Future of the Australian Defense Industry - Market Attractiveness, Competitive Landscape and Forecasts to 2023

Future of the Australian Defense Industry - Market Attractiveness, Competitive Landscape and Forecasts to 2023

Table of Contents

1. Introduction 9
1.1. What is this Report About? 9
1.2. Definitions 9
1.3. Summary Methodology 12
1.4. About Strategic Defence Intelligence 13

2. Executive Summary 14

3. Market Attractiveness and Emerging Opportunities 16
3.1. Current Market Scenario 17
3.1.1. Primary threat perception 17
3.1.2. Military doctrine and strategy 18
3.1.3. Military Fleet Size 19
3.1.4. Procurement programs 22
3.1.5. Ongoing procurement programs 22
3.1.6. Future procurement programs 24
3.1.7. Top Procurement Programs by Value (US$ Million) 2018-2023 26
3.1.8. Social, political and economic environment and support for defense projects 27
3.1.9. Political and strategic alliances 28
3.2. Defense Market Size Historical and Forecast 29
3.2.1. The Australian defense budget is set to post a CAGR of 8.10% over the forecast period 29
3.2.2. Military modernization and participation in peacekeeping missions are the factors driving the Australian defense industry 31
3.2.3. Australian defense budget as a percentage of GDP will remain at an average of 1.94% over the forecast period 33
3.3. Analysis of Defense Budget Allocation 35
3.3.1. Capital expenditure share to increase over the forecast period 35
3.3.2. Capital expenditure to post a forecast-period CAGR of 12.31% 37
3.3.3. Much of the defense budget is allocated to cyberspace and space-related security operations 39
3.3.4. The other segment to account for the majority share of Australia’s defense budget 41
3.3.5. Per capita defense expenditure to increase over the forecast period 45
3.4. Homeland Security Market Size and Forecast 46
3.4.1. Measures to curb organized crime, cyberattacks, and maritime threats to drive homeland security expenditure 48
3.4.2. Australia faces “moderate risk” of terrorism 49
3.5. Australia faces a moderate level of threat from foreign terrorist organizations 50
3.6. Australia has a terrorism index score of 3.1 52
3.7. Benchmarking with Key Global Markets 53
3.7.1. Australia’s defense expenditure to remain modest compared to the leading spenders 53
3.7.2. Australia will continue to dominate the arms market in the Asia-Pacific region 55
3.7.3. Defense expenditure as a percentage of GDP to remain at 1.9% over forecast period 56
3.8. Market Opportunities: Key Trends and Growth Stimulators 57
3.8.1. Top 10 defense market categories by value (US$ million) - forecast-period projections 57
3.8.2. Land-based C4ISR 58
3.8.3. Multirole aircraft 60
3.8.4. Submarines 61

4. Defense Procurement Market Dynamics 62
4.1. Import Market Dynamics 64
4.1.1. Defense imports expected to increase considerably over the forecast period 64
4.1.2. The US was the largest arms supplier to Australia during 2013-2017 65
4.1.3. Import of aircraft and missiles expected to surge over the forecast period 66
4.2. Export Market Dynamics 67
4.2.1. Defense exports are expected to increase over the forecast period owing to government initiatives 67
4.2.2. The US was the main importer of the Australia’s defense goods during 2013-2017 68
4.2.3. Aircraft and naval vessel constitute the majority of Australia’s exports 69

5. Industry Dynamics 70
5.1. Five Forces Analysis 70
5.1.1. Bargaining power of supplier: low to medium 71
5.1.2. Bargaining power of buyer: high 71
5.1.3. Barrier to entry: high 71
5.1.4. Intensity of rivalry: medium to high 71
5.1.5. Threat of substitution: high 71

6. Market Entry Strategy 72
6.1. Approval for foreign investment in defense industry set at US$216.2 million 72
6.2. Market Regulation 74
6.2.1. AIC program ensures the participation of local industry 74
6.3. Market Entry Route 74
6.3.1. Budgeting process 74
6.3.2. Procurement policy and process 75
6.3.3. Establishing a domestic subsidiary is the preferred market entry route 78
6.3.4. Foreign OEMs sub-contract defense deals to domestic firms to enter the market 78
6.3.5. Foreign OEMs offer domestic companies access to global supply chains in order to enter the industry 79
6.4. Key Challenges 80
6.4.1. Cost overruns and project delays continue to worry the defense industry 80
6.4.2. Low allocation of skilled labor in the defense industry 81

