Market Trends of APAC Defense Industry
Air Force Segment to Dominate Market Share During the Forecast Period
Air forces in the region are acquiring new fleets under large modernization programs. Countries like India, China, and Japan have ordered new fleets of advanced fifth-generation fighters like the F-35 and Su-57 and are developing their aircraft.
Air force capabilities are being enhanced due to increased geopolitical tensions in the South China Sea, the Taiwan Strait, and the Indo-Pacific region. The threat of conflict in this region has increased the demand for high-class air power with responsive strategic maneuvers. The integration of next-generation aircraft or advanced aircraft, surveillance, and missile defense systems has to be made to ensure a strategic advantage.
A major growth-driving factor in aerial defense operations is the introduction of advanced technologies like stealth, hypersonics, and artificial intelligence. APAC air forces invest in next-generation technologies to enhance operational efficiency and survivability. For example, Japan's F-X program aims to develop a sixth-generation fighter aircraft embedded with advanced AI and stealth capabilities.
On the other hand, countries like India and South Korea are focusing on the indigenous development of air force assets. This includes fighter aircraft like the HAL Tejas of India and the South Korean KF-21 Boramae, which is an attempt to break free from dependence on foreign suppliers and promote self-reliance in defense technology. Considerable government support and funding for programs like these drive the segment growth.
For instance, in December 2023, South Korea signed a contract with Lockheed Martin to procure 20 F-35A stealth fighter jets. This agreement aims to enhance South Korea's defense capabilities against North Korean threats. The F-35A jets, known for their advanced radar and stealth features, will be delivered in 2027.
India is Expected is Projected to Witness Highest Growth During the Forecast Period
The Government of India has significantly enhanced its defense budget to modernize its military capabilities. Approximately USD 72.6 billion was set aside for defense in FY 2024-25. This is an increase of 13% over the previous year, reflecting strong interest in boosting the national security infrastructure.
India is going through a significant modernization program for the military, which envisions the replacement of aging equipment with up-to-date technology. These include advanced aircraft, naval vessels, and missile systems, backed by 'Make in India' initiatives to increase domestic manufacturing. The Indian government has undertaken large defense procurement programs to strengthen its defense. Significant acquisitions in recent times are the French fighter aircraft Rafale, the Russian air defense system S-400, and the indigenous development of Tejas Light Combat Aircraft. These procurements are part of India's broader strategy to diversify its defense suppliers and enhance its technological edge.
The Indian government, with the initiative of "Atmanirbhar Bharat," or self-reliant India, envisages a significant reduction of dependence on imports for defense. India supports domestic defense manufacturing by encouraging indigenous production of defense equipment, such as through the Defense Production and Export Promotion Policy (DPEPP) 2020. In this way, the policy for the growth of a robust defense industrial base supports sustainable development in the sector. India has continuously worked towards strategic defense collaboration with major world powers. This includes technology transfer, joint venture arrangements, and co-development in defense systems with the US, Russia, France, and Israel. These collaborations are critical to integrate India's defense capabilities and secure access to state-of-the-art technologies. India's defense expenditure is also based on its relatively stable economic growth.
For instance, in March 2024, the Indian Ministry of Defence contracted five crucial, irrevocable contracts worth USD 4.69 billion to implement the Aatmanirbharta in Defence and Make-in-India programs to enhance domestic capabilities and reduce dependency on foreign sources. The contracts include the procurement of RD-33 aero engines for MiG-29s from Hindustan Aeronautics Ltd, Close-in Weapon Systems, and High Power Radars from Larsen & Toubro Ltd and BrahMos Missiles & Shipborne BrahMos systems from BrahMos Aerospace Pvt. Ltd –aimed to enhance significantly the operational capabilities of the Indian Military, growth in domestic industries, and the creation of large-scale employment.
