🎖 Intro
Throughout 2023, the two main themes worth tracking within the military and defense industries more broadly are the ongoing conflict between Russia and Ukraine, as well as heightened tension between the US and China. In aggregate, the United States security apparatus and congressional members more broadly seem to be more apprehensive overall of China than Russia as posing a direct threat to our country and the sovereignty of free democratic peoples throughout the world.
☑️ Post objectives: We will be focusing on two main topics, US market research around military and defense, as well as the trends, innovations, and tech that will drive military and defense in 2023 and beyond, both for the US market, and for the world at large.
🏷️ Tags:
US Military spending ; Military and Defense Market value ; Military and Defense Market Research ; Military and Defense Forecast ; Hypersonic Missiles ; Directed Energy Weapons ; Advanced Robotics ; Space Technology ; Additive Manufacturing ; Cyber War and Cyber Security ; Space DOD
🔰 Table of contents
🌐 Military and Defense Market Research
🥇 US Military and Defense spending
With an estimated $741 billion allocated to defense in 2020, the US was the largest spender. By 2023, this will increase to $819 billion, a 10% increase. According to estimates, the US exported $148 billion worth of defense products and services in 2020. By 2023, this will grow to $183 billion, a 23% increase.
🇺🇸 R&D Spending in the US Military and Defense Sector
In 2020, the US spent $85 billion on research and development, which is expected to rise to $95 billion by 2023. This represents an increase of 11%. In terms of venture capital investment, the US invested $21 billion in 2020 and is expected to invest $30 billion in 2023.
📈 Military and Defense Market Value
The market value of the global defense industry was estimated at $1.77 trillion in 2020. Globally, the U.S. defense industry accounted for roughly 40% of the market, while the European Union accounted for about 20%.
📊 Military and Defense forecast
From 2020 to 2023, the global defense market is expected to grow at a CAGR of 3%-4%, reaching $1.9 trillion. With an estimated market size of around $800 billion in 2023, the U.S. defense industry is expected to remain the market’s largest contributor. With an estimated market size of $400 billion in 2023, the European Union is expected to remain the second-largest contributor to the global market.
🧮 DoD Department of defense budget for 2024
In 2024, the Department of Defense (DoD) budget will be $740 billion, a 6% increase from 2021. Various branches of the military utilize this budget for personnel and operations, as well as research and development. With the increasing tensions between the US and China and the ongoing, zero-sum game war between Ukraine and Russia, the Department of Defense’s budget for 2024 is likely to be heavily oriented toward technology and equipment that will give the US an edge in the ongoing geopolitical landscape, as well as responding directly to the themes we are currently facing.
Furthermore, the budget is expected to fund the continued modernization of the US military and the acquisition of new weapons systems and platforms, which we will discuss in more detail in the next section on 5 military and defense technology trends for 2023.
🗺 Geopolitical military shifts in a unipolar world
Defense and military industries have undergone many changes in recent years. It has become increasingly important to have military and defense technology to protect national security interests as a result of geopolitical shifts, including tensions between the US and China, as well as the Ukrainian-Russian War, which has sparked a call to arms across the Eastern block and throughout Europe in anticipation of a potential contagion.
This endless zero-sum game is forcing the US to focus on long-term investments in military technology, while at the same time focusing on influencing European countries to follow a similar theme, including Germany and France, as well as European nations that have a border with Russia. However, with recent NATO summits indicating a possible NATO expansion to the east, it is truly anyone’s guess when the epitasis of this war will unfold.
🛡️5 Military and Defense Sector Trends for 2023
1. AI, ML, and Robotics 🤖
Artificial Intelligence (AI), machine learning (ML), robotics, and unmanned or autonomous (RAS) systems have also gained in popularity, and are employed as strategic military advantages; the shape of war in the post-industrial age. When thinking about the potential use cases for AI within the military and defense sector, both defensively and offensively, the applications are almost infinite, and will inevitably be used to solve problems within each of the themes that are covered in this section, from detecting cyber security threats to guidance systems for hypersonic missile systems.
