Shipbuilding and Repair
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 shipbuilding and repair industry includes about 500 companies with combined revenue of about $15 billion. Major companies include the shipbuilding divisions of Northrop Grumman and General Dynamics, both of which are US military contractors. Other top companies are Todd Shipyards, Conrad Industries, Trinity Marine Products, and Jeffboat. The industry is highly concentrated: the largest 50 companies account for about 90 percent of revenue.
Competitive Landscape
Demand for military shipbuilding is largely determined by the US military budget, and to a much lesser extent, the military spending of foreign governments allied with the US. Commercial shipbuilding demand is determined by international and domestic trade, the health of the global economy, and rate of fleet replacement due to age or obsolescence. Small companies usually specialize in building and repair of small commercial vessels. Large companies tend to offer a wide range of building and repair services for both commercial and military vessels, and enjoy economies of scale in purchasing, design, and manufacturing. The average annual revenue per employee is about $175,000.
Products, Operations & Technology
Revenue is generated by the design and construction of new commercial and military vessels, and the renovation and repair of existing ships. Commercial products include tankers, passenger vessels and cruise ships, barges and bulk carrier barges, and cargo and container vessels. Military products include aircraft carriers, attack submarines, transport and ammunition ships, cruisers, destroyers, amphibious assault ships, and mine hunters. For most large shipbuilders, commercial shipbuilding accounts for 40 percent or less of sales.
Shipbuilding takes place at large, coastal shipyards. Large companies typically have at least one major shipyard on the East and West coasts, and on the Gulf coast. Smaller shipbuilders usually have one or more facilities that service a single US coast. Shipbuilding facilities include dry docks, shipways, wharves, outfitting piers, cranes, and covered or indoor facilities for assembly and construction. Other operations include steel fabrication, pipe, and sheet metal shops, and repair and maintenance facilities. In some cases, labor requirements have been reduced by using modular construction techniques.
Lead times for new military vessels can be quite long. Extremely complicated vessels such as Virginia-class attack submarines can be built at a rate of about one per year. Large commercial container ships capable of carrying thousands of shipping containers can be built at a rate of about two per year.
Maintenance, overhaul, and repair schedules and specifications for commercial vessels usually are negotiated during the competitive bidding process. Maintenance is then determined by the agreed upon contract. Commercial vessels typically have a service life of about 25 to 30 years.
Builders of large naval vessels provide life cycle support services for the vessels they deliver to the US Navy. These services include configuration and data management, fleet services, integrated logistics support, and life cycle engineering and design. Large naval surface vessels such as a battleship may be commissioned for 40 years or longer.
While large military vessels are usually maintained by life cycle support services provided by the original builder, contracts for smaller or older vessels can be open to competitive contract bidding. These contracts are usually awarded based on repair capability and the shipyard's geographic proximity to a given vessel's location of service.
Raw materials include steel, aluminum, electronics, and plastics. Due to the large scale of the manufacturing process, shipbuilding depends on subcontractors, and in some cases, corporate partnerships. Builders of military ships work closely with the US military on vessel engineering and design. Both military and commercial ships are delivered directly from shipyards to military or commercial customers.
Computer technology is used to design and engineer finished products. Due to the complicated nature of the industry, shipbuilders use IT systems that track project progress in real-time to ensure that projects are completed on time and on-budget. Technology also is used to ensure the security of government and defense contractor networks that transmit sensitive information. The US government works closely with defense contractors to ensure that networks are protected.
R&D is critical to the industry due to the high level of product complexity. Costs associated with R&D are often built into fixed-price or cost-plus contracts for military products. R&D for both government and commercial products can also be self-funded.
