Military & Defense Semiconductor Market

Military & Defense Semiconductor Market Size:

The global military & defense semiconductor market size reached US$ 6.84 Billion in 2023. Looking forward, IMARC Group expects the market to reach US$ 13.79 Billion by 2032, exhibiting a growth rate (CAGR) of 7.8% during ​2024-2032​. The market is driven by the rising demand for secure system, the growing geopolitical tension, the increasing use of unmanned systems, and the significant upgradation of military platforms.

Military & Defense Semiconductor Market Analysis:

• Major Market Drivers: The latest technical developments in defense systems and equipment are driving the need for customized semiconductors made for military applications. Mounting purchases of sensors and electronic warfare systems to counter changing threats are propelling the military and defense semiconductor market. 
• Key Market Trends: The increasing need, for real time data processing semiconductor chips arises as military applications integrate intelligence and machine learning algorithms. To meet the demand for energy-efficient solutions in electronics, semiconductor design, and production processes are focused on miniaturization and optimizing Size, Weight, Power, and Cost (SWaP C).
• Geographical Trends: North America leads the sector, supported by defense spending, the presence of semiconductor manufacturers and defense contractors, and its geographical dominance, notably in the United States. Meanwhile, the Asia Pacific, including South Korea and China, among other countries, is expanding its defense capabilities through semiconductor technologies.
• Competitive Landscape: Some of the major market players in the military and defense semiconductor industry include Analog Devices, Inc., Digitron Semiconductors, Infineon Technologies AG, Microchip Technology Inc., Northrop Grumman Corporation, NXP Semiconductors NV, ON Semiconductor Corporation, Raytheon Technologies Corporation, Teledyne Technologies Inc., Texas Instruments Incorporated, among many others.
• Challenges and Opportunities: Challenges include disturbances to the supply chain due to shortages of material and geopolitics with respect to production schedules and procurement timelines. On the other hand, opportunities include newly emerging domains such as weapons and quantum computing, where semiconductor manufacturers may innovate to meet the needs to operate.

Military & Defense Semiconductor Market Drivers:

Growing Demand for Secure Systems

The increasing cyber threats and electronic warfare and the demand for secure systems within the military and defense sectors is propelling market growth. Advanced semiconductors are essential in improving the security of communication systems, data storage, and critical infrastructure. According to the Stockholm International Peace Research Institute (SIPRI) in April 2022, military expenditure increased by 0.7 percent (%) in 2021, reaching $2113 billion. The United States, Russia, China, the United Kingdom, and India are the biggest spenders in 2021 accounting for 62 percent of expenditure according to the new data of SIPRI, passing $2.1 trillion for the first time. Hence, this rising expenditure is also driving the demand for semiconductors in the sector.

Upgradation of Military Platforms

The enhancement of equipment plays a role, in shaping the military and defense semiconductor industry. This includes integrating state of the art semiconductor technologies into airplanes, naval vessels and land vehicles to improve their efficiency, dependability and functionalities. These expansions involve the integration of sensors, navigation systems, and communication devices that count on superlative semiconductors. The military warrants their effectiveness in operative settings by upgrading these platforms thus fueling the demand for advanced semiconductor solutions. For illustration, in June, 2023, the United States and India accomplished an ambitious roadmap for defense industrial teamwork to fast-track technology tie-ups and co-production of military platforms including air combat and land systems, due to the wake of China's rising aggressive behavior in the Indo-Pacific region.

Rising Need for Unmanned Systems

The changing shift toward unmanned systems in military operations underscores the growing importance of semiconductors. Unmanned Aerial Vehicles (UAVs), Unmanned Ground Vehicles (UGVs), and Unmanned Naval Vessels (UNVs) depend on semiconductors for control, navigation, and communication. These systems offer strategic advantages such as reduced risk to human life and enhanced operational efficiency. For instance, Teledyne Technologies, part of the company Teledyne FLIR Defense unveiled that it received new orders worth $62.1 million from the U.S. Armed Services for its ultra-modern, multi-mission robots. The U.S. Navy, Army, and other command centers appoint orders for nearly 500 more Centaur unmanned ground systems such as additional antennas, spares, and payload mounting kits employed to perform dangerous tasks.

