First Research US Industry Profile

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Aerospace Products & Parts Manufacturing
SIC Codes: 3721, 3724, 3728, 3761, 3764, 3769
NAICS Codes: 3364
Last Quarterly Update: 7/1/2019
Companies in this industry manufacture aircraft, aircraft components, and missiles and space vehicles. Major companies include US-based Boeing, General Dynamics, Lockheed Martin, Northrop Grumman, Raytheon, Space Exploration Technologies (SpaceX), and United Technologies, as well as Airbus (the Netherlands), BAE Systems (the UK), Bombardier (Canada), and Leonardo (Italy). Many companies work primarily as subcontractors to the largest manufacturers.
Top countries for aerospace products and parts manufacturing include Canada, France, the UK, and the US. North America and Europe are the largest markets for aerospace products, but emerging economies in the Asia/Pacific region are expected to provide the greatest growth opportunities. Global aerospace and defense revenue is forecast to rise nearly 8% in 2019 and about 5% in 2020, according to S&P Global. Aerospace and defense revenue is expected to be driven by increased commercial aircraft production and rising defense spending in the US and Europe.
The US aerospace products and parts manufacturing industry includes about 1,800 establishments (single-location companies and units of multi-location companies) with combined annual revenue of about $245 billion.
Competitive Landscape
Demand is driven by military budgets and the overall economic climate, which affects airline traffic and demand for new commercial aircraft. The profitability of individual companies depends on technical expertise and the ability to accurately price long-term contracts. Large companies enjoy economies of scale in design, manufacturing, and purchasing. Small companies can compete effectively by concentrating on selected components and parts manufacturing for particular prime contractors. Increasingly, small companies are developing system integration capabilities as large firms outsource more aspects of contracts. The US industry is highly concentrated: the 20 largest companies account for about 90% of industry revenue.
Nearly 60% of all US aerospace industry production is exported. The countries receiving the largest amounts of US exports include China, France, the UK, Canada, Germany, and Japan. Imports account for a third of the US aerospace products and parts market and come largely from France, Canada, Japan, Germany, the UK, Italy, and Mexico. The US aerospace manufacturing industry faces increasing competition in global markets from state-supported firms.
Competitive Advantages:
Risk Sharing - Aerospace parts manufacturers can better compete by forging collaborative relationships with prime contractors. Aircraft manufacturers want suppliers to share in the costs and risks inherent in developing new products. To increase their bargaining power with aircraft makers, suppliers may also pursue acquisitions that enhance their position in the supply chain.
Additive Manufacturing - Aerospace companies are making significant investments in additive manufacturing to reduce development and production costs and to improve product design and quality.
Global Reach - Aerospace and defense manufacturers are investing in global networks of maintenance, repair, and overhaul (MRO) facilities to service their products and enhance product life cycle revenue. Asia, particularly China and India, is a key focus of MRO operation expansion. Amid rising defense spending by US allies, especially for missile defense systems, defense contractors are increasingly focused on markets outside the US.
Data Analytics - Aircraft and parts manufacturers are improving efficiency and adding value by leveraging machine learning and advanced analytics. Sensors built into components collect data that can be used to anticipate repairs earlier in the maintenance cycle, which decreases airline customer downtime and provides additional product life cycle revenues for manufacturers.
Companies to Watch:
Airbus is Europe's largest aerospace company and with rival Boeing dominates the global market for large commercial aircraft. Other operations include transport tankers and combat aircraft, civil and military helicopters, satellites and launch systems, missile systems, radar, defense electronics, and unmanned aerial systems.
BAE Systems is a leading military contractor and major foreign player in the US defense market. The company's offerings include electro-optical sensors, flight controls, commercial and financial security, ship repair and modernization, and aircraft. North America is BAE's biggest market.
Boeing is one of the world's largest aerospace companies. In addition to its commercial jet aircraft, the company serves the military, science, and space and sea exploration sectors. Major customers include the US Department of Defense and NASA. Additionally, Boeing provides airplane financing and leasing services to both commercial and military customers.
Lockheed Martin serves the civil and commercial sectors, but it is firmly on the defense/government side of the aerospace industry. Major products include combat aircraft and UAVs, satellites, space vehicles, air and missile defense systems, and ship and submarine combat technology.
Space Exploration Technologies, also known as SpaceX, is developing space launch services that it says could help the US Department of Defense save up to $1 billion a year by increasing competition. The company's Falcon Heavy rocket successfully launched a test payload in 2018. SpaceX and other upstart space ventures represent a potential disruption of the decades-old launch services market dominated by traditional aerospace firms.
United Technologies (UTC) operates aerospace businesses that include commercial and military aircraft engine maker Pratt & Whitney and Aerospace Systems, a producer of engine controls and flight systems for military and commercial clients. In a major move to bolster its aerospace operations and give it more bargaining leverage with customers, UTC purchased aircraft parts manufacturer Rockwell Collins in 2018.
Products, Operations & Technology
Aircraft manufacturing accounts for about 55% of US industry revenue; aircraft engines and other parts for about 35%; and missiles and space vehicles for ... plus:
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