Unmanned Systems Beyond Iraq:What is the Next Step for this Booming Industry?

Lindsay Voss, Industry Analyst

Aerospace and Defense

September 24, 2008

Focus Points

• Market Overview

• Market Attractiveness

• Technology Roadmap

• Market Drivers, Restraints & Trends

• Spending Overview

• Competitive Overview

• Conclusions

Source: U.S. Air Force Source: U.S. Navy Source: U.S. Air ForceSource: U.S. Navy Source: U.S. Navy

Market Overview

Coverage includes Unmanned Air, Ground, and Maritime SystemsCoverage includes Unmanned Air, Ground, and Maritime Systems

Violence in Iraq, Afghanistan and around the world has triggereViolence in Iraq, Afghanistan and around the world has triggered staggering d staggering

growth in the unmanned systems marketgrowth in the unmanned systems market

Unmanned Aerial Systems (UAS) represent the largest market segmeUnmanned Aerial Systems (UAS) represent the largest market segment and the nt and the

most mature technologymost mature technology

The Department of Defense (DoD) purchases 95 percent of unmannedThe Department of Defense (DoD) purchases 95 percent of unmanned systems systems

sold in the U.S. sold in the U.S.

The unmanned ground vehicle (UGV) market segment is growing in rThe unmanned ground vehicle (UGV) market segment is growing in response to esponse to

the threat if improvised explosive devices (IEDs)the threat if improvised explosive devices (IEDs)

The DoD is the largest UGV customer, however law enforcement is The DoD is the largest UGV customer, however law enforcement is an expanding an expanding

market space market space

Unmanned Underwater and Surface vehicles comprise the maritime mUnmanned Underwater and Surface vehicles comprise the maritime market arket

segmentsegment

Unmanned maritime systems (UMS) make up the smallest markets andUnmanned maritime systems (UMS) make up the smallest markets and are the are the

least mature technologiesleast mature technologies

The UMS market segment has the least number of entrenched competThe UMS market segment has the least number of entrenched competitors and is itors and is

expected to see the largest amount of growthexpected to see the largest amount of growth

Technology Roadmap2007

2015

2025 2030

Unmanned Aerial Systems

Unmanned Ground Vehicles

Unmanned Surface Vehicles

Unmanned Underwater

Vehicles

ISR Missions

DoD Tactical Strike

Meteorological Research

Border Surveillance

Limited Civil Use

SIGINT Collection

SEAD Role

Communications Relay

Maritime Patrol

Civil Use

CBRN Detection

Limited Commercial Use

Aerial Refueling

Battle Management

Penetrating Strike

Increased Civil Use

Combat Missions

Medical Evacuation

Airlift

Commercial Use

Mine Clearance

Mine Neutralization

EOD

IED Disruption

CBRN Detection

ISR Roles

Perimeter Security

Weaponization

Combined Arms

Engagement

Maritime Surveillance

Maritime Interdiction

Anti-Submarine Warfare

Mine Counter Measure

Surface Warfare

Reconnaissance

Inspection

Mine Neutralization

Autonomous Mapping

Mine Counter measures

Oceanography

Communications

ISR Mission

Armed ASW

Strike Capability

Ship-deployed Comms

Submarine Tracking

Information Operations

Strike Capability

Aerial Refueling

Battle Management

Penetrating Strike

Civil Use

Combat Missions

Medical Evacuation

Airlift

Commercial Use

Market Attractiveness Table

This table directly correlates with the market attractiveness grid on slide 5. Market attractiveness is based on concentration of

market competition, market supplier capacity, presence of dominant participants, market revenue potential, and rate of market

growth between 2008 and 2016. On the market attractiveness grid on the following slide the large oval represents the market

in 2007 while the small oval is representative of the market in 2016.