Increasing Geopolitical Tension

Geopolitical tensions globally act as a catalyst for the expansion of the military and defense semiconductor market. As countries seek to bolster their defense capabilities in response to regional conflicts and potential threats, the demand for advanced semiconductor technology intensifies. For instance, the United States is a prominent military spender, according to the Stockholm International Peace Research Institute (SIPRI). The expenditure reached a total of $877 billion in 2022, which accounts for thirty-nine (39) % of total global military expenditure amidst inflation. It is also three times more than the amount spent by China, the world’s second-largest spender.

Military & Defense Semiconductor Market Opportunities:

Technological Innovation

Technological innovation is driving opportunities within the military and defense semiconductor market. As defense requirements evolve, there is a continuous demand for more sophisticated and efficient semiconductor solutions. For example, Airbus and STMicroelectronics, a prominent global player in the aerospace and semiconductor industries are exploring the advantages of wide bandgap semiconductor materials including Silicon Carbide (SiC) and Gallium Nitride (GaN), for aircraft electrification owing to their superior electrical properties compared to traditional semiconductors like silicon. Last year (2023), in March, Accenture Federal Services won a $380 million IT infrastructure operations and modernization award from the U.S. customs and Border Protection (CBP), which will supply comprehensive tech support for safeguarding the nation’s borders and facilitate lawful international travel and trade.

Collaboration and Partnership Among Players

Collaboration and partnership among market players are pivotal in harnessing collective expertise to address complex defense needs. Strategic alliances between semiconductor companies, defense contractors, and research institutions facilitate the pooling of resources, knowledge, and technology. In  June 2023, Airbus, a prominent global player in the aerospace industry, and STMicroelectronics, a global semiconductor leader providing customers across electronics applications signed a treaty to collaborate on power electronics research and development (R&D) to supply more competent and lighter power electronics, important for further hybrid-powered aircraft and full-electric urban air vehicles.

Integration of Artificial Intelligence

The integration of artificial intelligence into military systems offers a lucrative opportunity for the semiconductor industry. This is due to AI requiring sophisticated semiconductor chips capable of processing massive volumes of data rapidly. Semiconductor chips facilitate the integration of autonomous systems, aid in making appropriate decisions, and allow for advanced surveillance and reconnaissance. Given that AI is becoming increasingly popular among defense forces, this validates the need for specialized semiconductor solutions. This is because AI will improve operational capacity and will also push the semiconductor market to leverage AI technology in the defense sector.

Rising Government Spending on Defense

Another factor that validates the market opportunity for military and defense semiconductors is government spending on defense. Governments worldwide are under tremendous pressure to allocate a significant portion of their resources to the military to modernize and strengthen their capacity. This spending pattern implies increased demand for high-performance semiconductors that facilitate the technological realization of military and defense mechanisms. Hence, ongoing spending by governments to equip their armed forces with state-of-the-art technology will create an enabling environment for this market. As governments seek to equip their armed forces with the latest technologies, the market for military and defense semiconductors is set to expand, benefiting from sustained investment in defense infrastructure.

Key Technological Trends & Development:

Gallium Nitride (GaN) Technology

Gallium Nitride (GaN) technology has revolutionized semiconductors, especially in high-frequency, high-power applications where traditional silicon falls short. GaN's superior properties, such as higher breakdown strength and thermal conductivity, make it ideal for radar, communications, and electronic warfare systems in the defense sector. Its ability to operate at higher temperatures and voltages significantly improves the performance and reliability of military equipment, offering enhanced capabilities with reduced size and weight.

System on Chips (SoC) Integration

System on Chips (SoC) integration represents a leap forward in miniaturization and efficiency. It offers a compact, energy-efficient solution for complex military systems by integrating all necessary electronic circuits and components into a single chip which facilitates the development of smaller, lighter, and portable defense equipment without compromising on power or functionality. SoCs are particularly beneficial in unmanned systems, wearable technology, and mobile communication devices, enabling advanced capabilities in constrained form factors. This year in January 2024, the U.S. awarded a $162 million grant to Microchip Technology Inc. (MCHP) in federal funding from the CHIPS Act to enhance domestic production of semiconductors and microcontrollers at two (2) U.S. factories.

