This market research report was originally published at Yole Développement’s website. It is reprinted here with the permission of Yole Développement.
As Yole Développement (Yole) prepares to launch its 2022 report on high-end inertial sensors for defense, aerospace and industrial applications (See here the 2020 edition), the unexpected industry merger between ECA Group and iXblue raises many questions as to what will follow. This article has been written in collaboration with Yole Finance, part of Yole.
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Earlier this year, France-based developer of robotics and intelligent systems for aerospace and defense markets, ECA Group, revealed plans to buy high-end inertial sensor manufacturer, iXblue, also from France, for $450 million. For a market that’s seen its fair share of acquisitions in the last few years, another merger is not a huge surprise – but this one is different.
Recent market acquisitions have largely been between competitors or at the same level in the supply chain. For example, in October last year, inertial sensor heavyweight, Safran, France, bought up and coming Norwegian gyro sensor and MEMS inertial systems maker, Sensonor, to extend its reach into MEMS-based sensors technologies and related applications. In contrast, ECA and iXblue are long-standing partners, with ECA integrating iXblue’s inertial and underwater positioning systems to its autonomous underwater vehicles for naval mine warfare.
A further factor that sets this deal apart is iXblue’s impressive level of vertical integration. The company makes components such as optical modulators and optical fibers, which it then integrates to make fibre-optic gyroscopes (FOGs), and accelerometers that are both used in its inertial navigation systems and along the way has also developed its own calibration and testing platform. The company also combines these systems, with its other positioning devices, to make drones and deep sea robots.
With iXblue’s comprehensive supply chain and ECA’s extended market reach and customer base, the new company is set to become a formidable force in the high-end inertial sector market, both close to home and further afield. The combined entity consolidates ECA’s French sovereignty while also helping to secure Europe’s supply of inertial sensors. And together, ECA and iXblue will be a clear rival for the big 3 high-end inertial sensor players, Honeywell, Northrop Grumman, both of the US, and of course, Safran.
So where next for high-end inertial sensor markets? In the past 60 years, inertial measurement units have progressed from crude mechanical devices, used to guide the early V-2 rockets, to today’s sophisticated solid state devices found in myriad applications destined for defense, aerospace and industrial/commercial markets. Think missile target guidance, aircraft navigation, commercial satellite stabilisation, autonomous vehicle navigation and much more.
Critically, overall growth for these 3 key markets is forecast to increase at CAGR 6.5% from $3.1 billion, in 2021, to $4.5 billion, come 2027. At a time of huge geopolitical instability, including emboldened extremism and the Ukraine war, the industry’s largest market, defense, is expected to rise from $1.3 billion to $1.5 billion from 2021 to 2027.
Here, inertial sensors are not only needed for missile guidance but also in assured position navigation and timing (PNT) systems for missiles, munitions, and armoured vehicles, to combat the threat of GPS jamming and navigation warfare. Alongside this, inertial sensors are being fitted to the world’s huge fleet of ageing military vehicles and weapons, as well as the rising numbers of military drones and weapons platforms that require pointing and stabilization.
At the same time, the commercial aerospace market is set to increase from $800 million to $1.2 billion from 2021 to 2027. This market sector has taken a huge hit during the Covid-19 pandemic as demand for flights has plummeted. However, inertial sensors remain essential in navigation and flight control systems, in all types of commercial aircraft, as well as for correcting trajectories and stabilization of satellites. And a flurry of activity in two up and coming markets is set to bolster market growth.
First, so-called Urban Air Mobility – automated passenger or cargo-carrying air transport around urban regions – has prompted significant investment in relatively small vertical-takeoff-and-landing aircraft and unmanned aerial vehicles. Market take-off is still around a decade away, but already high-end inertial sensor players have witnessed industry interest.
Second, commercial Space activities are bringing new opportunities to the high-end inertial sensor industry. The rise of micro- and nano-satellite constellations from the likes of SpaceX and OneWeb – for global Internet broadband and remote Earth monitoring – is driving demand for inertial sensors in satellites to unprecedented levels. Market demand is heightened further by the growing need for inertial sensors in the sub-systems of commercial rocket launchers; developments of new types of launchers have spiked, as the race to get satellite constellations into orbit at an affordable price heats up.
Defense and aerospace aside, the industrial/commercial market is forecast to grow from $800 million in 2021 to $1.8 billion in 2027 – the fastest rate of all 3 key high-end inertial sensor markets. Robotics, logistics and automation systems all require inertial sensors, but in addition, the industrial logistics chain is undergoing transformation as the trend towards autonomous vehicles continues. New applications to look out for include last-mile delivery robots and drones, and other autonomous platforms, including mining trucks and warehouse robots. Meanwhile, an increasing demand for offshore autonomous underwater vehicles (AUVs) and remotely operated vehicles (ROVs) in the energy and exploration industry presents new market opportunities, as does a growing need for condition monitoring in industrial machines.
But amid the proliferation of applications – will there be a winning technology? While there might be some overlap of different technologies in the same applications, the answer is no, because technology choice largely depends on the specifications of each application.
For example, affordable MEMS-based accelerometers will suffice for vibration monitoring in industrial pumps while hemispherical resonator gyroscopes (HRGs) are a better choice for more sophisticated defense and aerospace applications. Indeed, Safran’s industrialization of HRGs has driven down costs making the technology a contender for the more mature ring laser gyroscope (RLG) in non-captive markets. Meanwhile, high-performing FOGs also remain a firm favourite in navigation, stabilization, and more recently, autonomous vehicle guidance back-up systems.
Looking to the future, high-end inertial sensors will continue to provide an exhilarating ride for industry players. Following the recent ECA-iXblue deal, the big 3 – Honeywell, Northrup Grumman and Safran – will be carefully tracking developments from start-ups such as Anello Photonics from Silicon Valley, One Silicon Chip Photonics, Canada, and UK-based Zero Point Motion, as well as smaller players including Al Cielo Inertial Solutions (Israel) and KVH Industries (US).
Many of these companies have been working on integrating FOGs on photonic integrated chips or silicon photonics chips to drive down costs for future mass markets such as autonomous cars – of which all industry players will want a piece. Activities such as this could prompt a top 3 player to acquire a specialized business to augment its technology portfolio and gain more of a competitive edge over rivals. Likewise, smaller companies could also join forces to consolidate products and capture more market share.
More mergers and acquisitions will undoubtedly follow, but ultimately, will the industry behemoths keep pace with their smaller, agile competitors? Only time will tell.
Dimitrios Damianos, Ph.D.
Senior Technology & Market Analyst, Photonics & Sensing Division, Yole Développement