By Kalwinder KaurJul 2 2012
A significant growth is seen in the Unmanned Aerial Vehicle (UAV) manufacturing industry. The advantages of unmanned drones coupled with diverse military and civilian requirement have generated optimal conditions for drone producers over the last five years.
The industry will have multinational firms like Northrop Grumman dominating, while expertise firms like General Atomics Aviation Systems will also represent a substantial share of overall revenue.
Potential conditions resulting from recent conflicts in the Middle East, and the current demand for homeland security are likely to result in the growth of industry revenue at a rate of 11.5% per year from five years to 2012. Industrial firms take advantages from the low operating costs owing to the reduced prices for semiconductors and electronic components. Reduced input prices and high demand will combine to improve the profit of the industry, thereby attracting more companies to the drone manufacturing business. This year, overall increase in the revenue is from 13.2% to $4.8 B. This is due to the achievement of contracts by the US government to develop drones, followed by local deployment or export. Over the next five years, drone manufacturers will witness steady opportunities.
Medium to high level of concentration characterizes in the UAV manufacturing industry, where 59.2% of industry revenue has been reported by four major companies. The overall industry includes 36 companies with 38 production facilities. Northrop Grumman and General Atomics Aeronautical Systems are the two major companies that result in the combined revenue share of 40.5% or around $2.0 B owing to their UAV production operations. Major barriers to entry will contribute to resolving the concentration level, as the US military contracts provide the majority of industry revenue. Furthermore, there is increase in the associated costs for manufacturing complex UAV systems. Existing players receive large contracts in similar fields or contracts are awarded to those with an earlier successful rapport with the US Department of Defense (DOD).
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