7. Competitive Landscape and Strategic Insights 82
7.1. Competitive Landscape Overview 82
7.2. Key Domestic Companies 84
7.2.1. Thales Australia: overview 84
7.2.2. Thales Australia: products 84
7.2.3. Thales Australia: recent announcements and strategic initiatives 85
7.2.4. Thales Australia: alliances 86
7.2.5. Thales Australia: recent contract wins 87
7.2.6. Boeing Defense Australia: overview 88
7.2.7. Boeing Defense Australia: products 88
7.2.8. Boeing Defense Australia: recent announcements and strategic initiatives 88
7.2.9. Boeing Defense Australia: alliances 89
7.2.10. Boeing Defense Australia: Recent Contract Wins 90
7.2.11. Lockheed Martin Australia: overview 91
7.2.12. Lockheed Martin Australia: products 91
7.2.13. Lockheed Martin Australia: recent announcements and strategic initiatives 91
7.2.14. Lockheed Martin Australia: alliances 92
7.2.15. Lockheed Martin Australia: recent contract wins 92
7.2.16. Raytheon Australia: overview 93
7.2.17. Raytheon Australia: products 93
7.2.18. Raytheon Australia: Recent Announcements and Strategic Initiatives 93
7.2.19. Raytheon Australia: alliances 94
7.2.20. Raytheon Australia: recent contract wins 94
7.2.21. Austal Ltd: overview 96
7.2.22. Austal Ltd: products and services 96
7.2.23. Austal Ltd: recent announcements and strategic initiatives 96
7.2.24. Austal Ltd: alliances 97
7.2.25. Austal Ltd: recent contract wins 97
7.2.26. Saab Systems: overview 99
7.2.27. Saab Systems: alliances 99
7.2.28. Saab Systems: products 100
7.2.29. Saab Systems: recent announcements and strategic initiatives 101
7.2.30. Saab Systems: recent contract wins 101
7.2.31. General Dynamics Land Systems Australia: overview 103
7.2.32. General Dynamics Land Systems Australia: products 103
7.2.33. General Dynamics Land Systems Australia: recent announcements and strategic initiatives 103
7.2.34. General Dynamics Land Systems Australia: recent contract wins 104
7.2.35. Navantia: overview 105
7.2.36. Navantia: products 105
7.2.37. Navantia: recent announcements and strategic initiatives 105
7.2.38. Navantia: alliances 106
7.2.39. Navantia: recent contract wins 106
7.2.40. Airbus Group Australia Pacific: overview 107
7.2.41. Airbus Group Australia Pacific: products 107
7.2.42. Airbus Group Australia Pacific: recent announcements and strategic initiatives 107
7.2.43. Airbus Group Australia Pacific: Alliances 108
7.2.44. Airbus Group Australia Pacific: Recent Contract Wins 108
7.3. Key Public Sector Company 109
7.3.1. ASC: overview 109
7.3.2. ASC: products 109
7.3.3. ASC: recent announcements and strategic initiatives 109
7.3.4. ASC: alliances 110
7.3.5. ASC: Recent Contract Wins 111

8. Business Environment and Country Risk 112
8.1. Economic Performance 112
8.1.1. GDP per capita 112
8.1.2. GDP at current prices (US$) 113
8.1.3. Exports of goods and services current prices 114
8.1.4. Imports of goods and services (current prices) 115
8.1.5. Gross national disposable income (US$ Billion) 116
8.1.6. Domestic currency unit per US dollar 117
8.1.7. Market capitalization of listed companies 118
8.1.8. Market capitalization of listed companies a percentage of GDP 119
8.1.9. Government cash surplus/deficit as a percentage of GDP 120
8.1.10. Goods exports as a percentage of GDP 121
8.1.11. Goods imports as a percentage of GDP 122
8.1.12. Goods trade surplus/deficit as a percentage of GDP 123
8.1.13. Service imports as a percentage of GDP 124
8.1.14. Service exports as a percentage of GDP 125
8.1.15. Foreign direct investment, net (BoP, current US$ Billion) 126
8.1.16. Net foreign direct investment as a percentage of GDP 127
8.1.17. Mining, manufacturing, utilities output (LCU Billion) 128

