Changing perceptions and threats usher in next generation naval sensors

14 April 2000

The traditional paradigm that has linked greater tonnage to greater firepower is changing. While procurement of smaller class ships (under 3,500 ton) has always been the pursuit of navies with limited power projection and resources (i.e. manpower, ports, access to deep water), the historical "blue water" western navies are also looking to smaller ships to confront a changing post-Cold War threat environment. This will change the strategies of radar and sonar manufacturers in addressing naval sensor markets.

Today, nations from every region of the world are procuring small ships, from frigates to patrol vessels. Today, western navies are focused on strengthening capabilities in coastal waters that are home to ever diversifying and illusive challenges, from mines to missile-equipped civilian vessels.

This threat scenario in which an adversary's weakness is exploited while avoiding his strengths, namely asymmetric warfare, is driving development of small, high firepower ships – and a new generation of sensors to equip them.

The table below is taken from Frost & Sullivan's latest study, World Markets for Naval Radar and Sonar; it provides the forecast market value in terms of unit and revenue sales, and growth for naval radar and sonar. The report provides detailed segment chapters covering radar and sonar markets individually [see The Executive Summary below].

Next generation naval radar and sonar are both reaping the benefits of advances in information technology (IT). The key driver being effectively networking and integrating these sensors through an enhanced IT infrastructure.

Advances in processing and communications technologies are being incorporated into concepts of operations for naval sensors. Orchestrated processing and integration of data from multiple radar and sonar from any number of vessels lowers risks of mission failure if any one vessel is crippled, expands the area of operations, and allows improved threat identification in removing "clutter" from the target area being surveyed.

Overlapping and redundant tasks traditionally taken on by "stovepipe" sensors, in which information is not integrated and shared, will ultimately be streamlined and removed.

Technologies allowing reduction of sensor size and power requirements, and multifunction capabilities, will also drive applicability toward smaller class ships.

Manufacturers are betting on the naval customer's embrace of these new operating concepts, which are embodied in new efforts such as the U.S. Navy's Street Fighter concept. They will be the key determinants to success and survival in a competitive environment that is increasingly predatory in nature.

The Frost & Sullivan report provides detailed analysis of the world markets for naval radar and sonar for the period 1998-2008. The regions covered include North America, Europe, Asia, the Middle East, Latin America and the Rest-of-World (ROW) regions. The report is segmented into distinct naval radar and sonar chapters, each of which cover the following applications:

Naval Radar

• Air defence surveillance radar
• Coastal surveillance radar
• Fire control radar
• Navigation radar

Naval Sonar

• Mine countermeasures
• Anti-submarine warfare

Summary of Major Findings

The two major categories of the naval sensor industry, radar and sonar, will each experience moderate revenue growth through 2008. Next generation sensor manufacturers are targeting the major growth forecast in international sales of smaller class (under 3,500 ton) ships, with reduced power requirements and size, and performance advances. As such, this relatively mature industry is currently experiencing a wave of technological change, which is examined in each segment chapter.

Radar and sonar are examined separately in this report as each exhibits unique market characteristics, which both drive and restrain projected growth. Each segment chapter also provides regional and competitor market share analysis. The forecasts reflect sales of the sensors only and no accompanying systems. For example, integrated combat systems are included.

Analysis by Major Segment

1. World Naval Radar Market - The world naval radar market accounted for $389 million in sales for 1999. While each of the major naval radar applications will exhibit different growth rates and trends, the combined segments reflect a compound annual growth rate (CAGR) of 13.7 percent for the period 1998-2008.

Major market drivers covered in the analysis are as follows:

• Surging International Procurement of Smaller Class Ships
• U.S. Navy's Support of Next Generation Radar Development will Stimulate World Market for Decades
• Advances in Radar and Communications Technology Signals Growth as Operational Scenario Changes
• Outright Radar Replacement Sought Versus Maintenance
• Proliferation and Diversifying Threats Drives Demand for New Radar Capabilities
• Need for Operational Flexibility Supports Continued Procurement of a Variety of Naval Radar
• Coastal Surveillance is a Growth Market

Major market restraints covered in the analysis are as follows:

• Current Budgets Limit Present and Future Radar Sales Growth
• High Rate of Technology Change Exacerbates Already-Slow Procurement Process
• Export Regulations are Always a Persistent Barrier
• Multinational Collaboration Increases Risks to Contractors
• Active Array Technology is Prohibitively Expensive, At Least in the Near Term
• Radar Modernisation Must Compete with Other High Priority Assets

2. World Naval Sonar Market - The world naval sonar market accounted for $244 million in 1999. Demand for sonar used in mine countermeasures is expected to drive a moderate level of growth overall, with a CAGR forecast to reach 6.3 percent for the period (1998-2008).

Major market drivers covered in the analysis are as follows:

• Mines are Increasingly Effective, Low Cost, and Proliferating
• Increasing Demand and Deployment of Submarines is Driving Strong Sales of Anti-Submarine Warfare Sonar
• Littoral Operations Challenge Acoustics, Stimulating New Approaches to Sonar Development
• Demand for Smaller Ships is Driving Growth of Sonar Market
• Off-Board Sensor Platforms Supporting Remote Mine Reconnaissance will Prove to be a Growth Application for Sonar
• Demand for a Network of Sonar in Anti-Submarine Warfare

Major market restraints covered in the analysis are as follows:

• Highly Fragmented Market Retains Barriers to Entry for Manufacturers
• Challenge of Imposing Multiple Missions on Next Generation U.S. Combatants
• Lower Priority of ASW Among International Navies
• Political Movements May Ultimately Impact Sonar Market

Competitive Analysis

Major defence/aerospace contractors dominate the naval radar and sonar markets, with each typically maintaining a division-level strength in both segments. However, there is a second tier of manufacturers that specialise in one or two particular applications of naval sensors.

Navigation radar is a particularly strong application representing this second tier participation. As is common with many defence markets, participation of the top tier, relatively large defence/aerospace manufacturers, occurs mostly when very large national-level government contract opportunities exist. Such programs often involve long-term technology development and application, and support of a major platform's lifecycle.

• Top tier participants in the naval radar market include:

  • Lockheed Martin Naval Electronics & Sensor Systems
  • Thomson CSF
  • Raytheon Systems Company
  • BAE SYSTEMS

• Top tier participants in the naval sonar market include:

  • Lockheed Martin Naval Electronics & Sensor Systems
  • Thomson Marconi Sonar
  • STN Atlas Elektronik
  • Raytheon Systems Company
  • Northrop Grumman Oceanic Systems

Conclusions

The naval radar and sonar markets are saturated, as the top tier competitors in each segment control more than 80 percent of the market in terms of sales revenues. However, competitors in each market segment are facing a number of challenges, the most formidable perhaps being the need to address competitive conditions arising from an increase in international partnerships and joint ventures among manufacturers.

These actions are enabling competitors to rapidly gain strong regional advantages, as their representation expands via the partnership. Issues regarding technology and employment offsets, and customer preferences for a local manufacturer continue to draw attention away from the selection of a sensor system based entirely on its technological merit.

Radar business and marketing strategies are undoubtedly becoming increasingly customer-benefit oriented and are focused on increasing international presence. The top tier competitors are clearly exemplifying this trend, however, the question remains as to the ultimate success of second tier competitors who are mostly reliant on business obtained from their home customer.

The industry will continue to reshape, as those not engaging in international partnerships will likely be subject to further industry acquisitions and consolidation.

REF XQQFS

editor@defence-data.com

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