industry overview: modernization of asian...

Industry Overview: Modernization of Asian Military

Mr. Subhranshu Sekhar Das

Director – Defense & Security Practice

Frost & Sullivan Asia Pacific

Training & Simulation to Drive Military Modernization in APAC

2M8FB-16

Training and Simulation to Drive Modernization of Asian

Military Forces

Most Military modernization expenditure is expected to be driven by spending in training

and simulation.

Globally, The military Training & Simulation Industry is expected to grow at a CAGR of 2.5

per cent to gain $9.21 billion from 2012 to 2021.

The APAC region is expected to witness one of the highest rates of military modernization

primarily being driven by spending in training and simulation.

Of all three departments of military forces (Army, Navy, and Air Force), most expenditure in

training and simulation is expected to be witnessed by the Air Force in the APAC region.

Spending will be driven by adoption of significant, complex combat platforms, increasing

fleet sizes, and new procurements in Asia-Pacific, the Middle East, and Central Asia.

Source: Frost & Sullivan analysis.

3M8FB-16

Significance of Training & Simulation in Military

Modernization – Key Takeaways

Increasing Geo-Political Instabilities and demand for military modernization to better deal

with threats in the region.

Rise of Asymmetric warfare and a need to enhance situational awareness expected to

create demand for technology adoption in Air Force. Example: Augmented Reality to be a

key technology adoption by many countries’ armed forces.

Adoption of newer platforms within Air Force and Naval forces are driving a demand for

Training & Simulation across countries’ armed forces.

Shortage of qualified Air Force Personnel and Pilots brings to light the increasing

requirement to train military personnel.

A number of military modernization programs being undertaken by certain APAC countries

involve introduction of newer technologies which require personnel to be trained.


4M8FB-16

Military

Military Training and Simulation Industry

End Users

Training

Types

Live

Capability

Types:

Training

Application

Support

Platforms

Live, Virtual, and

Constructive (LVC)

Maintenance

Systems

Constructive

Virtual

Definitions & Scope


Armed forces operating across the Army, Navy and Air Force divisions of Military.

Platform based training for ab initio (or initial), conversion, and mission training intended

for pilots, crew, drivers, etc.

Systems-based training includes training for Strategic Training, involving C4ISR

missions, and Tactical Training, involving Weapon Systems, Dismounted Soldier Training

Systems, Counter Improvised Explosive Devices (IEDs) training, etc.

Maintenance training is intended for military technicians to be trained to maintain and

repair platform and related sub-systems, such as avionics, either for routine and/or

unexpected maintenance activities, such as damage control.

Training accomplished by real people, on real equipment and actual devices, in real

environments or mock landscapes. Eg. Training exercises performed with aircraft

produced specifically for training pilot.

Training accomplished by real operators on simulators or in a simulated environment. Eg.

Training performed with Flight simulators, part tasks trainers including flight deck, bridge,

platform procedures, etc.

Training based on computer generated forces, mostly desktop based. Eg. Real time

radar software, computer 2D/3D virtual reality war gaming, etc.

Training combining live, virtual, and constructive procedures into an Integrated

Architecture, with linking different simulators and software

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Asia-Pacific—Industry Drivers and RestraintsIn

du

str

y D

rivers

Ind

us

try R

estr

ain

ts

The region at large has undertaken the modernisation

and expansion of most of its platform fleets, which are

expected to comprise new, complex systems and sub-

systems

There is a general trend to reduce armed forces

personnel and to rationalise defence budgets to face

global economic challenges

Lack of skilled armed forces personnel first have

to be adapted to new military structures with a

joint decision-making process mindset

There is strong interest for integrated and

constructive training to train armies in shorter

turnaround times

Military Training and Simulation Industry: Key Industry Drivers and Restraints, Asia-Pacific, 2013–2021

Due to geographical constraints, improving naval

training will be at the forefront of regional strategic

priorities

Preferences for low-cost, indigenous

programmes and restrictive offsets policies

impede the compatibility of fully immersive and

integrated training solutions


1–2 Years 3–4 Years 5–9 Years

High Medium-High Medium LowLow-Medium

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Asia-Pacific—Industry Challenges

Projected

Impact

High

Low

CertaintyLow High

The Unexpected The Expected

Regional interest to

acquire significant

C4ISR systems

Regional opportunities

increase Industry

consolidation

Large available

incomes for new

advanced

platforms and

systems

programmes

Fast growing

economies, not yet

significantly impacted

by the global

economic turmoil

Growing concerns in

regards to territorial

disputes

Critical need to

improve naval warfare

capabilities

Regional OEMs increasingly

gaining Industry shares

US engagement

into the Chinese

disputed islands

conflicts

---- Main Challenges


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Military Training Demand

(Industry Size)

Industry

Growth

(CAGR)

Low

0%–3%Low

<10 $Billion

High

>150 $Billion

Latin

America

Europe

Middle

East High

Attractiveness

Low

Attractiveness

High

3%–5%Asia-

Pacific

North

America

Africa

Region CAGR

Africa 0.03%

Asia-Pacific 4.3%

Central Asia 3.5%

Europe 1.8%

Latin America 3.0%

Middle East 3.9%

North America 1.0%

Central

Asia

Total Military Training and Simulation Industry: Industry

Attractiveness Map, Global, 2012–2021

Regional Industry Attractiveness Map


Key Takeaway: The Asia Pacific region is expected to witness the highest growth of Military Training

and Simulation spending..