9. Appendix 129
9.1. About SDI 129
9.2. Disclaimer 129

List of Tables

Table 1: Australia - Army Strength, 2018 19
Table 2: Australia - Navy Strength, 2018 20
Table 3: Australia - Air Force Strength, 2018 21
Table 4: Australia - Procurement Programs 22
Table 5: Australia - Future Procurement Programs 24
Table 6: Australia - Defense Procurement Programs by Value (US$ Million) 2018-2023 26
Table 7: Australia - Defense Expenditure (AUD Billion/US$ Billion), 2014-2023 29
Table 8: Australia - GDP Growth vs Defense Expenditure as Percentage of GDP Growth, 2014-2023 33
Table 9: Australia - Defense Budget Split by Capital and Revenue Expenditure (%), 2014-2023 35
Table 10: Australia - Defense Capital Expenditure (AUD Billion/US$ Billion), 2014-2023 37
Table 11: Australia - Defense Expenditure Allocation (%), 2014-2023 39
Table 12: Australia - Defense Budget Breakdown by Service (AUD Billion), 2014-2023 41
Table 13: Australia - Defense Budget Breakdown by Service ( US$ Billion), 2014-2023 43
Table 14: Australia - Per Capita Defense Expenditure (US$), 2014-2023 45
Table 15: Australia - Homeland Security Expenditure (AUD Billion/US$ Billion), 2014-2023 46
Table 16: Terrorism Index, 2018 50
Table 17: Australia - Benchmarking with Key Markets (US$ Billion), 2014-2018 vs 2019-2023 53
Table 18: Australia - 10 Leading Defense Market Categories by Value (US$ Million) - 2018-2023 57
Table 19: Australia - FATA Approval for Acquisitions within the Defense Industry 73
Table 20: Australia - Budget Formation Timetable, (July 1-June 30) 74
Table 21: Australia - Foreign Military Sales Deals, 2012-2014 76
Table 22: Australia - Key Foreign OEMS and Subsidiaries 78
Table 23: Australia - Small Projects with Cost Overruns (US$ Million), 2018 80
Table 24: Australia - Major Projects with Cost Overruns (US$ Million), 2018 80
Table 25: Australia - Project Delays, 2018 81
Table 26: Australia - Top 10 Defense Suppliers by Value (US$ Million), 2018-2023 82
Table 27: Australia - Competitive Landscape, 2018 83
Table 28: Thales Australia - Main Products 84
Table 29: Thales Australia - Alliances 86
Table 30: Thales Australia - Recent Contract Wins 87
Table 31: Boeing Defense Australia - Main Products 88
Table 32: Boeing Defense Australia - Alliances 89
Table 33: Boeing Defense Australia - Recent Contract Wins 90
Table 34: Lockheed Martin Australia - Main Products 91
Table 35: Lockheed Martin Australia - Alliances 92
Table 36: Lockheed Martin Australia - Recent Contract Wins 92
Table 37: Raytheon Australia - Main Products 93
Table 38: Raytheon Australia - Alliances 94
Table 39: Raytheon Australia - Recent Contract Wins 94
Table 40: Austal Ltd - Main Products and Services 96
Table 41: Austal - Alliances 97
Table 42: Austal Ltd - Recent Contract wins 97
Table 43: Saab Systems - Alliances 99
Table 44: Saab Systems - Main Products 100
Table 45: Saab Systems - Recent Contract Wins 101
Table 46: General Dynamics Land Systems Australia - Main Products 103
Table 47: General Dynamics Land Systems Australia - Recent Contract Wins 104
Table 48: Navantia - Main Products 105
Table 49: Navantia - Alliances 106
Table 50: Navantia - Recent Contract Wins 106
Table 51: Airbus Group Australia Pacific - Main Products 107
Table 52: Airbus Group Australia Pacific - Alliances 108
Table 53: Airbus Group Australia Pacific - Recent Contract Wins 108
Table 54: ASC - Main Products 109
Table 55: ASC - Alliances 110
Table 56: ASC - Recent Contract wins 111

