Future of the Greek Defense Industry Market Attractiveness, Competitive Landscape and Forecasts to 2018

Transcription

1 Future of the Greek Defense Industry Market Attractiveness, Competitive Landscape and Forecasts to 2018

2 TABLE OF CONTENTS 1 Introduction What is this Report About? Definitions Summary Methodology SDI Terrorism Index About Strategic Defence Intelligence Executive Summary Market Attractiveness and Emerging Opportunities Defense Market Size Historical and Forecast Greece expected to invest US$ billion in defense over the forecast period Conflict with Turkey and military modernization and the upgrade of existing systems to drive defense expenditure The Greek defense expenditure as a percentage of GDP set to decline Analysis of Defense Budget Allocation Capital expenditure share in the defense budget to increase over the next five years Greece expected to invest US$ billion in the acquisition of defense equipment over the forecast period Defense expenditure allocation for the Army and Air Force expected to be strong Hellenic Army expenditure to average US$ billion over the forecast period Hellenic Air Force expenditure to hover around US$ billion Naval expenditure to register a growth rate of % over the forecast period Homeland Security Market Size and Forecast Homeland security market to record a CAGR of % over forecast period Illegal migration predicted to drive homeland security procurements Threat of terrorism in Greece considered moderate Benchmarking with Key Global Markets Greek defense expenditure is small in comparison with its procurement level and is expected to decline over the forecast period The country will continue to be a small contributor in the global arms market As a percentage of GDP, Greek defense expenditure is the highest among EU nations Greece faces a moderate level of terrorist threat Market Opportunities: Key Trends and Growth Stimulators Frigates Submarines Fighters and Multi-role Aircraft

3 3.5.4 Rotorcraft MRO Defense Procurement Market Dynamics Import Market Dynamics Economic pressures affected the country s defense imports Aircraft and armored vehicles constitute the majority of Greek defense imports The US and Germany emerged as the leading arms suppliers to Greece Export Market Dynamics Greece has negligible arms exports Industry Dynamics Five Forces Analysis Bargaining power of supplier: low Bargaining power of buyer: high Barrier to entry: low Intensity of rivalry: low to medium Threat of substitution: medium Market Entry Strategy Market Regulation Offset obligations are attached to all defense deals European Defense Agency promote defense procurements within EU Market Entry Route Foreign OEMs enter the market through collaboration with domestic defense firms Key Challenges Economic crisis will affect current and future procurements IMF and EU regulations on Greek defense expenditure to limit Greece s flexibility in military maintenance Competitive Landscape and Strategic Insights Competitive Landscape Overview Key Domestic Companies Hellenic Aerospace Industry: overview Hellenic Aerospace Industry: product focus Hellenic Aerospace Industry: recent announcements and strategic initiatives Hellenic Aerospace Industry: alliances Hellenic Aerospace Industry: recent contract wins Hellenic Defence Systems S.A: overview Hellenic Defence Systems S.A: product focus Hellenic Defence Systems S.A: recent announcements and strategic initiatives Hellenic Defence Systems S.A: recent contract wins

4 7.3 Key Private Sector Companies ISI Hellas: overview ISI Hellas: product focus ISI Hellas: recent announcements and strategic initiatives ISI Hellas: recent contract wins Hellenic Shipyards S.A: overview Hellenic Shipyards S.A: product focus Hellenic Shipyards S.A: recent announcements and strategic initiatives Hellenic Shipyards S.A: recent contract wins SSMART S.A: overview SSMART S.A: product focus SSMART S.A: alliances Signaal Hellas: overview Signaal Hellas: product focus Signaal Hellas: alliances Theon Sensors: overview Theon Sensors: product focus Theon Sensors: recent announcements and strategic initiatives Theon Sensors: recent contract wins Ordtech Military Industries: overview Ordtech Military Industries: product focus Intracom Defense Electronics: overview Intracom Defense Electronics: product focus Intracom Defense Electronics: recent announcements and strategic initiatives Intracom Defense Electronics: recent contract wins Hellenic Vehicle Industry S.A: overview Hellenic Vehicle Industry S.A: product focus Hellenic Vehicle Industry S.A: recent announcements and strategic initiatives Hellenic Vehicle Industry S.A: recent contract wins Business Environment and Country Risk Demographics & Social Statistics Population Rural Population - Urban Population Number of Households Economic Performance Gross Domestic per Capita Gross Domestic Product, current US$ Exports of Goods and Services