NoNoLowLowLowLowLowLowFragmentedFragmentedUAS CivilUAS Civil

LowLow

LowLow

MediumMedium

LowLow

HighHigh

Revenue Revenue

PotentialPotential

HighHigh

HighHigh

MediumMedium

LowLow

MediumMedium

Rate of Rate of

Market Market

GrowthGrowth

YesYesHighHighHighly Highly

concentratedconcentrated

UAS DoD Market UAS DoD Market

Dominant Dominant

ParticipantsParticipants

Market Supplier Market Supplier

CapacityCapacity

Market Market

ConcentrationConcentration

NoNoLowLowFragmentedFragmentedUAS Commercial UAS Commercial

NoNoHighHighFragmentedFragmentedUSV Market USV Market

YesYesHighHighMildly Mildly

concentratedconcentrated

UUV Market UUV Market

YesYesHighHighMildly Mildly

ConcentratedConcentrated

UGV Market UGV Market

Market Attractiveness Grid R

even

ue

Att

racti

ven

ess

High

Low

Significant Barriers

Open Market

Market Openness

Most Attractive Markets

Most Attractive

Attractive

Least Attractive

DoD UASDoD UASDoD UAS

Civil UASCivil UASCivil UAS

USV MarketUSV MarketUSV Market

UUV MarketUUV MarketUUV Market

UAV

Commercial

UAV UAV

CommercialCommercial

UGV MarketUGV MarketUGV Market

SubsystemsSubsystemsSubsystems

Represents the Commercial UAS market if regulations are lifted

Represents the Commercial UAS market if regulations don’t change

Represents the Civil UAS Market if regulations are lifted

Represents the Civil UAS Market if regulations are unchanged

Market Drivers and RestraintsR

estr

ain

tsD

rivers

Strong

Med

Weak

Strong

Med

Weak

Demand for timely,

persistent ISR

capabilities drives

UAS market growth

System interoperability

is creating

opportunities

Entrenched

competition for UAS

and UGVs

Defense budget

constraints result in

program cutbacks

Unmanned systems

have liability issues

resulting in few

commercial

opportunities

Slowness in decision

making by the U.S.

military and other

government agencies

restrains market

growth

IED threats are driving

system procurement

Maturing technologies

drive market growth

Market Trends

Weak Medium Strong

Mark

et T

rends

UAS and UGV companies vying for position in the unmanned maritime systems market segment

Increased use of unmanned systems by federal non-DoD entities for both research and security applications

Length of arrows indicate impact of the challenge

New R&D programs for the DoD

Unmanned systems teaming with other unmanned systems and manned platforms

Spending Overview

0.0

500.0

1,000.0

1,500.0

2,000.0

2,500.0

3,000.0

3,500.0

4,000.0

Sp

en

din

g (

$ M

illio

n)

O&M 136.1 170.6 167.0 195.4 195.3 232.1 244.2 251.5 270.2 297.7

Procurement 703.0 709.8 1,227.0 1,309.5 1,039.1 827.0 647.1 538.3 468.5 468.9

RDT&E 1,360.6 1,715.8 1,922.4 1,996.9 1,878.8 1,865.71,751.0 1,661.7 1,712.6 1,704.9

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

0.0

1,000.0

2,000.0

3,000.0

4,000.0

Sp

en

din

g (

$ M

illio

n)

U.S. Navy 289.8 507.3 970.1 1,064.3 916.3 763.5 570.2 497.2 471.5 502.9

U.S. Army 591.7 425.8 502.1 828.6 696.9 632.3 579.9 628.7 640.1 622.7

U.S. Air Force 1,318.21,663.11,844.21,608.91,500.01,529.01,492.21,325.61,339.71,345.9

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

DoD Services UAS Spending Forecasts

UAS Procurement, RDT&E, O&M

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

160.0

180.0

Spendin

g (

$ M

illio

n)

USCG 0.0 1.0 5.3 3.3 2.1 6.9 11.5 9.0 15.7 20.8

DTRA 1.1 3.0 0.8 2.5 5.8 4.3 2.1 0.9 1.5 2.7

Other 1.5 2.3 3.7 4.8 5.5 10.1 17.8 20.2 22.5 25.7

NASA 3.2 4.1 6.7 7.7 5.3 6.9 10.1 18.0 25.6 19.1

USSOCOM 28.2 19.5 31.4 37.8 24.6 29.0 36.9 45.6 37.8 39.0

DARPA 15.7 27.8 33.2 18.3 27.9 33.9 25.5 39.0 26.7 20.6

CBP 5.6 27.2 10.1 22.2 35.6 18.7 15.5 28.6 39.0 41.6

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Other Federal UAS Spending

Spending Overview

0.0

50.0

100.0

150.0

200.0

250.0

300.0

350.0

Spendin

g (

$ M

illio

n)

DoD RDT&E 46.7 70.5 77.3 60.5 73.3 61.9 62.9 59.8 62.3 66.3

DoD Procurement 278.7 217.7 175.5 191.2 199.3 211.3 222.0 223.9 209.1 224.8

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

0.0

100.0

200.0

300.0

400.0

500.0

Spendin

g (

$ M

illio

n)