List of Figures

Figure 1: Australia - Defense Expenditure (AUD Billion), 2014-2023 30
Figure 2: Australia - Defense Expenditure (US$ Billion), 2014-2023 30
Figure 3: Australia - GDP Growth vs Defense Expenditure as Percentage of GDP, 2014-2023 34
Figure 4: Australia - Defense Budget Split by Capital and Revenue Expenditure (%), 2014-2023 36
Figure 5: Australia - Capital Expenditure (AUD Billion), 2014-2023 38
Figure 6: Australia - Capital Expenditure (US$ Billion), 2014-2023 38
Figure 7: Australia - Defense Expenditure Allocation (%), 2014-2023 40
Figure 8: Australia - Defense Budget Breakdown by Service (AUD Billion), 2014-2023 42
Figure 9: Australia - Defense Budget Breakdown by Service (US$ Billion), 2014-2023 44
Figure 10: Australia - Per Capita Defense Expenditure (US$), 2014-2023 45
Figure 11: Australia - Homeland Security Budget (AUD Billion), 2014-2023 47
Figure 12: Australia - Homeland Security Budget (US$ Billion), 2014-2023 47
Figure 13: Terrorism Heat Map, 2018 49
Figure 14: Terrorism Index, 2018 52
Figure 15: Benchmarking with Key Markets (%) 2014-2018 vs 2019-2023 54
Figure 16: Defense Expenditure of the World’s Largest Military Spenders (US$ Billion), 2018 and 2023 55
Figure 17: Defense Expenditure as a Percentage of GDP by Country (%), 2018 56
Figure 18: Australia - Land-Based C4ISR Market Size (US$ Million), 2018-2023 59
Figure 19: Australia - Multirole Aircraft Market Size (US$ Million), 2018-2023 60
Figure 20: Australia - Diesel Electric Submarine Market Size (US$ Million), 2018-2023 61
Figure 21: Australia - Defense Procurements in Terms of Supplier Relationships, 2018 63
Figure 22: Australia - Defense Import (US$ Million), 2013-2017 64
Figure 23: Australia - Defense Imports by Country (%), 2013-2017 65
Figure 24: Australia - Defense Imports by Category (%), 2013-2017 66
Figure 25: Australia - Defense Exports Trend (US$ Million), 2013-2017 67
Figure 26: Australia - Defense Exports by Country (%), 2013-2017 68
Figure 27: Australia - Defense Exports by Category (%), 2013-2017 69
Figure 28: Industry Dynamics - Porter’s Five Forces Analysis 70
Figure 29: Australia - GDP Per Capita at Constant Prices (US$), 2015-2025 112
Figure 30: Australia - GDP at Current Prices (US$ Billion), 2015-2025 113
Figure 31: Australia - Exports of Goods and Services (LCU Billion), 2005-2014 114
Figure 32: Australia - Imports of Goods and Services (LCU Billion), 2005-2014 115
Figure 33: Australia - Gross National Disposable Income (US$ Billion), 2005-2012 116
Figure 34: Australia - Domestic Currency Unit per US$ - Exchange Rate, 2015-2024 117
Figure 35: Australia - Market Capitalization of Listed Companies (US$ Billion), 2005-2012 118
Figure 36: Australia - Market Capitalization of Listed Companies as Percentage of GDP, 2005-2012 119
Figure 37: Australia - Government Cash Surplus/Deficit as a Percentage of GDP, 2005-2012 120
Figure 38: Australia - Goods Exports as a Percentage of GDP, 2005-2014 121
Figure 39: Australia - Goods Imports as a Percentage of GDP, 2005-2014 122
Figure 40: Australia - Goods Trade Surplus/Deficit as a Percentage of GDP, 2005-2014 123
Figure 41: Australia - Service Imports as a Percentage of GDP, 2005-2014 124
Figure 42: Australia - Service Exports as a Percentage of GDP, 2005-2014 125
Figure 43: Australia - Foreign Direct Investment, Net BoP (US$ Billion), 2005-2014 126
Figure 44: Australia - Net Foreign Direct Investment as a Percentage of GDP, 2005-2014 127
Figure 45: Australia - Mining, Manufacturing, Utilities Output (LCU Billion), 2005-2014 128

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