Semiconductors in Military and Aerospace Market: Global Industry Analysis by Market Share, Trend, Size, Competitive Landscape, Regional Outlook and Forecast (2024-2030)

Semiconductors in Military and Aerospace Market Overview

The semiconductor market for the military and aerospace sectors is rapidly evolving due to the increasing integration of advanced electronics and technology in defense systems. High-performance, ruggedized semiconductor components, essential for radar, communication, electronic warfare, and navigation systems, are in high demand. These components must withstand harsh conditions and meet stringent reliability requirements. The push for modernization and digitization in defense operations further fuels the adoption of semiconductor solutions, significantly increasing the market.

 

The market is set for substantial growth, with a compound annual growth rate (CAGR) of 5.7% expected from 2023 to 2030. According to the MMR report, the Semiconductors in Military and Aerospace Market was valued at USD 22.18 Bn in 2023 and is expected to reach USD 32.70 Bn by 2030. Strategic partnerships and advancing technologies continue to drive this growth, positioning the semiconductor market for significant advancements and opportunities in the military and aerospace sectors.

 

Governments worldwide are making significant investments in the semiconductor industry for military and aerospace applications to secure technological and economic advantages. The US and EU initiated substantial investments in their semiconductor supply chains in 2022. The growing recognition of semiconductors' strategic importance, coupled with escalating global tensions, has triggered various measures such as sanctions against Russia and Iran, restrictions on exporting telecom and AI chipsets to China, China's prohibition of certain US chipsets in its critical infrastructure and tariffs on electronic components from China.

 

These developments, reflecting the semiconductor in the Military and Aerospace industries plays crucial role in technology advancement, economic influence and military capability. Semiconductor Devices were the world's 20th most traded product, with a total trade of $156B. Between 2021 and 2022 the exports of Semiconductor Devices grew by 12.9%, from $138B to $156B. Trade in Semiconductor Devices represents 0.66% of total world trade. The top exporters of Semiconductor Devices were China ($70.2B), Japan ($9.88B), Malaysia ($9.24B), Germany ($9.02B), and Singapore ($7.25B).

 

 

To get more Insights: Request Free Sample Report

 

Semiconductors in Military and Aerospace Market Dynamics

Growing Demand for UAVs and Drones to Drive the Semiconductors in Military and Aerospace Market Growth

UAVs have become essential components of military operations worldwide, primarily employed in intelligence, surveillance, and reconnaissance missions. However, their roles have expanded to encompass electronic attacks, suppression or destruction of enemy air defense systems, network node or communications relay, combat search and rescue, and much more. The military continues to invest in research and development to increase operational efficiency and autonomy in UAVs, pushing the boundaries of their capabilities. However, drones have become indispensable tools for businesses, enabling efficient inspections, precise mapping, and transforming the way goods are delivered among other activities.

 

That is why the overall drone market (both commercial and recreational) is set to grow to US$54.6 billion by 2030 at a rate of 7.1% CAGR. The proliferation of unmanned aerial vehicles (UAVs) and drones for surveillance, reconnaissance, and combat roles is another key growth driver of Semiconductors in Military and Aerospace Market. These devices require advanced semiconductors to manage their complex navigation, control systems, and communication needs. The expanding use of drones in military operations, border security, and disaster response has significantly boosted the demand for high-performance semiconductor components. This trend is expected to continue as UAV technology evolves and becomes even more integral to modern military strategies.

 

Increasing Defense Budgets for Advanced Semiconductor Components Influencing the Market Growth

Rising defense budgets globally, particularly in major economies, are fueling the demand for advanced semiconductor components. Governments are allocating more funds to modernize their military capabilities, ensuring they remain technologically superior. This includes investments in next-generation fighter jets, missile defense systems, and cyber warfare tools, all of which rely heavily on sophisticated semiconductor technologies. The consistent increase in defense spending acts as a robust catalyst for the growth of the Semiconductors in Military and Aerospace Market. For instance,

 

US 2025 Defense Budget to Cut Semiconductor Spending: On March 11, 2024, the US Department of Defense unveiled the proposed fiscal year 2025 defense budget, totaling $849.8 billion. Despite prioritizing defense against the "multi-domain challenge" posed by China and building a "resilient joint force and defense ecosystem," the budget indicates cuts in semiconductor spending. Especially, programs like Defense Microelectronics Activity (DMEA) and Trusted & Assured Microelectronics (T&AM) are seeing reduced funding. DMEA's budget drops to $137.2 million from $144.7 million in FY 2024, and T&AM's advanced component development sees a decrease from $810.8 million to $593.6 million. The Microelectronics Commons, supported by the CHIPS Act, has received additional funding beyond FY 2023.

