Is Israeli Drone Dominance Waning?

Greater competition from U.S. and European firms and global military budget cuts contributing to fewer Israeli drone sales.

Israel has been considered the world's leading exporter of unmanned aerial vehicles (UAVs) in recent years, as evidenced by a study earlier this year showing that the country exported billions of dollars worth of drones over almost a decade. Despite this, some officials in the local aerospace and military industries fear this trend might change, due to budget cuts in militaries across the world and increasing competition in the drone market.

In the last year, Israel's military industries lost out on two tenders -- in France and the Netherlands -- after both countries opted for the MQ-9 Reaper, produced by the American firm General Atomics. France decided to acquire 12 MQ-9 Reapers at a cost of $890 million, according to French news agency AFP, to spy on Al-Qaida militants in Mali, while the Netherlands planned to buy four of them, a Dutch website reported.

This past year has also seen a decline in the number of arms deals between Israel and other countries, at least according to data published by the military industries. Only several deals were signed this year, industry sources said, adding that no major deals like the one between Israel and India in 2012, reported to be worth some $1 billion, have been signed.

However, officials mentioned there are still two forthcoming tenders, in Switzerland and Germany, in which Israeli companies including Israel Aerospace Industries and Elbit are taking part. Just last week, though, German website Speigel Online reported that the Germans, too, favor the U.S.-manufactured Reaper.

"Countries that have made large-scale UAV purchases already have fleets of drones, but that doesn't meant they won't buy more or upgrade to more advanced models or buy new technologies," one source familiar with the industry told Haaretz. "It's too early to eulogize the military market. Just as there are plans to manufacture new fighter jets, the market will continue to require drones, for strategic purposes.”

Yakov (Yaki) Baranes, a consultant at Frost & Sullivan, said recent developments do not necessarily signal Israel's demise in the market. "Israeli industries have a reputation based on many years' worth of technological capabilities, which cannot be undermined that easily," Baranes said. At the same time, he said, the market has changed. He explained that Israeli firms initially benefitted from their innovation and won tenders because they were the first to present unmanned platforms. Since then, he said, many American and European firms have made technological advances. "If, in the past, there were relatively few players, today there is greater competition," Baranes said.

Part of the change in the market is also reflected in the tenders themselves, which now demand various services, the transfer of all information regarding the technology, and pre-conditions, such as cooperation with local manufacturers.

Last year Frost & Sullivan rated Israel as the world’s leading exporter of drones, but Baranes prefers to remain cautious at the moment. “What we can say is that Israeli industries have responded to the changing market, and are focusing on other geographic regions, and markets previously considered unconventional, such as non-military uses.”

Another factor that could affect the market is growing pressure on the Defense Ministry to issue more import and export permits. Sources familiar with the industry say that defense budget cuts, coupled with the depreciating U.S. dollar, are prompting Israeli military to increase their marketing and apply greater pressure on the ministry to issue more permits.

Reuters
Elbit Systems