Artificial intelligence in Defense Market – Mapping the Growth Trends & Competitive Strategy

The defense industry is widely changing with the adoption of advanced technologies such as artificial intelligence (AI), machine learning, quantum computing, space-based telecommunications, and robotics. The rise in threats due to wars and cyberattacks in the defense industry has supported the implementation of the technologies by land, sea, and naval-based military forces. The application of AI and autonomous systems helps these military forces to gain information about battlefield situational awareness and efficiently operate precision-guided weapons systems.

Factors such as the growing adoption of AI in unmanned aerial vehicles and high government spending on defense to improve AI capabilities are influencing the artificial intelligence in defense market growth. Moreover, the incorporation of quantum computing in artificial intelligence and the growing development of robots using AI are among other factors contributing to the market growth.

Fujitsu, Lockheed Martin, Honeywell International, Safran, and Raytheon Technologies Corporation – Prominent Market Participants in AI In Defense Market.

The adoption artificial intelligence (AI) technology is anticipated to revolutionize the defense landscape globally. North America is focused on strengthening its defense sector by increasing its military spending and incorporating advanced technologies in its defense systems to gain a competitive advantage in warfare. The US government is boosting its investments in artificial intelligence-based systems to continue its military dominance and mitigate the risk of cyberattacks on computer systems. For instance, in June 2021, the Department of Defense (DoD) announced an investment of US$ 874 million for the development of artificial intelligence (AI) and machine learning technologies for the year 2022. Moreover, North America is the global hub for major producers, exporters, and users of AI-based systems with the strongest AI capabilities.

With the rise of country-to-country wars, defense services are also improving, leading to the increased deployment of powerful AI-enabled weapon systems. Military forces are focusing on the integration of cutting-edge technology into existing systems to improve their efficiency. Governments of various countries are investing a significant amount in updating their defense system. For instance, China increases its military expenditure every year to develop edge-cutting technologies, making China the biggest competitor of the US, according to the US National Security Commission on Artificial Intelligence 2021 final report. Thus, the rise in military expenditure across Asia Pacific propels the artificial intelligence in defense market growth.

The artificial intelligence in defense market growth in Europe is attributed to the presence of several major players such as Thales SA and BAE Systems. Also, significant investments made by the European government to procure technologically advanced systems to modernize and improve their military performance on the battlefield boosts the market growth. For instance, governments of the EU members are focused on developing multilingual conversational artificial intelligence-based systems to cater to the defense needs involving transcription, translation, and interaction in different languages. Thus, the growing incorporation of AI technology defense solutions contributes to the artificial intelligence in defense market growth in Europe.

The COVID-19 outbreak considerably impacted the global economy during its peak in Q1 and Q2 of 2020, and the crisis has hampered business activities in various industries. Governments of different countries imposed stringent regulations on human mobilization and trade bans. The global economy witnessed a paradigm shift toward work-from-home culture and a change in consumer buying behavior. As a result, in Q3 and Q4 of 2020, the demand for electronic products increased considerably.

In APAC, India is the worst-hit country due to the COVID-19 outbreak. APAC experienced a notable decline in several economic activities as the government authorities imposed strict lockdowns, travel bans, and business shutdowns.

The use of artificial intelligence increased in the defense sector in APAC in 2020, irrespective of the COVID-19 outbreak. Also, the government continued investing in the defense sector across the region during the pandemic. China released its new defense budget in May 2020, announcing a 6.6% increase from 2019. Also, Japan (3.3%), South Korea (5.5%), and Taiwan (10%) all submitted budget proposals to their legislatures seeking to raise defense spending in 2020.

Further, South Korea continued spending on advanced defense and military technologies such as artificial intelligence to boost its domestic defense industry. However, the shortage of raw materials caused due to interruptions in the supply chain restrained the development of artificial intelligence technology. The COVID-19 pandemic impact on the AI in defense market was negligible as key countries in the region were investing in developing and procuring new technologies during the pandemic. However, even though there were technological advancements in the market, the general performance of the AI in defense market is affected by discrepancies in the production network and supply chain.

Fujitsu, Lockheed Martin, Honeywell International, Safran, and Raytheon Technologies Corporation, are some of the key players operating in the AI in defense market. The global AI in defense market is highly consolidated in nature due to presence of large, small, and medium players, at regional and local level for addressing the local demand. Since, the market is in emerging phase, number of more startups and players is expected to make entry. Hence, we have derived this listing of “Key Five Players” in the global AI in defense market by giving weightage to following key parameters: overall revenue, segmental revenue, brand image & industry experience, current AI in defense market portfolio, innovative and advanced technology integration, customer base, geographical reach, new product launches, partnerships, and other market related activities. A few of the important market initiatives and product developments from the industry are mentioned below: