Late last year, Lockheed Martin announced the acquisition of privately held contractor CDL Systems, a company specializing in software for operating unmanned vehicle systems.
The move reflected a broader industrywide trend among contractors, big and small, as they position themselves in the growing market for unmanned aerial systems (UAS), analysts say.
With the sequester and budget battles injecting uncertainty into the defense budget, major contractors like Lockheed have lots of incentive to gobble up smaller companies and increase market share in the fast-growing UAS sector.
Spending worldwide is expected to double from $5.2 billion annually to $11.6 billion in a decade, according to a June 17 market study from the Teal Group, which predicts the U.S. will account for more than half of the spending.
In recent years, major contractors like Northrop Grumman, Textron, Boeing and BAE Systems all have purchased UAS manufacturers, Teal Group noted in an earlier analysis.
Meanwhile, smaller contractors with established technology can sell to or partner with larger companies as a way to weather an unsettled legislative landscape, as lawmakers, the Federal Aviation Administration and others wrestle with how to balance privacy interests with the benefits of integrating technology into the U.S. airspace.
“I think the defense companies are going to do one of two things,” said Michael Blades, senior industry analyst for aerospace and defense at Frost & Sullivan. “They’re either going to use their own research and development funds to make their own UAS’s ... or they’re going to buy companies that are already in the market.”
In a blog post earlier this year, the Association for Unmanned Vehicle Systems International predicted that while the Pentagon would spend about $6.5 billion in 2013 on robotics, defense spending will likely slow and eventually be outpaced by the commercial market.
While the public knows about how drones fired Hellfire missiles at terrorist targets overseas, industry supporters point to lesser-known uses at home, such as detecting pests in farmland, inspecting power lines and search-and-rescue missions.
Because of sequestration, the government probably will plow fewer resources into developing new platforms and instead focus more on improving existing technologies, Blades said.
He said smaller companies also are striking up partnerships with major defense contractors, as they await rules from the FAA on integrating UAS’s into the U.S. airspace.
“These small companies are going to have to do those kinds of things to stay afloat because as long as the FAA rules keep getting kicked down the road they’re going to be left out in the cold,” Blades said.
Still, the UAS market is much stronger for small companies compared to a decade ago, when big defense contractors dominated the landscape, according to John Rose, deputy director of public policy for western states at the American Institute of Aeronautics and Astronautics.
“The barrier to entry is so much lower,” he said. “People are able to leverage what’s been done before.”
“You’re not just talking about the Northrop’s and Lockheed’s … you’re talking about much smaller groups who can now say, ‘Hey, I’m going to rent a little industrial suite here, and I’m going to build one just as capable as the one the local sheriff’s office uses,’ ” he said.
Meanwhile, John Beck, chief engineer unmanned systems for contractor Oshkosh Defense, said government interest remains strong in unmanned ground vehicles.
The company recently demonstrated its TerraMax unmanned ground vehicle technology to the Marine Corps, which he described as a live-force experiment that involved multiple unmanned trucks operating alongside manned trucks in a supply convoy.
The company will be among the hundreds of exhibitors at a large industry gathering later this month in Washington hosted by the Association for Unmanned Vehicle Systems International.
“If you rewind five, six or seven years, these types of conferences were largely unmanned aerial vehicle-centric,” he said.
But that’s changed: “Over the years, there’s been more and more presence of unmanned ground vehicles and unmanned underwater and surface vehicles,” Beck added.