The dynamic growth in Civil Unmanned Aerial Systems (UAS) over the next decade will create significant rewards for smart investment as nations open their airspace, commercial applications take off, and civil governments adopt systems for new roles in border security and public safety. At the same time, some sectors of the market are reaching maturity faster than anticipated, requiring caution and careful research from investors and potential market entrants, according to a report from the Teal Group.
“UAS has been a boom market with possibilities that appeared limitless. It’s entered the shakeout phase, particularly since some markets have become saturated, and others so dominated by a single company that competition is difficult,” said Jeremiah Gertler, Teal Group’s senior analyst and author of the study. ” In much of the world, growth markets are turning to commodity replacement markets where producers compete with the local used drone lot, and some companies see that as their cue to exit.”
By contrast, the United States market is expected to grow when other global markets are already beginning to level off. “The FAA has raised the starters pistol to the sky; we’re just waiting for it to fire,” Gertler said. “U.S. markets will be the second great UAV wave.”
Although the U.S. has made significant strides in closing the regulatory gap with other countries, the lack of a regulatory regime for beyond visual line of sight operations continues to hold the U.S. market back. The Teal study projects that the U.S. will integrate unmanned systems into its national airspace sometime within the next decade, but there is no clarity as to which year that will occur.
Teal Group’s 2023/2024 World Civil UAS Market Profile and Forecast forecasts that non-military UAS production will jump from $8.2 billion market (value of air vehicles) in 2023 to $19.5 billion by 2032, a 10.1% compound annual growth rate in constant dollars. Over the next 10 years the market will total $149.8 billion. The study includes annual forecasts of commercial, consumer and civil government systems and individual submarkets. Teal Group, an independent aerospace and defense research and analysis company, has provided support for the FAA in the preparation of past annual commercial UAS forecasts.
UAS have already proven their worth in numerous commercial applications. Yet a lagging regulatory environment has stifled demand, keeping UAS out of valuable roles as nations struggle to figure out how to incorporate unpiloted aircraft into their air traffic management systems. The results are a high level of unsatisfied demand for UAS capabilities, especially at the higher end.
At the same time, economic challenges in several customer sectors led to slashed capital spending, creating opportunities for services businesses to step in where industries are reluctant to make the upfront capital investment necessary to operate their own systems.
Commercial use will drive the market as consumer drone purchases slow and government purchases remain a small but growing portion of the market. “Major corporations have been the early movers in optimizing UAS use and are best positioned to take advantage when regulations finally lock in,” said Gertler. “At the same time, the consumer market skipped right through adolescence to maturity, leading UAS manufacturers to search upmarket for their next big opportunity. That means more focus on more sophisticated, higher-value units, but also more competition in narrower niches,” Gertler added.
The greatest potential appears to be the delivery market, which has the possibility of touching every household in the world. However, Teal now projects that growth opportunities will not be spread evenly across that market. Teal finds the best delivery market opportunities will be in middle-mile (e.g., factory to warehouse) transportation, rather than in the last-mile deliveries that are most frequently discussed. Last-mile delivery will have to operate in the most complicated regulatory environment, with not just national bodies but localities and even homeowners’ associations having a say in whether and when delivery drones appear in neighborhoods, while much of the regulatory framework for middle-mile transportation is already in place. Delivery is expected to be the leading sector in the United States by 2030.
Agriculture will be the leading sector overseas by 2030 thanks to heavy Chinese investment in subsidising agricultural drone spraying and increasingly capable but more affordable UAS moving into the sector, particularly for smaller farms.
Industrial inspection has emerged as a major commercial drone market over the next decade. Construction will be the largest portion of that industrial inspection market, according to the Teal study. The largest worldwide construction firms have deployed or are experimenting with systems and will be able to quickly deploy fleets worldwide. Industrial inspection also includes other major segments such as energy, mining and railroads. Other important commercial UAS segments include general photography, communications, insurance, and entertainment.
Civil governments are deploying an increasing number of unmanned systems. The United States and European governments have growing programs to deploy systems to protect land and sea borders. The United Nations and other peacekeepers are deploying systems to provide protection. Use by law enforcement, particularly in the United States, is soaring.
“Firms in traditional aerospace, data analysis, semiconductors, telecommunications have aggressively pursued this diverse civil market, but we are beginning to see some consolidation as key players leverage their experience and start to dominate certain areas of technology and manufacturing,” said Tom Zoretich, Teal Group’s Chief Economist, and contributor to the study.
As unmanned systems proliferate, venture funding has flowed into UAS-adjacent efforts like analytical software to handle the data coming from unmanned systems and control networks. US start-ups have received a majority of the funding over the last 10 years, enabling them to take the lead in developing drone analytics. Chinese firms, which have received much less investment, are focusing on consolidating their lead in hardware, moving from consumer to commercial systems. Major Chinese players are adapting to a new reality as they move upmarket, as they are trying to enter markets already controlled by established players rather than creating and dominating new sectors as in the past, while also having to deal with increasing market restrictions from governments wary of Chinese drones’ operational security.
For Editorial Inquiries Contact:
Editor Matt Driskill at matt.driskill@asianaviation.com
For Advertising Inquiries Contact:
Head of Sales Kay Rolland at kay.rolland@asianaviation.com