Radiation-hardened Integrated Circuits (ICs)

Radiation-hardened integrated circuits (ICs) are designed to withstand extreme radiation environments, such as those found in space or near nuclear reactors. These ICs are crucial for satellites, space vehicles, and nuclear warfare equipment, where normal semiconductors would fail. By ensuring operational reliability in the presence of high radiation levels, these specialized ICs play a pivotal role in strategic defense systems and space exploration missions. On February two thousand twenty-four (2024), Teledyne FLIR Defense, part of Teledyne Technologies unveiled that Canada's Department of National Defence is seeking over 800 SkyRanger R70 Unmanned Aerial Systems (UAS), which is valued more at CAD$95 million (approximately US$70 million), which Canada is donating to the government of Ukraine.

RF/Microwave Technologies

RF/Microwave technologies are critical for communication, radar, and navigation systems within the defense sector. These technologies enable the transmission and reception of radio and microwave signals with high precision and reliability. Advances in RF/Microwave semiconductors have led to improved performance in terms of frequency range, noise reduction, and signal processing capabilities. This enhances the effectiveness of military operations by ensuring robust, secure, and clear communications, even in adverse conditions.

Advanced Packaging and 3D Integration

Advanced packaging and 3D integration technologies address the limitations of traditional 2D IC layouts, offering a path to greater performance and functionality in a smaller footprint. By stacking and interconnecting multiple semiconductor layers, these technologies enable higher data transfer speeds, reduced power consumption, and improved bandwidth. According to the IMARC GROUP, the global advanced packaging market size reached US$ 41.5 Billion in the 2023. The market is anticipated to reach US$ 98.3 billion by 2032, exhibiting a growth rate (CAGR) of 10% during ​2024-2032​. It is advantageous in defense applications, where equipment space is at a premium, and operational efficiency and speed are paramount.

Super-lattice Castellated Field Effect Transistors (C-FETs)

Super-lattice castellated field effect transistors (C-FETs) represent a cutting-edge circuit technology that offers superior performance over conventional FETs. With enhanced electron mobility and lower on-resistance, C-FETs provide higher efficiency and faster switching speeds. This technology is particularly beneficial for power amplification and switching applications in military platforms, contributing to more energy-efficient and high-performance systems.

Military & Defense Semiconductor Market Segmentation:

IMARC Group provides an analysis of the key trends in each segment of the market, along with forecasts at the global, regional, and country levels for ​2024-2032​. Our report has categorized the market based on mounting type, component, material used, and application.

Breakup by Mounting Type:

• Surface Mount
• Through Hole
   

Through hole accounts for the majority of the market share

The report has provided a detailed breakup and analysis of the market based on the mounting type. This includes surface mount and through hole. According to the report, through hole represented the largest segment.

Through hole semiconductors are mounted by inserting leads through holes in the PCB and soldering them to the opposite side. This traditional mounting technique provides mechanical stability and reliability, making it suitable for rugged environments and high-vibration applications commonly encountered in military and defense systems. Through-hole components are often preferred for their robustness and ease of repair and replacement, particularly in equipment subjected to harsh operating conditions where durability is paramount. It follows IPC standards including IPC 2221, IPC 7251, and IPC 610 A for assembling through-hole components. It is a general standard covering the production and electrical requirements.

Breakup by Component:

• Memory Devices
• Logic Devices
• Analog IC
• MPU
• Discrete Power Devices
• MCU
• Sensors
• Others
   

Memory devices hold the largest share of the industry

A detailed breakup and analysis of the market based on the component have also been provided in the report. This includes memory devices, logic devices, analog ICs, MPUs, discrete power devices, MCUs, sensors, and others. According to the report, memory devices accounted for the largest market share.