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Military Training and Simulation Industry—Expenditures

Forecast by End Users

• Total Military Training and Simulation

spending is expected to reach USD

46.09 Billion by 2021 from USD 36.88

Billion in 2012.

• APAC military Training and Simulation

spending is expected to increase from

USD 8.78 Billion in 2012 to USD 12.90

Billion by 2021.

• APAC Military Training and Simulation

Expenditure is expected to increase at

a CAGR of 4.3 % from 2012 to 2021.

• The forecast demand across land

forces is mainly steady, stimulated by

strong new procurements, but are

slightly less important due to regional

geographic constraints and regional

willingness to increase their force

projection capabilities.


0%

20%

40%

60%

80%

100%

2012 2021

Global 76.2% 72.0%

Asia-Pacific 23.8% 28.0%

Ind

ustr

y S

hare

(%

)

Military Training & Simulation Percentage Industry Share Trend,

2012-2021

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Air Force Military Training and Simulation Industry—

Expenditures Forecast by End Users

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

APAC 4,175.6 4,338.1 4,505.9 4,743.9 4,958.7 5,185.3 5,423.9 5,716.1 5,986.3 6,301.1

Global 18,269.6 18,638.6 19,019.1 19,627.9 20,095.4 20,562.0 21,071.6 21,868.1 22,514.0 23,301.2

0.0

5,000.0

10,000.0

15,000.0

20,000.0

25,000.0

Exp

en

dit

ure

s (

$ M

illio

n)

Year

Air Force Military Training and Simulation Industry: Expenditures Forecast by End Users, 2012‒2021

Key Takeaway: Air Force Military Training and Simulation spending is expected to be driven by the

APAC countries.

10M8FB-16

Air Force Military Training and Simulation Industry—

Industry Share Evolution


• APAC Air Force Training and

Simulation spending is expected to

reach USD 6.30 Billion by 2021 from

USD 4.17 Billion in 2012.

• The APAC Air Force Training and

Simulation Industry which comprises

22.9% of Global Air Force Training

and Simulation spending is expected

to contribute to 27.0% by 2012.

• Adoption and implementation of such

solutions will be driven by the

modernisation of military capabilities

in Japan, New Zealand, and

Australia.

• Rising demand for cost-efficient

training solutions will drive Air Force

Training and Simulation in APAC.

0%

20%

40%

60%

80%

100%

2012 2021

Global 77.1% 73.0%

APAC 22.9% 27.0%

Mark

et

Sh

are

(%

)

Air Force Training and Simulation Industry: Expenditures Forecast,

APAC vs. Global 2012 - 2021

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APAC Military Training and Simulation Industry—

Expenditures Forecast by End Users


Key Takeaway: Air forces are expected to hold most of the training Industry opportunities as

countries with emerging industries increase their air fleets with advanced and complex platforms.

0

5000

10000

15000

2012 2021

Naval 2,603.9 3746.2

Land 2004.8 2848.3

Air 4175.6 6301.1

Exp

en

dit

ure

s (

$ M

illio

n)

Military Training and Simulation Industry: Expenditures Forecast by End

Users, 2012‒2021 APAC

0%

20%

40%

60%

80%

100%

2012 2021

Naval 29.6% 29.1%

Land 22.8% 22.1%

Air 47.5% 48.9%

Ind

ustr

y S

hare

(%

)

Military Training & Simulation Percentage Industry Share Trend,

2012-2021 APAC

12M8FB-16



Expenditures Forecast by End Segments

• As market demand is mainly

dominated by air and naval

platform-based training, majority of

expenditure will be driven by live

training, expecting to reach USD

10.09 billion by 2021.

• However, end users’ demand for

virtual and constructive training will

both grow at CAGRs of 4.1 per cent

and 4.2 per cent, stimulated by

Australian, Bruneian, Malaysian,

and Indonesian demand.

• Nonetheless, local and cost-

affordable training solutions explain

why the constructive training will

constitute a lesser portion of overall

spending by 2021.

0%

20%

40%

60%

80%

100%

2012 2021

LVC 1.5% 1.3%

Constructive 8.1% 7.9%

Virtual 12.7% 12.5%

Live 77.8% 78.3%

Mark

et

Sh

are

(%

)

APAC Military Training & Simulation Percentage Market

Share Trend, 2012-2021

13M8FB-16



Expenditures Forecast by Capabilities

6%

24%

70%

Military Training and Simulation Industry: Expenditures Forecast

by Capabilities, APAC 2013

Maintenance Systems Platforms

• While the region is significantly extending its military

capabilities, demand will stay largely focused on

platform-based training to enable regional armed

forces to operate new, advanced platforms, hence

generating a strong CAGR of 4.5 per cent.

