56 R&DMagazine December 2013 www.rdmag.com
R&D among aerospace, defense and security firms is primarily driven by two sectors: the U.S. Department of Defense (DOD) and the
global airline industry. The major aerospace and defense contractors
plan R&D in close coordination with DOD to meet the needs of
national defense and global security, while capacity, economics and
efficiency are drivers for civil aviation requirements. Recent declines
in U.S. R&D have been the result of reductions in defense R&D and
procurement spending and reductions in commercial aviation R&D,
driven largely by Boeing’s R&D returning to a more typical level following the Dreamliner launch.
Internal R&D and technological integration in materials, electronics and communication and surveillance technologies, within both
civilian and defense aerospace, is partially offsetting reduced government funding by creating more efficient, cost-effective capabilities.
The economic and policy climate indicates a small decline in 2014,
and we project (-1.2%) retrenchment for aerospace/defense/security industry R&D, reaching $12.6 billion. Beyond the U.S., global
industry R&D spending remains stable due to growth among major
non-U.S. aerospace firms in Asia, Russia and Europe, reaching $26.4
billion in 2014.
Trends and Forecast
The aerospace, defense and security (ADS) industry comprises
the major aerospace firms—almost all serving both military and
commercial aerospace markets. It also includes navigation, instrumentation and communication suppliers, and other firms engaged
in defense and homeland security-related activities. Firms in this
industry typically maintain close R&D ties with the U.S. DOD,
through collaboration and contract research.
The DOD funds a wide variety of contract research activities that
fall outside the scope of this specific industry forecast. 4 Our estimates and forecast for the U.S. and global ADS industry R&D are
based on company-funded efforts only and do not include the value
of defense-related contract research. However, ADS firms’ internal
R&D investments are often strongly aligned with the direction and
substance of these contract R&D efforts.
2014 GLOBAL R&D FUNDING FORECAST
Overall defense spending, and hence R&D spending, has been
declining over the last few years in a somewhat consistent and
expected manner. The impacts of sequestration, however, caused
additional across-the-board reductions in both contract research and
procurement, leading to declines in revenue at ADS contractors. Together, these reductions caused ADS firms to more directly reduce
their own R&D budgets now and into the future. 69% of our ADS
industry respondents believe their 2014 R&D budget is likely to be
affected by reduced U.S. federal R&D investments.
While the impact of federal spending on the ADS industry is noteworthy, it is important to recognize the significant role U.S. commercial aerospace has on ADS innovation and R&D trends, especially
among some of the largest firms in the industry. For example,
Boeing typically spends more than 60% of its annual R&D on commercial airplanes, with more funds and a larger share of investment
during major jet liner development.
With the combination of reductions in defense spending, and a
commercial market that is essentially flat in R&D expenditures, we
forecast a small decline of 1.2% in U.S. ADS R&D to $12.6 billion
in 2014. Outside the U.S., the ADS industry’s R&D will be generally flat, leading to a total global industry decline of -0.9% to $26.4
billion in 2014.
Aerospace/Defense/Security Industry R&D Spending
28.0 27. 3 26. 6 26. 4
13. 2 13.1 12. 8 12. 6
2011 2012 2013 2014