DoD Spending 325.4 288.2 252.8 251.7 272.6 273.2 284.9 283.7 271.4 291.1

Civil Spending 55.4 57.9 65.8 60.8 69.0 73.6 80.8 89.6 99.7 105.7

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

DoD UGV Spending Forecasts

DoD and Civil UGV Spending Forecasts

0.0

20.0

40.0

60.0

80.0

100.0

Spendin

g ($ M

illion)

Spending 16.9 19.2 20.8 29.0 24.5 31.8 46.2 53.0 68.4 78.3

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

Sp

en

din

g (

$ M

illio

n)

Spending 10.3 11.9 12.1 14.2 15.9 21.6 24.9 27.2 33.4 34.2

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

DoD UUV Spending Forecasts

DoD USV Spending Forecasts

U.S. Navy: 84.3%

NOAA: 4.6%

Research: 6.0%

Commercial:3.0%

Other: 2.1%

End-User Overview

U.S. Navy: 58.4%

U.S. Army: 36.7%

U.S. Air Force: 4.5%

Other: 0.4%

U.S. Air Force:57.5%

U.S. Army: 36.1%

U.S. Navy: 5.6%

Other: 0.8%

The following pie-charts display end-user market share for

the UAS, UGV, and UMV market segments. Additional users

of unmanned systems within the United States include the

Department of Justice (DOJ), Central Intelligence Agency

(CIA), Customs and Border Protection (CBP), Defense

Advanced Research Projects Agency (DARPA), Defense

Threat Reduction Agency (DTRA), Special Operations

Command, Environmental Protection Agency (EPA), National

Oceanic and Atmospheric Administration (NOAA), National

Aeronautics and Space Administration, Research Entities,

and Law Enforcement Agencies

2007 UMS End-Users

2007 UGV End-Users

2007 UAS End-Users

Foster-Miller: 60.4%

iRobot Corporation: 23.4%

DOK-ing: 1.2%

General Dynamics RoboticSystems: 3.3%Hydrema: 1.1%

Northrop Grumman: 4.2%

BAE Systems: 1.7%

Lockheed Martin: 2.5%

Other: 2.2%

Company Market Share Overview

Northrop Grumman: 42.8%

General Atomics: 20.3%

AAI Corporation: 19.8%

Aerovironment, Inc.: 8.2%

Aurora Flight Sciences: 1.4%

Boeing/Insitu: 2.7%

Other: 4.8%

Bluefin Robotics: 37.0%

Hydroid LLC.: 30.7%

Foster-Miller Inc.: 10.6%

Boeing: 6.2%

ARINC Engineering:

4.4%

Lockheed Martin: 2.1%

Other: 9.0%

EDO Corporation (ITT): 43.3%

General Dynamics Robotic

Systems: 34.3%

Oregon Iron Works: 9.0%

Other: 4.6%

Maritime Applied Physics

Corp.: 4.2%

Accurate Automation: 2.0%

Robotic Marine Systems, LLC.:

1.7%

Sea Robotics Inc.: 0.9%

2007 UAS Company Market Share

2007 USV Company Market Share 2007 UUV Company Market Share 2007

2007 UGV Company Market Share

Conclusions

The U.S. Unmanned Systems market continues to increase drasticalThe U.S. Unmanned Systems market continues to increase drastically with new technologies and ly with new technologies and

new applicationsnew applications

Competition is becoming tighter with less opportunity for new paCompetition is becoming tighter with less opportunity for new participants across all segments rticipants across all segments

Subsystems are the hot new market: Sensors, Command and Control,Subsystems are the hot new market: Sensors, Command and Control, Communications, GuidanceCommunications, Guidance

Civil and Commercial markets are an opportunity in the longCivil and Commercial markets are an opportunity in the long--termterm

The U.S. Unmanned Systems market as a whole is positioned to seeThe U.S. Unmanned Systems market as a whole is positioned to see strong future growthstrong future growth

Your Feedback is Important to Us

Growth Forecasts?

Competitive Structure?

Emerging Trends?

Strategic Recommendations?

Other?

Please inform us by taking our survey.

What would you like to see from Frost & Sullivan?

For Additional Information

• To leave a comment, ask the analyst a question, or receive the free audio segment that accompanies this presentation, please contact Stephanie Ochoa, Social Media Manager at (210) 247-2421, via email, analystbriefings@frost.com, or on Twitter at http://twitter.com/stephanieochoa.