Military and defense systems rely heavily on data for surveillance, reconnaissance, communication, and intelligence purposes and memory devices provide the necessary storage capacity to hold large volumes of data securely. These devices come in various forms such as volatile (e.g., RAM) and non-volatile (e.g., flash memory), offering flexibility to meet diverse application requirements. The growth of non-volatile (NV) memory, which are memory chipsets that can retain the data stored in it after the removal of power supply, has created interest in the possibility of using such technology in especially autonomous military vehicles. .

Breakup by Material Used:

• Silicon Carbide
• Gallium Manganese Arsenide
• Copper Indium Gallium Selenide
• Molybdenum Disulfide
• Others
   

Silicon carbide represents the leading market segment 

The report has provided a detailed breakup and analysis of the market based on the material used. This includes silicon carbide, gallium manganese arsenide, copper indium gallium selenide, molybdenum disulfide, and others. According to the report, silicon carbide represented the largest segment.

Silicon carbide is a wide-bandgap semiconductor material known for its durability and high-temperature tolerance. In military applications, SiC is widely used in power electronics, such as high-power amplifiers and radar systems. Its ability to withstand harsh environments makes it ideal for rugged military operations. The traditional semiconductor silicon has a small bandgap of around 1.12 electron-volts (eV), while silicon carbide has a bandgap of about 3.26 eV (Wolfspeed). SiC semiconductors enhance the performance and reliability of electronic systems in military aircraft, ground vehicles, and communication devices, ensuring consistent operation even in extreme conditions.

Breakup by Application:

• Communication
• Vehicles
• Weapons
• Others
   

Communication exhibits a clear dominance in the market 

A detailed breakup and analysis of the market based on the application have also been provided in the report. This includes communication, vehicles, weapons, and others. According to the report, communication accounted for the largest market share.

Communication is the backbone of coordination and strategic execution. Semiconductor technologies play a pivotal role in ensuring secure and reliable communication channels for soldiers, commanders, and support personnel. From encrypted radios to satellite communication systems, semiconductors enable the transmission of critical data and intelligence across vast distances, even in hostile environments. Consequently, the government of various countries are introducing favorable policies to encourage the usage of semiconductors. For instance, On August 9, 2022, President Biden signed the CHIPS and Science Act into law. The CHIPS and SCIENCE ACT provides $280 Billion to science-related research and development. Around $52 Billion of that is dedicated to improving the domestic production of semiconductors and other materials

Regional Insights:

• North America
  • United States
  • Canada
• Europe
  • Germany
  • France
  • United Kingdom
  • Italy
  • Spain
  • Others
• Asia Pacific
  • China
  • Japan
  • India
  • South Korea
  • Australia
  • Indonesia
  • Others
• Latin America
  • Brazil
  • Mexico
  • Others
• Middle East and Africa

North America leads the market, accounting for the largest military and defense semiconductor market share

The report has also provided a comprehensive analysis of all the major regional markets, which include North America (the United States and Canada); Europe (Germany, France, the United Kingdom, Italy, Spain, and others); Asia Pacific (China, Japan, India, South Korea, Australia, Indonesia, and others); Latin America (Brazil, Mexico, and others); and the Middle East, and Africa. According to the report, North America represents the largest regional market for military and defense semiconductors.

North America currently dominates the market due to the world's largest defense contractors and military organizations, which drive significant demand for advanced semiconductor technologies to power their defense systems and equipment. Furthermore, ongoing investments in research and development (R&D), coupled with government initiatives aimed at enhancing national security through technological innovation, contribute to the continued growth of the market. In January, this year, two thousand twenty-four (2024), the U.S. Air Force granted Raytheon, an RTX organization, a $400 million contract to manufacture and supply more than 1,500 StormBreaker smart weapons, which is a prominent air to surface, network-enabled weapon that can seize moving targets in all-weather circumstances deploying its multi-effects warhead and tri-mode seeker.