5 8.2.4 Imports of Goods and Services Manufacturing Output Manufacturing Output Consumer Price Index Consumer Price Index Local Currency Unit per US$ Local Currency Unit per US$ Local Currency Unit per US$ Goods Imports as a % of GDP Goods Trade Surplus/Deficit as a % of GDP Services Imports as a % of GDP Services Exports as a % of GDP Services trade surplus/deficit as a % of GDP Net Foreign Direct Investment Net FDI as a percentage of GDP International reserves, including Gold Energy and Utilities Total Conventional Thermal Electricity Net Generation Hydroelectricity Net Generation Total Conventional Thermal Electricity Installed Capacity Total Electricity Imports Total Electricity Imports Total Petroleum Consumption Crude Oil Proved Reserves (Billion Barrels) Infrastructure Quality and Availability Rail lines, total network Minerals Mining, Manufacturing, Utilities Output Technology Patents Granted Telecommunication Telephone lines Telephone lines Penetration Rate Appendix About SDI Disclaimer

6 LIST OF FIGURES Figure 1: Greek Defense Expenditure, Figure 2: Greek Defense Expenditure, Figure 3: Greek GDP Growth vs. Defense Expenditure Growth and Defense Expenditure as Percentage of GDP Growth, Figure 4: Greek GDP Growth vs. Defense Expenditure Growth and Defense Expenditure as Percentage of GDP Growth, Figure 5:Greek Defense Budget Split Between Capital and Revenue Expenditure (%), Figure 6: Greek Defense Budget Split Between Capital and Revenue Expenditure (%), Figure 7: Greek Defense Capital Expenditure, Figure 8: Greek Defense Capital Expenditure, Figure 9: Greek Defense Expenditure Breakdown (%), Figure 10: Greek Defense Capital Expenditure Breakdown (%), Figure 11: Hellenic Army Expenditure Allocation (US$ Billion), Figure 12: Hellenic Army Expenditure Allocation (US$ Billion), Figure 13: Hellenic Air Force Expenditure Allocation (US$ Billion), Figure 14: Hellenic Air Force Expenditure Allocation (US$ Billion), Figure 15: Hellenic Navy Expenditure Allocation (US$ billion), Figure 16: Hellenic Navy Expenditure Allocation (US$ billion), Figure 17: Greek Homeland Security Expenditure Allocation (US$ Billion), Figure 18: Greek Homeland Security Expenditure Allocation (US$ Billion), Figure 19: SDI Terrorism Heat Map, Figure 20: SDI Terrorism Index, Figure 21: Benchmarking with Key Markets vs Figure 22: Defense Expenditure of the World s Largest Military Spenders (US$ Billion), 2013 and Figure 23: Defense Expenditure as a Percentage of GDP of Largest Military Spenders (%), Figure 24: Frigates Market Size (US$ Million), Figure 25: Diesel Electric Submarines Market Size (US$ Million), Figure 26: Fighters and Multi-role Aircraft Market Size (US$ million), Figure 27: Rotorcraft MRO Market Size (US$ million), Figure 28: Greek Defense Imports (US$ Million), Figure 29: Greek Defense Imports by Category (%), Figure 30: Greek Defense Imports by Supplier (%), Figure 31: Industry Dynamics Porter s Five Forces Analysis Figure 32: Greece s Population Rural (In Millions), Figure 33: Greece s Population Urban (In Millions), Figure 34: Greece s Population Number of Households (In Millions), Figure 35: Greece s GDP per capita, Figure 36: Greece s Gross Domestic Product (current US$ Billion), Figure 37: Greece s Exports of goods and services (current US$ Billion), Figure 38: Greece s Imports of goods and services (current US$ Billion), Figure 39: Greece s Manufacturing Output (US$ Billion), Figure 40: Greece s Manufacturing Output (US$ Billion), Figure 41: Greece s Consumer Price Index, Figure 42: Greece s Consumer Price Index, Figure 43: Greece s LCU per US$, Figure 44: Greece s LCU per US$, Figure 45: Greece s LCU per US$, Figure 46: Greece s Goods Imports as a % of GDP, Figure 47: Greece s Goods Trade Surplus/Deficit as a % of GDP, Figure 48: Greece s Services Imports as a % of GDP, Figure 49: Greece s Services Exports as a % of GDP, Figure 50: Greece s Services trade surplus/deficit as a % of GDP, Figure 51: Greece s Net Foreign Direct Investment (current US$ Billion), Figure 52: Greece s Net FDI as a percentage of GDP, Figure 53: Greece s International reserves, including Gold (US$ Billion), Figure 54: Greece s Total Conventional Thermal Electricity Net Generation (Billion Kilowatt Hours), Figure 55: Greece s Hydroelectricity Net Generation (Billion KWH), Figure 56: Greece s Total Conventional Thermal Electricity Installed Capacity (Million