• Maintenance platform-based training is also

expected to increase during the forecast period, as

militaries need to train their personnel to maintain

larger, complex fleets, as is the case in Malaysia and

Indonesia.

• Reluctance to outsource maintenance to foreign

OEMs will also be responsible for maintenance

platform based training.

• With the exception of Australia and New Zealand,

systems training remains a nascent trend in Asia-

Pacific, with an early integration of advanced C4ISR

capacities in India, China, and South Korea.

14M8FB-16

Asia-Pacific—Major Training and Simulation Programmes

(non-exhaustive list)

Programmes Quantity Timeline Cost Description

Platform Acquisition

programme with

Transfer of

Technology

3 submarines 2013–onward $1.1 B

South Korean Daewoo Shipbuilding and Marine

Engineering will deliver three 1,400-ton class diesel-

powered submarines to the Indonesian Navy. Under this

agreement, Daewoo will train naval crews and technicians.

G2B Platform

acquisition

programmes

28 T-50 2012 Circa $840 M

Korean Aerospace Industries is expected to deliver 16 T-

50s to Indonesia and potentially12 to Philippines, as both

countries have expressed interest to acquire this supersonic

advanced trainer, jointly developed with Lockheed Martin.

Memorandum of

Understanding

Platform and

C4ISR simulators2012 NA

The Turkish Company Havelsan has signed with the

Pakistani Air and Land Forces to provide C4ISR training

and flight simulators for the F-17 Thunder, F-16 Fighting

Falcon, C-130 Hercules, Mil Mi-17, Super Mushak, artillery,

and driving simulators.

G2B System and

training Programme

Japanese MCH-

101 fleet2012–onward NA

The Japanese Maritime Self Defence Force has awarded a

contract to Science Applications International Corporation to

provide Mine Warfare and tactical training for this helicopter

Airborne Mine Countermeasures (AMCM), which includes

the AN/AQS-24A mine hunting side scan sonar, the

AN/AES-1 airborne laser mine detection system, and the

MK-104 acoustic minesweeping system.

Training CentreAir, Land, & Naval

Australian Forces2012–onward NA

Rheinmetall Group is opening a simulation-based training

centre in Adelaide.

Joint Venture

Between CAE and

Bruneian Air Force

Multi-purpose

Training Centre 2012–onward

At least $169 M

training contract

included

The Ministry of Finance of Brunei will partner with CAE

within a 60:40 joint venture and has already given an award

to the Canadian training firm for the Sikorsky S-70i, Pilatus

PC-7, and Sikorsky S-92.


15M8FB-16

Asia-Pacific—Training and Simulation Next Mega Trend

• Domestic Asia-Pacific defence companies have recently become noteworthy challengers and are gaining

market share against leading global OEMs, both regionally and globally.

• Across the Air Training Segment:

o Korean Aerospace Industries has successfully managed to procure its KT-1 light attack trainer to

Indonesia, Turkey, and Peru; meanwhile the Royal Thai Air Force has chosen the Singapore-based

company ST Electronics, to deliver F16A simulators, at a total estimated value of $18 Million.

o China is developing the Lead-In Fighter Trainer, the Hongdu L15, in collaboration with the Russian

Yak Aircraft Corporation; apart from the People’s Liberation Air Force in China, this programme could

also interest Pakistan and Latin American countries, such as Bolivia and Venezuela.

• Regarding the Naval Segment:

o Daewoo Shipbuilding Marine and Engineering Co., which delivered naval vessels to Indonesia and

Bangladesh, is currently developing training vessels, which could catch Malaysian and Israeli navies’

interests.

o Because the company is consolidating its market share though US FMS, as seen in the Fast Missile

Craft being built for the Egyptian Navy, ST Electronics is expanding its training products range with

innovative and immersive solutions, such as the Fleet Instrumented Sea Training System (FISTSTM).

• Although this nascent market penetration is mainly benefiting from affordable, high training technology and

COTS procurement approaches, these regional companies are slowly increasing their global presence and

have already positioned themselves with less expensive and efficient cyber and LVC training products,

which could significantly reduce market opportunities for traditional leading OEMs.


16M8FB-16

The Last Word—Overall Predictions

2Augmented Reality will revolutionise platform-based training and platform

maintenance training by significantly reducing operating costs while improving

soldiers’ task specialisation.

3Global financial and political instability to challenge the current training business

models, mostly affecting outsourcing, contract duration, and quantity, putting

existing contract renewals at risk and restricting new contract opportunities.

1While the APAC region is significantly extending its military capabilities, demand

will stay largely focused on platform-based training to enable regional armed

forces to operate new, advanced platforms.


4

With the exception of Australia and New Zealand, systems training remains a

nascent trend in Asia-Pacific, with an early integration of advanced C4ISR

capacities in India, China, and South Korea, explaining a lower, but relative

CAGR of 3.9 per cent.

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