 

These cuts has impact the development of crucial defense technologies, potentially slowing advancements in areas like electronic warfare, AI hardware, and secure communications. Also, according to a study of MMR, the Department of Defense announced the award of two contracts totaling $49 million to revitalize advanced packaging capabilities and capacity for semiconductors used in defense applications. The awards were made through the Industrial Base Analysis and Sustainment (IBAS) program to Micross Components and the government of Osceola County, Florida. As global geopolitical tensions reemerge after many decades, the security environment in Europe is changing. European countries are also again rebuilding their defense capabilities to ensure their security after three decades of reduced defense spending. Such factors are expected to drive the semiconductor market in military and aerospace applications.

 

Key Insights on U.S. Defense and Semiconductor Spending

Factor	Details
A New Competition	Technological leadership is crucial for national power. The U.S. needs to adapt to the changing nature of conflict, where technology and ideas are as important as military strength.
China's Advantage	China invests heavily in technology, including semiconductors, and has introduced market dynamism into its state-controlled economy. China's government investment includes over $58 billion in semiconductor funds and significant tax exemptions for chipmakers.
U.S. Federal Investments	The U.S. has historically won global conflicts through federal investments in technology, which have waned since the 1980s. Current spending on R&D is significantly lower compared to China's, highlighting the need for renewed federal investment in strategic industries.
CHIPS Act and U.S. Security	The CHIPS Act aims to bolster the U.S. semiconductor industry with significant funding and incentives. It includes provisions for tax credits, research funding, and establishing a National Semiconductor Technology Center to maintain U.S. technological leadership.
Spending Comparison	The cost of semiconductor fabs is comparable to other major defense expenditures like aircraft carriers. However, fabs provide direct commercial benefits and support multiple key industries, emphasizing the importance of investing in semiconductor infrastructure.
Global Competition	Countries around the world, especially China, provide substantial subsidies to attract semiconductor fabs, creating a competitive disadvantage for the U.S. without similar support.
Strategic Importance	Semiconductors are foundational for both economic and military performance. Increased federal investment in this sector is necessary to maintain U.S. leadership and competitiveness against China.
Policy Recommendations	To effectively compete with China, the U.S. needs to fully fund the CHIPS Act, provide tax incentives, and increase federal investment in technology. This strategy is essential for national security and maintaining technological superiority.

 

The rapid pace of technological advancements in semiconductor design and manufacturing is a primary growth driver. Innovations such as smaller, more efficient chips, enhanced processing power, and integration capabilities enable military and aerospace applications to perform more complex and demanding tasks. These advancements facilitate improvements in areas such as radar systems, communication equipment, and unmanned aerial vehicles (UAVs). As the industry continues to push the boundaries of what semiconductors achieve, the demand for cutting-edge solutions is set to rise, driving significant Semiconductors in Military and Aerospace Market growth.

 

Rising Need of Cybersecurity Solutions to Create Lucrative Opportunity for Market Growth

The defense sector uses a wide range of advanced technologies to perform its functions, including robotics, artificial intelligence, virtual reality and cyber security. Advanced technologies are becoming increasingly important to ensure the effectiveness of military operations and national security. As military and aerospace systems become increasingly interconnected and reliant on advanced technologies, the need for robust cybersecurity solutions is paramount. Semiconductor manufacturers and vendors must establish a robust incident response plan to handle cybersecurity incidents efficiently. Innova solutions provides regular firmware and software updates and patches to safeguard semiconductor devices from identified threats. Hardware cyberattacks often happen because of unnoticed weaknesses in the semiconductor design process or firmware.

 

These attacks come at different points in the product life cycle and cause issues like chip malfunction, denial of service, and the exposure of sensitive information. Sometimes, even well-made hardware vulnerabilities are hard to detect because of the complexity of microelectronics. Innova Solutions provides tailored solutions and services to assist semiconductor companies addressing cybersecurity issues. This presents a significant opportunity for semiconductor manufacturers to develop specialized chips and hardware with enhanced security features. These components help protect sensitive data, secure communications, and prevent cyberattacks, ensuring critical military operations' integrity and reliability. The growing focus on cybersecurity in defense applications opens up a lucrative opportunity of Semiconductors in Military and Aerospace Market for innovative semiconductor solutions.

 

Growing reliance on technology has also led to increased risks and threats. Cyberattacks and data breaches have become increasingly common and sophisticated. These risks have serious consequences for individuals, organizations, and states. Cybersecurity is vital in modern defense, integrating advanced technologies like drones and AI. Experts emphasize the importance of robust cybersecurity to protect critical systems and sensitive data, mitigate insider threats, and enhance global collaboration against cyber threats. Effective strategies include strong access controls, employee training, and intelligence sharing. The expansion of defense and aerospace industries in emerging markets such as India, Brazil, and Southeast Asia provides a promising opportunity for growth. These regions are investing heavily in modernizing their military capabilities and infrastructure, creating a substantial demand for advanced semiconductor components

 

 

The leading countries with the highest aerospace exports in 2022 and 2023, as shown in the chart, positively impact the semiconductor market by driving demand for advanced electronic components. Increased exports indicate robust aerospace activities, leading to higher requirements for reliable and high-performance semiconductor components in military and aerospace applications.

