Aerospace Products & Parts Manufacturing
Buy This Industry Report
Get more in-depth industry information with a First Research industry report containing business challenges, trends, executive insight, call prep questions, and so much more!
Industry Overview
The US aerospace products and parts manufacturing industry includes about 1,300 companies with combined annual revenue of about $180 billion. Major companies include Boeing, Northrop Grumman, Lockheed Martin, Raytheon, and General Dynamics. The US industry is highly concentrated: the 20 largest companies account for about 90 percent of industry revenue. Many companies work primarily as subcontractors to the five largest manufacturers.
The global aerospace manufacturing industry generates more than $700 billion in annual revenue. Major international companies include the Netherlands-based EADS (and its French subsidiary Airbus), BAE Systems (UK), Finmeccanica (Italy), and Bombardier (Canada).
Competitive Landscape
Demand is driven by the US military budget 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 industry is capital-intensive: average revenue per employee is about $400,000.
The US aerospace industry exports a significant portion of its output. The countries receiving the largest amount of US exports include France, the UK, China, Germany, and Canada. The US aerospace manufacturing industry faces increasing competition in global markets from state-supported firms such as Airbus, which is the primary competitor of Boeing for large commercial aircraft. Imports come largely from France, Canada, the UK, Japan, and Germany.
Products, Operations & Technology
Major products are aircraft, including commercial, military, private and business planes; aircraft components, including engines, fuselages, interiors, and avionics; and missiles and space vehicles. Aircraft manufacturing accounts for about half of industry revenue; aircraft engines and other parts for about 40 percent; and missiles and space vehicles for about 10 percent.
Boeing is the only US manufacturer for commercial aircraft, but outsources portions of its business to numerous subcontractors. Private and business aircraft are made by companies such as General Dynamics, through its Gulfstream subsidiary, and Cessna, a subsidiary of Textron. Subcontractors specialize in producing assemblies for various systems, such as engines, fuselages, interiors, rotors, electronic and hydraulic control systems, avionics, and guidance systems.
The manufacturing process involves forming, forging, metal fabricating, painting, and finishing activities. These activities require greater precision than in general manufacturing. Aerospace products also require high grade materials; raw materials include aluminum, titanium, carbon fiber, and special steel alloys. Assemblies and systems are manufactured according to designs specified by the prime contractor, and often developed in tandem by the prime and subcontractor. Small contractors generally work for a specific prime contractor.
Manufacturing costs are dominated by the costs of materials and supplies, especially aluminum, titanium, and carbon and boron composites. Some materials are available from only a few suppliers. As such, the timing and pricing of some materials and commodities can fluctuate widely.
Technology is constantly changing in the industry. R&D expenses for top-tier manufacturers often are about 2 percent of revenue, though such companies may receive significant federal funding for research and development. Systems development is especially important in the manufacture of guidance systems, communications, and space vehicles. Lockheed Martin and Raytheon both have business units devoted solely to electronic systems development. Aircraft are designed through computer-aided design (CAD) that allows companies to design an entire aircraft, including its components, by computer. Investment in computer-aided manufacturing (CAM) is common. Computer systems are critical for designing, testing, and operating aerospace products.
