Electro-Optics in Naval Market Research Report and Outlook by 2028

The global market for electro-optics in naval applications was valued at approximately US$ 8,629.35 million in 2022 and is projected to grow to around US$ 11,139.38 million by 2028, reflecting an estimated compound annual growth rate (CAGR) of 4.3% during the forecast period.

Increasing military budgets are driving investments in the technological advancement of naval vessels across various nations. Countries like the United States, Russia, China, and India are actively pursuing multiple naval vessel projects aimed at enhancing their naval fleets within their defense sectors. In the Middle East, nations such as Iran and Israel are focusing on the acquisition and modernization of small to medium-sized vessels, including corvettes, missile boats, and coastal patrol boats, primarily for surveillance, threat detection, and identification purposes. This ongoing procurement of naval vessels is creating a significant demand for electro-optic systems, thereby propelling the growth of the electro-optics in naval market.

Moreover, due to ongoing conflicts and geopolitical tensions, many countries have ramped up their investments in defense technologies, including electro-optic systems, to bolster their armed forces and ensure reliable operational capabilities. Additionally, various naval vessel projects that have already been commissioned across different nations are expected to be delivered during the forecast period, which is likely to create new opportunities for market participants.

Effects of the COVID-19 Pandemic on the Growth of Electro-Optics in Naval Market
The COVID-19 pandemic significantly disrupted operations and manufacturing processes across the defense and shipbuilding industries. The commercial shipbuilding sector faced severe challenges, with some companies on the brink of collapse. While the defense and security sectors did not experience an immediate market downturn as drastic as that of commercial shipbuilding, they were still affected by the pandemic's financial repercussions, which hindered the production of electro-optic systems and components due to supply chain disruptions. Furthermore, the redirection of government spending from military technologies to measures aimed at controlling the COVID-19 outbreak had a slight negative impact on planned investments in the electro-optic technology market for defense applications. Nevertheless, companies have adapted by devising new strategies to recover from the crisis and initiate new projects to regain momentum. Several vendors have secured contracts to supply electro-optic systems for naval applications, contributing to the resurgence of growth in the electro-optics in naval market.

In the Asia Pacific region, the increasing procurement of naval vessels by various naval forces is expected to drive demand for electro-optics solutions, thereby enhancing the growth of the APAC electro-optics in naval market in the coming years. Notable contracts related to electro-optic solutions in the region include:

• In May 2022, the Philippine Navy awarded a contract to Israel Aerospace Industries (IAI) for the provision of electro-optics solutions for their patrol vessels.
• In June 2021, Electric Systems Ltd secured a contract from an undisclosed country in the APAC region to deliver AI-powered electro-optical systems for their maritime forces, including the SPECTRO XR multi-spectral electro-optic systems over a four-year period.

Thus, the increasing number of contracts for electro-optic solutions, such as cameras, sensors, and laser range finders, is driving the growth of the APAC electro-optics in naval market.

The military sector in several Middle Eastern countries is currently in a growth phase, with these nations striving to enhance their military capabilities. According to global firepower assessments, Egypt, Turkey, Israel, Saudi Arabia, and Iran are among the leading military powers in the region. Additionally, government entities are making substantial investments to strengthen their armed forces. The International Institute for Strategic Studies (IISS) reports that Saudi Arabia has the largest military budget in the region, exceeding the combined budgets of the next five highest spenders: Israel, Iraq, Algeria, Iran, and Oman. Such significant military investments enable these countries to adopt advanced technologies for effective combat operations.

In South America, there is a noticeable increase in the number of merchant vessels, as naval logistics play a crucial role in the economies of these nations. These merchant vessels are often equipped with electro-optic systems, including cameras and sensors, which is further driving the growth of the electro-optics in naval market in the region. Argentina, for instance, had a substantial fleet of domestic ships, totaling 204 in 2021. The Argentinian shipping industry is primarily composed of general cargo ships, container ships, bulk carriers, and various other types of vessels. The continuous expansion of the shipping sector in Argentina is fueling the demand for innovative technologies, thereby propelling the growth of the electro-optics in naval market.

Key players in the electro-optics in naval market include Safran SA, L3Harris Technologies, Inc., Ultra Maritime, Tonbo Imaging, Aselsan AS, Elbit Systems Ltd., SAAB AB, Chess Dynamics, Israel Aerospace Industries Ltd., and Naval Group.