 

Analog Devices (ADI) offers a comprehensive portfolio for aerospace and defense, including solutions for radar, communication, and surveillance. Their technologies cover high-frequency RF applications, advanced avionics, and space systems. Key products include the HMC8411 Low Noise Amplifier and the ADRV9009 RF Transceiver. ADI supports system-level prototyping with mixed-signal front ends, RF transceivers, and precision components. Their solutions are crucial for mission-critical platforms, UAVs, and military communications. Explore their offerings and resources on Digi-Key’s platform.

 

However, the Semiconductors in Military and Aerospace Market face challenges such as supply chain disruptions. The sector relies on complex global supply chains vulnerable to geopolitical tensions and natural disasters, impacting production timelines and costs. Also, stringent regulatory requirements for security and reliability necessitate rigorous testing and certification processes, increasing time-to-market and operational costs for semiconductor manufacturers. Balancing innovation with compliance to evolving defense standards poses another challenge, requiring continuous adaptation and investment in research and development to maintain a competitive edge in the market.

 

Semiconductors in Military and Aerospace Market Segment Analysis

Based on product: The Memory segment held the largest Semiconductors in Military and Aerospace Market share in 2023. Memory components are vital for storing and retrieving data in various systems such as navigation, communication, and sensors. Military and aerospace applications demand high-reliability memory components capable of withstanding extreme environmental conditions, including temperature fluctuations, radiation, and shock. American manufacturing is dependent on a number of countries for chips, semiconductors, and integrated circuits. The U.S. does not have the current capability to manufacture existing 7 nanometre and 5-nanometre chips.

 

Today, corporations such as Taiwan's TSMC and South Korea's Samsung provide much of the chips for American commercial and military applications. To meet these rigorous requirements, semiconductor manufacturers develop specialized memory solutions, including non-volatile memories like flash memory, EEPROM, and MRAM. As the need for data storage and processing continues to grow in these sectors, memory components will remain a critical focus area for semiconductor manufacturers, driving ongoing innovation and market growth.

 

By Technology: Surface mount technology (SMT) is used in the electronic industry to assemble and solder electronic components directly onto the surface of printed circuit boards. Unlike through-hole technology, where components have leads inserted into drilled holes, SMT components have small leads or no leads, relying on solder paste and a reflow soldering process to establish electrical connections. Based on the technology, Surface Mount Technology (SMT) held the largest Semiconductors in Military and Aerospace Market share in 2023. The segment growth is due to its efficiency, compact size, and cost-effectiveness in manufacturing processes. Among components, Sensors play a pivotal role in military and aerospace applications, facilitating precise data collection and system operation. The Aerospace segment dominates the end-use category, owing to the extensive integration of semiconductor technologies in modern aircraft and spacecraft.

 

Semiconductors in Military and Aerospace Market Regional Analysis

North America dominated the largest Semiconductors in Military and Aerospace Market share in 2023. The growth is driven by the presence of a strong defense sector, high defense spending, and advanced technological infrastructure. The region's emphasis on research and development efforts, combined with favorable regulatory conditions, is expected to drive the growth of the Semiconductor in the Military and Aerospace market.  The presence of numerous headquarters in this region and substantial government and commercial spending, notably by NASA, bolster market strength. The U.S. government's $54.2 billion CHIPS Act aims to enhance domestic semiconductor manufacturing, providing significant investment and incentives.

 

This initiative, coupled with increased spending on satellite equipment for defense and surveillance, drives the demand for advanced semiconductor products. Strategic partnerships further stimulate market growth. For instance, Global Foundries collaborates with the U.S. Department of Defense to produce semiconductors at their advanced "Fab 8" facility, intended for critical defense applications. In Canada, the government invests $240 million to bolster the country's semiconductor industry, aiming to become a global supplier by 2050.

 

Defense contracts also play a crucial role. The U.K. Defense and Security Accelerator (DASA) awarded $2.8 million for the development of advanced Electro-Optics and Infrared (EOIR) sensors in 2020. These sensors, essential for tracking distant objects and phenomena in space, highlight the ongoing innovation in the sector. Despite challenges like semiconductor scarcity, increasing military expenditure, aircraft modernization programs, and investments in space technology present significant growth opportunities for the market. The Indian electronics and semiconductors market represents a promising export opportunity with considerable growth potential. 