7 Figure 57: Greece s Total Electricity Imports (Billion Kilowatt Hours), Figure 58: Greece s Total Electricity Imports (Billion Kilowatt Hours), Figure 59: Greece s Total Petroleum Consumption (Thousand Barrels per Day), Figure 60: Greece s Crude Oil Proved Reserves (Billion Barrels), Figure 61: Greece s Rail lines (total route-km), Figure 62: Greece s Mining, Manufacturing, Utilities Output (US$ Billion), Figure 63: Greece s Patents Granted, Figure 64: Greece s Telephone lines, Figure 65: Greece s Telephone lines Penetration Rate (per 100 people),

8 LIST OF TABLES Table 1: Greek Defense Expenditure, Table 2: Greek Defense Expenditure, Table 3: Greek GDP Growth vs. Defense Expenditure Growth and Defense Expenditure as Percentage of GDP Growth, Table 4: Greek GDP Growth vs. Defense Expenditure Growth and Defense Expenditure as Percentage of GDP Growth, Table 5: Greek Defense Budget Split Between Capital and Revenue Expenditure (%), Table 6: Greek Defense Budget Split Between Capital and Revenue Expenditure (%), Table 7: Greek Defense Capital Expenditure, Table 8: Greek Defense Capital Expenditure, Table 9: Greek Defense Expenditure Breakdown (%), Table 10: Greek Defense Capital Expenditure Breakdown (%), Table 11: Hellenic Army Expenditure Allocation (US$ Billion), Table 12: Hellenic Army Expenditure Allocation (US$ Billion), Table 13: Hellenic Air Force Expenditure Allocation (US$ Billion), Table 14: Hellenic Air Force Expenditure Allocation (US$ Billion), Table 15: Hellenic Navy Expenditure Allocation (US$ Million), Table 16: Hellenic Navy Expenditure Allocation (US$ billion), Table 17: Greek Homeland Security Expenditure Allocation (US$ Billion), Table 18: Greek Homeland Security Expenditure Allocation (US$ Billion), Table 19: Benchmarking with Key Markets vs Table 20: SDI Terrorism Index Table 21: Greek Defense Offset Guidelines Table 22: Hellenic Aerospace Industry Product Focus Table 23: Hellenic Aerospace Industry Alliances Table 24: Hellenic Aerospace Industry Recent Contract Wins Table 25: Hellenic Defence Systems S.A Product Focus Table 26: Hellenic Defence Systems S.A Recent Contract Wins Table 27: ISI Hellas product focus Table 28: ISI Hellas Recent Contract Wins Table 29: Hellenic Shipyards S.A Product Focus Table 30: Hellenic Defence Systems S.A Recent Contract Wins Table 31: SSMART S.A Product Focus Table 32: SSMART S.A Alliances Table 33: Signaal Hellas product focus Table 34: Signaal Hellas Alliances Table 35: Theon Sensors product focus Table 36: Theon Sensors Recent Contract Wins Table 37 Ordtech Military Industries Product Focus Table 38: Intracom Defense Electronics Product Focus Table 39: Intracom Defense Electronics Recent Contract Wins Table 40: Hellenic Vehicle Industry S.A Product Focus Table 41: Hellenic Vehicle Industry S.A Recent Contract Wins

