Naval Combat Systems Market – Global Industry Size, Share, Trends, Opportunity, and Forecast, Segmented By Type (Weapon Systems, Electronic Warfare, C4ISR), By Platform Type (Aircraft Carrier, Destroyers, Frigates, Corvettes, Submarine), By Region & Competition, 2021-2031F

Market Overview

The Global Naval Combat Systems Market will grow from USD 41.45 Billion in 2025 to USD 58.04 Billion by 2031 at a 5.77% CAGR. Naval combat systems constitute the integrated electronic networks, sensors, and weaponry installed on military vessels to manage command, control, and threat engagement operations. The market is primarily propelled by escalating geopolitical instability and territorial disputes, which necessitate enhanced maritime surveillance and strike capabilities. Furthermore, nations are prioritizing the modernization of aging fleets to ensure interoperability and maintain strategic deterrence against emerging asymmetric threats, creating a sustained demand for upgraded architectures distinct from technological trends.

Nevertheless, the market faces a significant challenge regarding the high cost of developing and integrating these complex technologies. Budgetary constraints frequently impede procurement programs, particularly in price-sensitive regions, despite the operational necessity. Indicating the robust funding environment required, according to the Stockholm International Peace Research Institute, in 2024, global military expenditure increased by 9.4 per cent in real terms to reach $2718 billion. While this expenditure supports market growth, the immense capital requirements for advanced naval systems continue to limit rapid expansion in developing markets.

Key Market Drivers

Rising global defense budgets and military expenditure function as a primary catalyst for the market, enabling the capitalization required for extensive fleet modernization programs. Governments are allocating substantial resources to procure new vessels and upgrade existing platforms with integrated sensors and weaponry to maintain strategic deterrence. This financial prioritization allows for the procurement of high-cost architectures necessary for maritime dominance and ensures interoperability among allied forces. According to the U.S. Department of the Navy, March 2024, in the 'Highlights of the Department of the Navy FY 2025 Budget', the service requested $32.4 billion specifically for shipbuilding and conversion to sustain a combat-credible fleet. This funding directly supports the installation of updated management networks on next-generation hulls to counter evolving maritime threats.

The integration of artificial intelligence and autonomous technologies is simultaneously reshaping naval operational requirements, necessitating systems that can manage unmanned assets. Navies are shifting focus toward network-centric warfare where unmanned surface and underwater vehicles operate alongside traditional combatants, requiring adaptable command modules. This technological shift demands new software architectures capable of processing vast amounts of sensor data without human intervention. According to the U.S. Department of Defense, March 2024, in the 'Fiscal Year 2025 Budget Request', the department sought $500 million for the Replicator initiative to accelerate the fielding of all-domain autonomous systems. The industrial impact of these combined drivers is visible in contractor performance; according to Thales, in 2024, the Defense and Security segment recorded an order intake of €6.1 billion during the first half of the year.

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Key Market Challenges

The high cost associated with the development and integration of complex naval combat systems stands as a primary obstacle to broader market expansion. Advanced electronic networks, sensors, and weaponry require substantial capital investment for research, engineering, and installation. These financial demands frequently result in extended procurement cycles or the reduction of program scopes, as naval forces must balance modernization goals against finite budgets. Consequently, the immense unit cost of these integrated architectures limits the ability of price-sensitive nations to acquire updated capabilities, thereby restricting the volume of new contracts and slowing the overall rate of market adoption.

This financial burden is illustrated by the significant portion of defense budgets required to support such acquisitions. According to the North Atlantic Treaty Organization, in 2024, member nations allocated an estimated 30.9 percent of their total defense expenditure specifically toward major equipment and associated research and development. This heavy allocation underscores the resource-intensive nature of procuring modern military hardware. Such high capital barriers prevent the rapid diffusion of new technologies into developing maritime security forces, directly impeding the growth potential of the global market.

Key Market Trends

There is a distinct shift away from proprietary, closed systems toward open-architecture frameworks that allow navies to rapidly integrate best-of-breed sensors. This adoption of Modular Open Systems Architecture (MOSA) facilitates faster upgrades and reduces vendor lock-in by decoupling software from specific hardware. The scale of this transition is evident in major procurement programs designed to unify fleet capabilities through shared software libraries. According to USNI News, July 2025, in the 'Missile Defense Agency Issues Lockheed Martin Aegis Contract Worth Up to $2.97B', the agency issued a contract worth up to $2.97 billion to Lockheed Martin to upgrade the Aegis combat system, specifically mandating integration into the Integrated Combat Systems software architecture.