 

The government’s efforts to establish a robust semiconductor manufacturing ecosystem could further enhance market growth in the coming years.  U.S. companies in the sector should closely monitor this dynamic market for lucrative prospects. Also, India is highly dependent on imports for its semiconductor needs.?India imports 95% of its semiconductors from countries like China, Taiwan, South Korea, and Singapore. Multiple factors contribute to the growth of Indian electronics and Semiconductors in Military and Aerospace market.

 

Semiconductors in Military and Aerospace Market Competitive Landscape

The Semiconductors in Military and Aerospace Market is highly competitive, with major players including Intel Corporation, NVIDIA Corporation, Analog Devices Inc., Texas Instruments Inc., Broadcom Inc., Xilinx Inc., Renesas Electronics Corporation, Maxim Integrated Products Inc., Microsemi Corporation, and Infineon Technologies AG. These companies are investing heavily in new product launches, mergers, acquisitions, and collaborations to expand their global reach. Key products include military-grade microprocessors, RF components, and sensors, alongside advancements in AI, machine learning, and quantum computing.

 

For example, Intel focuses on high-performance microprocessors and FPGAs, while NVIDIA specializes in GPUs and AI technologies for applications like autonomous vehicles and drones. To remain competitive, market players must offer cost-effective solutions and innovate continuously. This dynamic market is driven by the need for advanced semiconductor technologies that enhance defense capabilities and national security.

 

In April 2023 developments highlight contrasting impacts on the semiconductor in the Military and Aerospace industry TSMC’s collaboration with Bosch to build a 28nm fab in Germany addresses automotive chip shortages but fails to meet advanced defense chip needs due to Germany's lack of a clear semiconductor strategy. In contrast, Brazil's partnership with China aims to boost semiconductor production in South America, despite U.S. opposition. This collaboration includes joint R&D in various technologies, potentially enhancing Brazil's capability in advanced semiconductor production. While Germany's approach may struggle with advanced node production, Brazil's initiative could expand the global supply chain, impacting the defense sector's access to high-tech components.

 

In Conclusion: The Semiconductors in Military and Aerospace sectors is experiencing robust growth, driven by the increasing integration of advanced technologies in defense systems. This growth is fueled by high demand for ruggedized components used in radar, communication, and navigation systems. Strategic investments, such as the U.S. CHIPS Act and substantial global defense budgets, are crucial in driving this market forward. However, challenges like supply chain disruptions and stringent regulatory requirements persist. The rising importance of UAVs and drones, along with increasing defense budgets, further propels market growth. Regional investments, particularly in North America and emerging markets like India, offer significant growth opportunities. Despite geopolitical tensions and supply chain issues, the market is poised for significant advancements and opportunities in military and aerospace applications.

 

Semiconductors in Military and Aerospace Market Scope

Semiconductors in Military and Aerospace Market
Market Size in 2023	USD 22.18 Bn.
Market Size in 2030	USD 32.70 Bn.
CAGR (2024(2030)	5.7 %
Historic Data	2018-2022
Base Year	2023
Forecast Period	2024-2030
Semiconductors in Military and Aerospace Market Segments	By Product Sensors Actuators Optical Memory Analog Others
	By Technology Surface Mount Technology Through-Hole Technology
	By Application Ruggedized Communications Imaging And Radar Smart Munitions Space Others

 

Semiconductors in Military and Aerospace Market, by Region

North America (United States, Canada and Mexico)

Europe (UK, France, Germany, Italy, Spain, Sweden, Austria and Rest of Europe)

Asia Pacific (China, South Korea, Japan, India, Australia, ASEAN, Pakistan and Rest of APAC)

South America (Brazil, Argentina Rest of South America)

Middle East & Africa (South Africa, GCC, Egypt, Nigeria and Rest of ME&A)

 

Semiconductors in the Military and Aerospace Key players

1. Analog Devices (Norwood, Massachusetts, USA)
2. Infineon Technologies (Neubiberg, Germany)
3. Microchip Technology (Chandler, Arizona, USA)
4. Northrop Grumman (Falls Church, Virginia, USA)
5. NXP Semiconductors (Eindhoven, Netherlands)
6. Raytheon Technologies Corporation (Waltham, Massachusetts, USA)
7. Advanced Micro Devices Inc (Santa Clara, California, USA)
8. Teledyne Technologies Inc. (Thousand Oaks, California, USA)
9. Texas Instruments Incorporated (Dallas, Texas, USA)
10. SEMICOA (Costa Mesa, California, USA)
11. Xilinx Inc (San Jose, California, USA)
12. KCB Solutions LLC (Shirley, Massachusetts, USA)
13. Semtech Corp (Camarillo, California, USA)