Market Trends of Passive Electronic Components Industry In Aerospace & Defense Industry
Increase in Defense Spending is Expected to Propel the Industry's Growth
- The rising defense budgets advance the defense sector and, due to rising geographical tension with various countries, also provide significant growth opportunities for passive electronic components in the aerospace & defense industry. For instance, to digitize, the US government signed off on a USD 29 billion spending increase to request the fiscal year 2022 national defense budget. Moreover, the national defense total in the 2022 omnibus spending bill had been USD 782 billion, a 3.9% increase over the administration's request for 2022 and a 5.6% increase over the 2021 appropriations.
- In March 2023, the government of China announced a 7.2% increase in its defense budget for the coming year. China also has a large stockpile of missiles, stealth aircraft, nuclear-capable bombers, advanced surface ships, and nuclear submarines.
- Similarly, in March 2023, the UK government announced spending USD 6 billion in defense to meet the challenges of an increasingly complex and volatile world. The government aims to modernize the UK's nuclear enterprise through this investment and bolster vital ammunition stocks. Such massive spending on defense will increase the demand for passive electronic components.
- Many European countries have increased their defense spending following Russia's invasion of Ukraine. Also, in November 2022, the European Union's Defense Minister approved a significant increase in the budget of the European Defense Agency (EDA) for 2023. This reflects the European Union's more ambitions and concrete strengthening of its institutions to support its growing defense efforts. The EDA budget for 2023 is expected to increase by 15% compared to 2022 to EUR 43.5 million. The increase is expected to help enhance domain expertise on land, air, sea, space, and cyber.
- The rise in the spending on the military sector by various countries is pushing the market players in the region to develop new products to meet the specifications of the defense. For instance, in May 2022, Vishay Intertechnology Inc. introduced a new thin-film wraparound chip resistor for military and aerospace applications. They are available in four case sizes from 0402 to 1206; these resistors have a high power rating of 1W in the 1206 case size (no underboard cooling).
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Asia Pacific to Witness Significant Growth
- Asia-Pacific is significantly investing in the aerospace & defense industry to improve military infrastructure and modernize the defense system. According to IBEF, the Ministry of Defence has been allocated a total budget of USD 72 billion which is 13.18 % of the total budget. The defense budget represents an enhancement of USD 8.35 billion, which is 13% more than in 2022-23.
- Japan has potential growth opportunities in the studied market due to the rise in technology penetration, high defense spending, and the presence of many small and medium enterprises (SMEs). In December 2022, Prime Minister Fumio Kishida instructed his defense and finance ministers to hike the country'scountry's defense spending by more than 50% over five years to around JPY 43 trillion (USD 326 billion).
- With the increasing defense sector in the country's heightened investment in advanced electronic systems, thereby the use of passive electronic components is projected to grow. They are widely used in power supplies, communication & navigation, displays & controls, optics & sensors, computing & networking, and among others.
- Moreover, the Indian government's initiative to expand domestic arms production demonstrates the country's determination to become more self-sufficient in the sector. Indian companies are partnering with foreign companies to showcase jointly developed capabilities in line with Make in India requirements, creating additional new growth opportunities for vendors operating in the studied market.
- Furthermore, South Korea is increasing its investment in space technology to strengthen its defense capabilities in outer space. The country is making efforts to develop core technologies for military satellites. Additionally, in March 2023, the Korean government announced to invest USD 38.5 million in private space startups by 2027.
- South Korea's defense industry is very much successive and growing. In addition, by 2027, the South Korean government plans to invest 1.5 trillion won (USD 1.16 billion) in defense technology development as part of a program including private-military collaboration. These trends will maximize the use of passive electronic components.
- In addition, in August 2022, Taiwan announced to invest USD 19 billion in defense spending for next year, a double-digit increase in 2022, including funding for new fighter planes, just weeks after China held large-scale military exercises around the island it views as its territory.
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