9 1. Executive Summary The Greek defense budget is projected to register a CAGR of % over the forecast period The ongoing economic crisis and cuts mandated by the EU (European Union), International Monetary Fund (IMF), and European Central Bank have affected the growth of the Greek defense industry. During the review period, the country s government reduced its military expenditure from US$ billion in 2009 to US$ billion in However, Greece and Turkey not only share a long-standing territorial dispute involving Cyprus, but are also involved in a maritime border dispute in the Gulf of Aegean. The situation has nearly escalated to an armed conflict twice, and has historically been the driving factor behind Greek defense procurements; it is expected to continue to be so over the forecast period. As a percentage of GDP, the country is expected to reduce its defense expenditure over the forecast period, from % in 2013 to % by Total defense expenditure for the forecast period is projected to value US$ billion and, in accordance with its commitment to the protection of civilians and critical infrastructure, Greece is expected to allocate an average per capita defense expenditure of US$. Over the forecast period arms procurement is forecast to value US$ billion, which corresponds to % of the country s total defense expenditure for the same period. The remaining % is forecast to be invested in the training of the Hellenic Armed Forces, the MRO activities of existing defense systems, and the salaries and pensions of military personnel. 9

10 2. Market Attractiveness and Emerging Opportunities Greece is one of the largest importers of arms in Europe and, of all the EU nations, allocates a high percentage of its GDP for defense purposes, making it one of the most sought after markets for foreign OEMs. Despite the weakness of its financial sector, both the country s minimal domestic defense capabilities and the threat of the Turkish military have driven Greece to continue to invest in defense, with particular focus on fighter jets, submarines, missile systems, and armored vehicles. The country primarily imports arms from EU nations and the US, and is assisting in the development of the domestic industry by sub-contracting deals achieved through defense offset obligations. Over the forecast period, the Greek Ministry of Defense (MoD) is estimated to allocate a cumulative of US$ billion for the procurement of military equipment. In 2013, the country invested US$ billion on homeland security (HLS), as part of its alignment with the international guidelines regarding the introduction of the biometric identification of citizens and travelers. Consequently, Greece is expected to make significant acquisitions in order to implement biometric profiling. 10

11 Defense Expenditure Future of the Greek Defense Industry Market Attractiveness, Competitive Landscape and Forecasts to Defense Market Size Historical and Forecast Greece expected to invest US$ billion in defense over the forecast period The ongoing national debt crisis forced the country s government to reduce its military budget from US$ billion in 2009 to US$ billion in 2013, at a CAGR of % during the review period. On a cumulative basis, the country is forecast to spend a total of US$ billion over the forecast period on its armed forces, compared to US$ billion spent during the review period. Over the forecast period, the allocation of funding for the acquisition of military hardware and technology is projected to value US$ billion. The following table and figure show the Greek defense expenditure during the review period: Table 1: Greek Defense Expenditure, Year Defense expenditure (US$ bn) Defense growth percentage CAGR % Source: Greek Ministry of National Defense and SDI analysis Figure 1: Greek Defense Expenditure, Revenue Expenditure Capital Expenditure Growth Rate (%) Source: Greek Ministry of National Defense and SDI analysis 11

