essential to infantry weapons, including assault rifles, carbines, and submachine guns. These weapons are the principal weaponry used by individual soldiers, providing versatility and adaptability in various combat situations. Small weapons technology advancements aim to improve accuracy, reduce weight, and increase modularity to suit the changing needs of modern infantry. In the fourth quarter of 2023, the United States sold more than 4.7 million weapons, a 4.6% rise over the same quarter in 2022. The total for 2023 is about 15.9 million, slightly lower than the 16.4 million recorded in 2022. Military modernization plans, the necessity for lightweight and dependable personal weapons, and developments in materials and production techniques all propel the small arms and rifle market forward.
Heavy Arms and Missiles segment includes a wide range of products such as ballistic missiles, cruise missiles, anti-aircraft missiles, and large calibre artillery systems. Technological advancements, such as improved targeting systems, enhanced propulsion mechanisms, and increased payload capacities, are fuelling growth in this market. Major players in the industry are investing heavily in research and development to create next-generation weapons systems, which are in high demand from governments and defines organizations worldwide. The segment is also influenced by international arms trade regulations, defines procurement policies, and collaborations between countries for joint development projects.
Unmanned aerial vehicles, commonly known as drones, dominate this segment due to their extensive use in surveillance, reconnaissance, and combat operations. UGVs are gaining traction for their roles in bomb disposal, logistics, and ground reconnaissance. The demand for unmanned vehicles is driven by their ability to reduce human casualties, provide real-time data, and enhance operational efficiency. Technological advancements, such as autonomous navigation systems, further propel the growth of this market segment
Communication Systems include military tactical communication systems, satellite communications, radio communications, and secure data links. These systems allow smooth coordination between all types of military forces and platforms to ensure an uninterrupted flow of time-critical information to achieve command and control in carrying out modern operations. Advancements in communication technology have resulted in more robust and adaptable systems that come with features such as encryption, cybersecurity, and the interoperability to link with other defence communications. Additionally, defence modernization programs worldwide are propelling the demand for cutting-edge communication systems to replace outdated equipment and enhance military capabilities.
The naval fleet segment refers to the products used for naval operations and maritime defence, including procurement and maintenance of carriers, submarines, destroyers, frigates, corvettes, patrol boats, auxiliary/support ships, and supply and hospital ships. Advanced weapon systems, radar and sonar technologies, communication and navigation systems, and propulsion systems are some of the key components. Maritime security concerns, geopolitical tensions, and a fleet renewal program against a backdrop of aging fleets thus drive the market growth. Other technological developments in this segment include stealth technology, unmanned naval systems, and integrated combat systems. Some of the major firms operating in this market include global defence contractors and shipbuilders that render end-to-end solutions from designing and manufacturing to lifecycle support and modernization programs.
Aircraft and Aero Engines make up an important component of new technologies that enable strategic capabilities. Military aircraft, from fighter jets to transport aircraft, helicopters, and UAVs, and the related engines are part of this segment. This is growing market demand, impelled by advanced requirements in aerial combat systems, surveillance, reconnaissance missions, and fast troop and cargo transport. Next-generation aero engines go with improved fuel efficiency, reduced emissions, and higher thrust-to-weight ratios. Principally, the leading players drive better performances of aircraft through huge investments in R&D for innovating the technology of propulsion systems.
Submarines can be divided into nuclear-powered and diesel-electric-powered. Nuclear-power-based submarines have enriched operational range and endurance; they can sustain longer and more operations without frequent refuelling. Whereas the diesel-electric ones are relatively cheaper and more suitable for coastal defence and shorter missions, the general requirement of submarines is basically met by advanced underwater capability demands in areas such as stealth, surveillance, and strike. The main participants in the submarine market are key countries that field large naval forces—for instance, the US, Russia, and China—and India and Brazil, the emerging naval powers. Advancements in sonar systems, advanced weaponry, and enhancement of stealth features are some of the technological developments that are factored as critical for the market growth.
The market can be further bifurcated by sales channels into Air Force, Army, Navy, and Research and Development Institutions.
Army influenced the market growth. The Army sector of the sales channel includes the procurement and sale of ground-based defensive equipment designed for land operations. This comprises various military vehicles, artillery systems, small guns, and communication technologies. Armies worldwide invest in tanks, armored personnel carriers, infantry weapons, and other ground-based technologies to improve their capabilities in various operational scenarios. In 2023, India's defense exports hit a historic Rs.16,000 crore, over Rs.3,000 crore higher than the previous year. Defense production exceeded Rs.100 crore for the first time in 2022-2023. The Army sales channel includes procurement plans to provide ground forces with sophisticated and adaptable technology that ensures mobility, protection, and firepower. Collaboration with defense industries is critical for achieving militaries' specialized objectives and modernization goals. Army segment includes a comprehensive array of equipment essential for army operations, such as infantry weapons, battle tanks, artillery systems, and armoured personnel carriers. It also covers advanced technologies like unmanned aerial vehicles (UAVs), missile defence systems, and tactical communication networks. The army's equipment needs are shaped by evolving warfare strategies, operational requirements, and advancements in technology. As threats and defence strategies evolve, there is a growing emphasis on developing and procuring equipment that enhances mobility, firepower, and protection. Additionally, modern armies require integrated systems for command, control, and intelligence to support decision-making and operational efficiency.
The sales channel's Air Force section concentrates on purchasing and selling defense equipment designed for aerial warfare. This encompasses a diverse spectrum of military aircraft, helicopters, and related technology. Air forces worldwide invest in fighter jets, surveillance aircraft, transport planes, and airborne early warning systems. These acquisitions aim to preserve air superiority, strategic reach, and the ability to carry out aerial operations such as surveillance, interception, and strategic bombing. The Air Force sales channel works with military contractors to supply cutting-edge aircraft and related technology tailored to air forces' demands and strategic goals worldwide.
Air force segment encompasses a wide range of products, including fighter jets, transport aircraft, unmanned aerial vehicles (UAVs), and various support systems like radar and communication equipment. The increasing geopolitical tensions and the need for modernizing air fleets drive the demand for these advanced air defence systems. Additionally, technological advancements in stealth, artificial intelligence, and electronic warfare further propel the growth of this segment. Investments in research and development are substantial, with a focus on enhancing capabilities such as speed, manoeuvrability, and payload capacity. The Air Force's emphasis on maintaining air superiority ensures continuous innovation and procurement.
Navy segment includes a variety of assets such as naval vessels, submarines, and maritime patrol aircraft, which are critical for maintaining naval superiority and ensuring maritime security. The market for Navy-specific defence equipment is driven by ongoing modernization efforts, geopolitical tensions, and the need for advanced technologies to address emerging threats. Modernization programs often emphasize integrating advanced technologies like autonomous systems, cyber warfare capabilities, and sophisticated radar and sonar systems to enhance operational effectiveness. As navies around the world seek to maintain a competitive edge, investments in cutting-edge technology and the development of next-generation naval platforms continue to drive growth in this market segment.