AI in the military and defense sector is projected to reach a market size of ~$13.1 billion USD by 2028, measured as a CAGR of 10.8% for the forecasted period.
2. Cyber war and cyber security 📡
Cyber security and cyber warfare are two additional themes that have been a significant focus point for militaries and are often viewed as the 5th dimension of war, based on the respective military doctrines of countries throughout the world. When thinking about the cyber capabilities of nations, one can think about the scope and effect of the Stuxnet virus and the subsequent effects it had on computer systems throughout the world. This virus was able to penetrate an air-gapped system to infiltrate an Iranian nuclear enrichment facility, targeting a unique Simons control switch.
Within this new dimension of war, companies are racing to design solutions that both militaries and nation-states can leverage for both defensive and offensive purposes.
3. Additive Manufacturing and 3D Printing 🏗️
When thinking about the use cases for additive manufacturing and 3D printing within the military and defense sector, its applications can be viewed as being somewhat limitless, and only limited by the technology itself - Let’s for a moment imagine a future battlefield arena, where additive manufacturing can be used to print-on-demand replacement parts, from mechanical components to vital organs.
“The Office of the Secretary of Defense Manufacturing Technology (OSD ManTech) Program Office in the Office of the Under Secretary of Defense for Research and Engineering (OUSD(R&E)) released its first-ever comprehensive Additive Manufacturing (AM) Strategy in January 2021. The AM Strategy establishes a common vision for the use of this game-changing technology, which is also known as three-dimensional (3D) printing. OSD ManTech, which is under the Strategic Technology Protection and Exploitation (STP&E) Office in OUSD(R&E), crafted the Strategy in partnership with the Military Services and other defense agencies.”
The continued R&D for additive manufacturing can be viewed as a strategic advantage for future militaries. These processes will only continue to improve over the next few years and decades, whilst their use cases and military application will elucidate over time.
4. Directed Energy Weapons and Hypersonic Weapons 🔫
Directed energy weapons are projected to see widespread adoption, especially within the Navys of the world, as they provide a unique solution to the problem space of range and lethality of many of the current munition systems, specifically systems to counter hypersonic missiles. These systems are projected to grow to $17.43 billion USD in total market value at a CAGR of 9.48% according to Defense Engage.com.
The other future munition system worth calling out is hypersonic weapons, which have made headlines recently due to their use by Russia in the ongoing conflict. In the coming years, the militaries of the world will continue to research and develop more complex systems that are intrinsically difficult to counter via current missile defense systems.
5. Space Technologies and Aerospace 🛰️
As private space companies have become more prevalent, the military and defense sectors have shifted their focus to leveraging the private sector to solve military pain points, primarily the Air Force, as it is responsible for most of the US’s space defense efforts. There is a massive opportunity for companies operating in this space to support the military’s needs with the recently created Space Force and the rise of private space companies. SpaceX has single handedly changed the way the military space launch market functions by providing a better, more cost effective solution to launching materials, and people into orbit.
Before SpaceX, the US government had to rely on foreign governments to meet the launch quota for the US military. As a result, private space companies such as SpaceX and Blue Origin have experienced massive growth over the last few years and are projected to continue to grow.
Based on the report published here, the global launch services market was valued at $12.67B USD in 2021 and is projected to grow from $14.21 billion in 2022 to $31.90 billion by 2029, growing at a rate of 12.25% measured as CAGR.
⚛ Closing Thoughts
As society looks ahead to 2024, the military and defense industry is expected to continue its sustained contribution to the global economy. Let us not forget that it was often a direct result of the military-industrial complex that birthed so many of the technologies and scientific innovations we now take for granted, which is one silver lining of the ongoing geopolitical tensions and wars for any company operating within this space. Additionally, new technologies such as blockchain and quantum computing will be key to the development of future complex defense systems, beyond the themes we have already covered in this article.
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