12 Defense Expenditure Future of the Greek Defense Industry Market Attractiveness, Competitive Landscape and Forecasts to 2018 The following table and figure show projected defense expenditure of the Greek over the forecast period: Table 2: Greek Defense Expenditure, Year Defense expenditure (US$ bn) Defense growth percentage CAGR % Source: Greek Ministry of National Defense and SDI analysis Figure 2: Greek Defense Expenditure, Revenue Expenditure Capital Expenditure Growth Rate (%) Source: Greek Ministry of National Defense and SDI analysis 12

13 2.2. Analysis of Defense Budget Allocation Capital expenditure share in the defense budget to increase over the next five years During the review period, the country allocated an average of % of the total defense budget to capital expenditure, and the remaining % to revenue expenditure. The country s revenue expenditure is characterized by high levels of investment in military operations, such as MRO activities and salaries, and the pensions of retired personnel. Over the forecast period, the government is proposing to cut operational expenditure and salaries, resulting in a lower share of revenue expenditure, an average of %. The following table and chart display the Greek defense budget share of capital and revenue expenditure during the review period: Table 3: Greek Defense Budget Split Between Capital and Revenue Expenditure (%), Year Capital Expenditure Share Revenue Expenditure Share Source: Greek Ministry of National Defense and SDI analysis Figure 3: Greek Defense Budget Split Between Capital and Revenue Expenditure (%), %Percentage of Defense Expenditure 100% 80% 60% 40% 20% 0% Revenue Expenditure Capital Expenditure Source: Greek Ministry of National Defense and SDI analysis 13

14 Percentage of Defense Expenditure % Future of the Greek Defense Industry Market Attractiveness, Competitive Landscape and Forecasts to 2018 The following table and chart display the Greek defense budget share of capital and revenue expenditure over the forecast period: Table 4: Greek Defense Budget Split Between Capital and Revenue Expenditure (%), Year Capital Expenditure Share Revenue Expenditure Share Source: Greek Ministry of National Defense and SDI analysis Figure 4: Greek Defense Budget Split Between Capital and Revenue Expenditure (%), % 80% 60% 40% 20% 0% Revenue Expenditure Capital Expenditure Source: Greek Ministry of National Defense and SDI analysis 14

15 Homeland Security Expenditure Future of the Greek Defense Industry Market Attractiveness, Competitive Landscape and Forecasts to Homeland Security Market Size and Forecast Homeland security market to record a CAGR of 0.45% over forecast period Greek homeland security (HLS) expenditure, valued at US$ billion in 2013, registered a CAGR of % during the review period. The country s HLS expenditure is expected to grow at a CAGR of % during the forecast period, to reach an estimated US$ billion by With Greece s proximity to several other countries, the chances of illegal immigration are heightened. Over the next five years, HLS equipment manufacturers will experience increased demand for border surveillance equipment such as CCTV and biometric identification systems. Increased demand is also expected for equipment for the protection of critical infrastructure, borders, and maritime security. The following table and figure show the Greek HLS budget during the review period: Table 5: Greek HLS Budget (US$ Billion), Year HLS budget (US$ bn) Source: Ministry of Defense, Greece and SDI analysis Figure 5: Greek HLS Budget (US$ Billion), Source: Ministry of Defense, Greece and SDI analysis 15

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17 Homeland Security Expenditure Future of the Greek Defense Industry Market Attractiveness, Competitive Landscape and Forecasts to 2018 The following table and figure show the Greek HLS budget over the forecast period: Table 6: Greek HLS Budget (US$ Billion), Year HLS budget (US$ bn) Source: Ministry of Defense, Greece and SDI analysis Figure 6: Greek HLS Budget (US$ Billion), Source: Ministry of Defense, Greece and SDI analysis 17