Navies are simultaneously transitioning high-energy laser systems from experimental prototypes to operational fleet integration to counter asymmetric threats like drone swarms. These directed energy weapon systems offer deep magazines and a significantly lower cost-per-shot compared to traditional kinetic interceptors, making them essential for financial sustainability. This operationalization is accelerating through substantial manufacturing commitments intended to equip frontline vessels with laser-directed energy weapons. According to Naval Technology, November 2025, in the 'MBDA wins £316m contract to supply DragonFire to Royal Navy', the UK Ministry of Defence awarded a £316 million contract to MBDA UK to deliver DragonFire laser systems for installation on Royal Navy Type 45 destroyers.

Segmental Insights

Electronic Warfare represents the fastest-growing segment within the Global Naval Combat Systems Market, primarily driven by the escalating necessity for non-kinetic defense mechanisms against complex asymmetric threats. As naval forces globally modernize their fleets, there is a strategic prioritization of electronic attack and protection capabilities to effectively counter advanced anti-ship missiles and unmanned systems. This rapid expansion is further fueled by rising geopolitical tensions, compelling defense ministries to invest heavily in spectrum dominance and enhanced situational awareness. Consequently, the demand for upgraded electronic countermeasures is surging to ensure operational survivability and secure communication networks in contested maritime environments.

Regional Insights

Asia Pacific currently leads the global naval combat systems market due to significant increases in defense budgets across the region. Nations such as China, India, and South Korea are heavily investing in fleet modernization programs to address rising maritime security concerns and territorial disputes. This growth is further supported by government initiatives promoting domestic defense manufacturing and the procurement of new naval vessels. According to data from the Stockholm International Peace Research Institute, the region consistently records high military expenditure, reinforcing its position as a primary hub for naval defense development and procurement.

Recent Developments

• In January 2025, BAE Systems secured a contract worth £285 million from the UK Ministry of Defence to support the Royal Navy's surface fleet. The agreement covers the maintenance and modernization of Combat Management Systems (CMS), shared infrastructure, and warship networks across various naval assets, including Type 45 destroyers and Queen Elizabeth Class carriers. This eight-year program, known as RECODE, aims to ensure high availability and security for critical naval systems while facilitating agile capability updates. The initiative will also adopt modern engineering methodologies to accelerate the deployment of future warfare technologies.
• In November 2024, Naval Group entered into a strategic partnership with Thales and KNDS to develop the Multi-purpose and Modular Launching System (MPLS). This collaboration was formalized to create a versatile weapon platform capable of deploying various effectors, such as rockets, missiles, grenades, and underwater weapons, from a single launcher. The system features interchangeable ammunition modules and a payload capacity of approximately 1,000 kilograms, offering enhanced operational flexibility. The MPLS is designed to operate autonomously or connect directly to a ship's combat management system, optimizing logistical support and fleet readiness against asymmetric threats.
• In October 2024, Lockheed Martin successfully demonstrated the deployment of a virtualized Ship Self-Defense System (SSDS) on hardware intended for the U.S. Navy's future Integrated Combat System (ICS). This demonstration, conducted at the Navy's software factory, proved the capability to decouple software from hardware, a critical requirement for modernization. The test highlighted the potential for rapid, over-the-air software updates across the fleet, mirroring commercial technology standards. This milestone marked a significant step in the development of the ICS, which aims to unify combat capabilities across aircraft carriers and amphibious ships while enhancing independent hardware and software evolution.
• In June 2024, Saab received a contract from the Swedish Defence Materiel Administration valued at approximately SEK 400 million to produce ten combat boats. These vessels, based on the CB90 Next Generation design, will feature an advanced combat management system and new sensors to enhance surveillance and attack capabilities. The agreement underscores the company's role in strengthening Sweden's naval defenses through modern platform integration and advanced trackfire systems. Deliveries were scheduled to commence in late 2024, providing the navy with improved speed, agility, and amphibious operational support in shallow coastal waters.

Key Market Players

• BAE Systems PLC
• Lockheed Martin Corporation
• RTX Corporation
• Thales Group
• General Dynamics Corporation
• Saab AB
• L3Harris Technologies Inc.
• Northrop Grumman Corporation
• Safran SA
• Elbit Systems Ltd.

Report Scope:

In this report, the Global Naval Combat Systems Market has been segmented into the following categories, in addition to the industry trends which have also been detailed below:

• Naval Combat Systems Market, By Type:

• Weapon Systems
• Electronic Warfare
• C4ISR

• Naval Combat Systems Market, By Platform Type:

• Aircraft Carrier
• Destroyers
• Frigates
• Corvettes
• Submarine

• Naval Combat Systems Market, By Region:

• North America
• United States
• Canada
• Mexico
• Europe
• France
• United Kingdom
• Italy
• Germany
• Spain
• Asia Pacific
• China
• India
• Japan
• Australia
• South Korea
• South America
• Brazil
• Argentina
• Colombia
• Middle East & Africa
• South Africa
• Saudi Arabia
• UAE