F.I. on the Saudi Defense Market to 2012

In 2006 Saudi Arabia announced a raft of arms purchases, from mobile howitzers, to helicopters, to advanced fighter aircraft. More requests have followed, including a controversial request for JDAM GPS-guided bombs. Many of these official requests have yet to turn into firm contracts, but the volume of fulfilled requests has attracted attention nonetheless. So, too, has the diversification of Saudi suppliers, as Russia enters the arena for the first time. Will Saudi spending continue? How significant is it? Forecast International… forecasts:

“Faced with both internal and external threats to its security, Saudi Arabia will continue to boost defense spending significantly over the coming years… Record-high oil prices, substantial influxes of energy revenues and an unyielding global demand for Saudi petroleum, meanwhile, will continue to serve as enablers… Saudi defense and security spending – estimated by Forecast at around $36 billion for 2008 – will reach almost $44.5 billion by 2012… the fledgling Saudi defense industrial base is limited primarily to maintenance work thus leaving Riyadh heavily dependent upon international suppliers for its equipment. As a result the Saudi market is not only the largest for defense equipment in the Middle East, but one of the largest worldwide.

…Meanwhile, the Saudi government is attempting to rectify its defense industrial shortcomings, partly by increasingly insisting on offsets and technology transfers as conditions for arms purchases. The defense ministry is also initiating a program to domestically-produce spare parts for its weapons platforms, and a ‘Saudization’ process whereby a shortage of technically-qualified workers is filled through increased ranks of trained, qualified Saudi workers. Despite these initiatives progress in developing the Saudi defense sector is slow and its projects and workforce remain foreign-dominated…”

US AFA: Threats to American Air Supremacy

The US Air Force Association recently released a video entitled “Threats to Air Supremacy,” which offers a very basic look at emerging land and air-based threats to America’s “teen series” fighters in particular. Given the importance of air supremacy to American military doctrine, this is an issue that can be expected to become more prominent in coming years. As such, we present a Flash-based version below, without commentary, as a service to our readers.

The video can also be viewed using Windows Media Player: [High-res | Low-res]

Lexington: US Politics and the Defense Budget

With American elections approaching, questions are being asked in the industry about the potential implications for American defense policy. In January 2007, “The Impact of Recent Political Changes on the Defense Sector” transcribed Loren Thompson of the Lexington Institute think tank, during the Raymond James Washington Technology & Services Summit. It offered some interesting thoughts on the contractor/ military political gap, and added:

“The bottom line on the Democratic defense agenda is that it doesn’t reflect much support for new technology outlays, but it also doesn’t herald an era of rapidly declining defense budgets. What’s likely to change is the composition of defense spending rather than the scale.”

Fast forward to February 2008, where Thompson is speaking to US Army Leaders at the RAND Arroyo Center. “The Role Of Party Politics In Shaping Defense Priorities” offers an impartial presentation of how the two major parties evolved, how they think about national security, their inclinations and allocation preferences with respect to the defense budget, and what a victory by either side probably means. Unusually, it is a fair presentation that puts forward each party’s broad view reasonably faithfully. Which matters, because:

“…we need to understand how party politics shapes defense policy — not because we like it, but because it is a fundamental reality of life in a democracy. Did you know that a recent study of weapons outlays found 91% of all the variation in spending over the last four decades was traceable directly or indirectly to which party controlled the Senate and the White House? Like me, you probably thought that threats were the main driver of weapons spending, but the data show otherwise.

Read both speeches, consider your own experiences, and decide what you think. Thompson also changes his tune slightly, however, when he says that:

“… if the Democratic Party wins control of the White House and Congress in November, it will take a huge demand stimulus from the likes of Osama bin Laden to prevent a leveling off and then decline in defense spending in subsequent years.”

KC-X: Rating the Contenders

KC-X contenders

As the $35 billion KC-45 tanker purchase flies into the teeth of Washington’s political battles, the Lexington Institute think-tank discusses the relative ratings of each contestant in the USAF’s aerial tanker competition. This is a bit unusual, as even Boeing has yet to hear the official debrief – a fact that has them somewhat upset. DID would not normally consider a report of this nature credible, but the think-tank has a wide range of contacts in Washington, and has been focusing on this deal for some time. Their broad assessment also mirrors commenets made by Sen Richard Shelby [R-AL], so it is possible – but not certain – that their report is correct.

