Reduced defense spending will constrain revenue for night vision device manufacturers
Los Angeles, CA (PRWEB) February 14, 2012
The Night Vision Equipment Manufacturing industry was minimally affected by the economic downturn; in 2009, in the midst of the recession, revenue reached a record high of $713.2 million. According to IBISWorld industry analyst Brian Bueno, “the resilience of night vision equipment is attributed to the nature of industry demand, which is predominantly sourced from the US military.” As defense funding increased through 2011, revenue followed along, though it declined in 2010, due to the completion of contracts and reduced demand from local government and commercial sources. In 2012, revenue is projected to witness its strongest decline in a decade, falling 14.2% to $589.0 million, as defense budgets face cutbacks due to the withdrawal of military personnel from conflict zones. Despite the decline, previous years of strong demand will raise the annualized rate of growth to 7.3% from 2007 to 2012.
Bueno says, “the industry's dependence on military funding for research and development (R&D) and revenue has largely worked in its favor during the past five years.” Revenue growth has been supported by a sharp rise in defense spending. Over the five years to 2012, federal funding for defense is expected to increase at an average annual rate of 4.9% to $738.5 billion, according to information sourced from the Congressional Budget Office. Federal defense spending has been fueled by the wars in Iraq and Afghanistan and increased security concerns following the terrorist attacks of September 11.
Nevertheless, because of greater federal budget deficit concerns and the withdrawal of troops from the Middle East, government spending on defense is expected to contract over the next five years. The Pentagon will likely face cuts of $486.0 billion during the next decade, which will shrink ground forces and slow defense purchases. Consequently, demand for military night vision devices (NVDs) is anticipated to decline. The industry will enter a period of decline over the next five years, as defense budgets are cut along with a fall in US conflict involvement. However, the decline will be mitigated by the need to replace older and nearly obsolete NVDs, as technologies advance and demand from commercial enterprises and local and state governments rises. In the five years to 2017, IBISWorld projects that industry consolidation will increase slightly as firms seek to increase market share. The market for night vision equipment manufacturing is competitive, where large and niche players compete on the basis of continued product innovation. The industry is characterized by a relatively stable number of players; contractors that have established relationships with the US military have dominated the industry. Together, the top three players, ITT Exelis, L-3 Communications Corporation and FLIR Systems, represent nearly half of the overall market.
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This industry manufactures night vision devices. These devices include image intensifier tubes, which are protective and generally water-resistant housing and mounting systems.
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