Analysis Covered Across Each Country:

• Historical, current, and future market performance
• Historical, current, and future performance of the market based on mounting type, component, material used, and application.
• Competitive landscape
• Government regulations
   

Competitive Landscape:

The market research report has provided a comprehensive analysis of the competitive landscape covering market structure, market share by key players, market player positioning, top winning strategies, competitive dashboard, and company evaluation quadrant, among others. Detailed profiles of all major companies have also been provided. This includes business overview, product offerings, business strategies, SWOT analysis, financials, and major news and events. Some of the major market players in the military and defense semiconductor industry include Analog Devices, Inc., Digitron Semiconductors, Infineon Technologies AG, Microchip Technology Inc., Northrop Grumman Corporation, NXP Semiconductors NV, ON Semiconductor Corporation, Raytheon Technologies Corporation, Teledyne Technologies Inc., Texas Instruments Incorporated.

At present, the key players in the military and defense semiconductor market are actively engaged in various strategies to maintain their competitive edge and capitalize on emerging opportunities.  They are investing in R&D to develop innovative semiconductor solutions tailored to the specific needs of military and defense applications. Many players are forming strategic partnerships and collaborations with government agencies, defense contractors, research institutions, and other stakeholders to co-develop next-generation semiconductor technologies and solutions. Besides this, they are expanding their product portfolios to offer a comprehensive range of semiconductor solutions catering to diverse defense requirements. In March, 2024, Northrop Grumman Corporation announced the launch of a ballistic missile target vehicle to assist the missile defense agency’s flight test Aegis Weapon System 32 (FTM-32), which cooperated with the U. S Navy.

Analysis Covered for Each Player:

• Market Share
• Business Overview
• Products Offered
• Business Strategies
• SWOT Analysis
• Major News and Events
   

Military & Defense Semiconductor Market News:

• February 2024: Analog Devices Inc. unveiled that the company collaborated with TSMC, the prominent player in semiconductor foundry, to deliver long-term wafer capacity through Japan Advanced Semiconductor Manufacturing Inc. (JASM), improving the capacity and resiliency of the company.
• February 2024: Biden-Harris Administration unveiled that the U.S. Department of Commerce and GlobalFoundries (GF) signed a non-binding preliminary memorandum of terms (PMT) that enables providing approximately $1.5 billion in direct government funding over the CHIPS and Science Act which boosts the U.S. domestic supply chain resilience, manufacture, and design which modernizes GlobalFoundries’s U.S. manufacturing sites that produce essential communications, automotive, and defense semiconductor technologies. 
   

Military & Defense Semiconductor Market Report Scope:

Key Questions Answered in This Report:

• How has the global military & defense semiconductor market performed so far, and how will it perform in the coming years?
• What are the drivers, restraints, and opportunities in the global military & defense semiconductor market?
• What is the impact of each driver, restraint, and opportunity on the global military & defense semiconductor market?
• What are the key regional markets?
• Which countries represent the most attractive military & defense semiconductor market?
• What is the breakup of the market based on the mounting type?
• Which is the most attractive mounting type in the military & defense semiconductor market?
• What is the breakup of the market based on the component?
• Which is the most attractive component in the military & defense semiconductor market?
• What is the breakup of the market based on the material used?
• Which is the most attractive material used in the military & defense semiconductor market?
• What is the breakup of the market based on the application?
• Which is the most attractive application in the military & defense semiconductor market?
• What is the competitive structure of the market?
• Who are the key players/companies in the global military & defense semiconductor market?

Key Benefits for Stakeholders:

• IMARC’s industry report offers a comprehensive quantitative analysis of various market segments, historical and current market trends, market forecasts, and dynamics of the military & defense semiconductor market from 2018-2032.
• The research report provides the latest information on the market drivers, challenges, and opportunities in the global military & defense semiconductor market.
• The study maps the leading, as well as the fastest-growing, regional markets. It further enables stakeholders to identify the key country-level markets within each region.
• Porter's five forces analysis assists stakeholders in assessing the impact of new entrants, competitive rivalry, supplier power, buyer power, and the threat of substitution. It helps stakeholders to analyze the level of competition within the military & defense semiconductor industry and its attractiveness.
• The competitive landscape allows stakeholders to understand their competitive environment and provides insight into the current positions of key players in the market.