Lexington defense analyst Loren Thompson contends that the Airbus/Northrop Grumman proposal would be able to deliver 49 operational tankers by 2013, whereas Boeing would have been able to deliver just 19 aircraft within that timeframe. That’s an interesting calculation whose basis DID would be interested in viewing, but public access may be an issue as it was attributed to USAF reviewers. Beyond that, Thompson concludes that Boeing lost out on 4 of 5 key measures, and tied on the 5th. Of course, sharp-eyed DID readers will recall that they were 9 Key Performance Parameters listed in the RFP…

Teal 2008: $55B Global UAV Market Over Next Decade

(click for report page)

In November 2005, “UAV Market to Top $13.6B from 2006-2014” covered a Forecast International report. In September 2006, a Teal Group market study added R&D, maintenance, related sensors, et. al. to their total, and came up with a much higher total from 2006-2016 – $54 billion.

The Teal Group is now issuing their 2008 World Unmanned Aerial Vehicle Systems annual sector study, and the total is holding steady at a projected $55 billion. They see the current worldwide UAV expenditures of $3.4 billion annually to $7.3 billion within a decade, with the USA accounting for 73% of the worldwide RDT&E spending on UAV technology and about 59% of the procurement (vs. overall global defense spending shares of 67% and 37%, respectively). Even so, European UAV markets are becoming increasingly important, and UAV projects in countries like Turkey, Pakistan, the UAE, Argentina, et. al. are demonstrating that the sector’s dynamism at the low-medium end is well within the reach of local players around the world. Maintenance will also grow as more UAVs enter service, and so will the complementary sensors market that Teal includes in its forecasts as an integral part of platform costs. Teal Group release | Report overview page.

Can the US Army Afford Helicopter Modernization?

RAH-66 Comanche

The Defense Procurement Death Spiral. It’s what happens when the costs of each successive generation of equipment rise faster than inflation, leading to smaller, longer production runs that inflate costs further and often force additional rounds of cuts, as weapons programs collide with one another inside limited budgets. That isn’t what’s happening to the US Army’s helicopter modernization program, which canceled the world-leading RAH-66 Comanche scout/attack helicopter in favor of less capable but cheaper and more numerous off-the-shelf designs in the light utility (UH-72A) and armed reconnaissance (ARH-70A?) space, and is sticking with the proven CH-47 Chinook family (heavy lift) and H-60 Black Hawk family (utility) as its new-build options. A choice that’s creating a niche for new options and features in the utility space like the NH90 TTH, and Sikorsky’s H-92 Superhawk.

Even so, the Congressional Budget Office sees choppy air ahead. The US Army’s helicopter fleet has plunged from 9,000 at the end of the Cold War to 3,500 just 20 years later, and the “procurement holiday” of the 1990s plus high demand in the current conflict means that most of the helicopters in today’s fleet already exceed or soon will reach ages “greater than the Army considers practical.”

ARH-70A testing

The CBO estimates that the Army’s modernization plan will cost $3.3 billion per year, on average, from 2007-2030, significantly more than the $2.2 billion annual average the Army has spent between 1986-2005. Military planners who propose future spending boosts are usually deluding themselves, unless the country embarks on a major increase in the defense procurement budget as a whole, or other areas are short-changed in exchange. Worse, this proposed spending boost comes in the same post-2020 time frame that the Army expects to invest heavily in the new $260+ billion Future Combat Systems (FCS) family of equipment. Yet short of shrinking the force again, or accepting further aging in the fleet, the low-cost approaches pursued by the US Army mean that there’s little potential to reduce spending on its overall helicopter modernization programs – as the CBO’s 4 alternative scenarios demonstrate. Read “Modernizing the Army’s Rotary-Wing Aviation Fleet (November 2007)” [PDF]

FI: Radar Market $50B from 2007-2016

APG-79 AESA

Market analyst firm Forecast International projects that the worldwide radar market will be worth $50 billion from 2007-2016, with at least 11.306 units produced. “The Market for Radar Systems,” is based on a review of 107 radar production, operations & maintenance, and RDT&E programs.

One trend noted in the report is the consolidation of platforms into single radars that can perform multiple tasks, while operating close to the enemy and in urban areas. Another is the growth of the airborne early warning and control (AEW&C) market, thanks to smaller radars like the MESA radar (E-737), Saab’s Erieye (EMB-145, S-100), and IAI’s EL/M-2075 Phalcon (Gulfstream 450) that can be mounted on smaller aircraft. A third is the growth of Active Electronically Scanned Arrays. These radars boast a number of important multi-tasking, performance, maintainability, upgradeability, and capability advantages over traditional mechanically-steered radars. While more mechanically-scanned arrays will be produced, AESA radars will catch up in terms of overall value, and will become increasingly important.

Raytheon and Northrop Grumman are expected to continue to top the top 5, but consortia like AGS Industries creating the TCAR radar in NATO’s new ground surveillance planes; the MEADS International anti-air missile project; and the Euroradar consortium are beginning to appear on the leader board. Forecast International release | study.

Vector Predicts $8B US Material Market for Vehicle Armor

Analyst firm Vector Strategy recently released a report that provides a forecast of materials required to meet the Department of Defense’s annual procurement rate of armor for military ground vehicles. The forecast covers a time horizon of 2006-2013 inclusive, and covers only of military ground vehicles purchased by the DoD for deployment by US military services, addressing the supply chain, the competitors, and the demand and prospect for various materials involved in that chain.

The firm projects that over $8 billion of material will be required, covering steel, aluminum, ceramics, composites, transparent armor, and more. They expect 2008 to be a surge market due to MRAP vehicle armor procurement, and EFP (Explosively Formed Penetrator, think “instant tank shell”) land mine protection for Hummers and MRAPs. They’ve clearly based their report on Pentagon plans, for the market is expected to sag a bit from 2010-2011 timeframe, then grow substantially by 2013 due to JLTV armor and a transition to higher cost non-metallic armor solutions. This depends, of course, on one’s assessment of what JLTV will become – if anything. In 2008, meanwhile, metals will retain a 2/3 share of the market by weight, with demand driven by light tactical vehicles (38% of material requirements), mine resistant vehicles (31%) and other combat vehicles (20%); the remaining 11% covers armor for medium and heavy tactical vehicles, and marine specific vehicles.

HMMWV, IEDed

“Material Requirements and Supply Chain Analysis of Armor Procurement for US Military Ground Vehicles” has more, including key questions answered, more detail re: scope of coverage, and downloadable items.

Urban Challenge 2007: A Tech Exec’s Reflections

By Tim Oren

This article is a follow-on to the play-by-play discussion in “DARPA Urban Challenge 2007: George Town Races” that looked at events on the course. This article looks at everything that happened, and is likely to begin happening, outside of it.

Looking at the crowds at the 2007 Urban Challenge, you’d be forgiven for wondering if DARPA has touched off another of the famous side-effects from its research projects. The event was open and free to the public. While the teams and DARPA staff were present for the duration, the spectators came and went through the day, making it hard to judge the crowd. But I’d say at least a third and maybe half of the attendees were fans. Some seemed to have found a new kind of southern California entertainment: NASCAR for Nerds!

In reality, the goals of DARPA and the tastes of race fans are in conflict. Safety and reliability aren’t usually compatible with speed and risk. (There could be a future for autonomous bot races on the tube, however. Rumor had it that the presence of Discovery Channel talent indicated a forthcoming special or mini-series on the Urban Challenge.)

The Grand Challenges are like NASCAR in some important respects, however – and a few of them herald changes to the way we think about vehicle platforms, robotics, and more…

Forecast International: A Gloomy Outlook for Europe

Europe

Analyst firm Forecast International’s “Europe Market Overview” offers a less-than-optimistic view of Europe’s status as a defense market, and provide very relevant background to US Secretary of Defense Robert Gates’ Oct 25/07 speech at the Conference of European Armies. Forecast International:

“Currently only four dual EU-NATO members have military budgets that allocate the NATO minimum requisite of 2 percent of annual GDP for defense: France, the United Kingdom, Bulgaria and Romania… Greece – typically one of the bigger defense spenders in Europe – is reining in its budget, bringing it down to 1 percent of GDP or less through 2015. Forecast International projects that, by 2011, total defense spending across the European continent will amount to just under $300 billion…

“What you have today is a Europe that seeks to project greater international involvement and security responsibility, whether through defensive measures in Afghanistan or humanitarian or peacekeeping operations in Lebanon, Kosovo and areas of Africa,” [Forecast International analyst Dan] Darling continues. “Yet these governments are asking more from their downsized militaries while providing less by way of defense appropriations… So long as Europe’s public at large lacks the perception of a distinct security threat, raising defense spending will not be an immediate concern in European capitals, thus forcing governments to confront hard choices.”…”

See also DID’s “EU Procurement Challenges & Defense Weakness Debated“