The naval EO/IR domain will continue to grow and evolve, with countries implementing naval modernization and forcing expansion programs as global tensions rise and as neglected fleets reach their expected end-of-life dates. The need for modern and more capable multi-role fleets comes as European and North American navies become involved within the Arctic Arms Race and as trade fleets require greater protection from growing piracy and actions from Iran. The threat of Chinese expansionism because of more frequent airspace violations and a rapidly increasing fleet drives the US requirement to develop a larger fleet that can operate within littoral environments, in addition to creating a resurgence of submarine programs across the Asia-Pacific region.

Some of the main trends seen within the EO/IR market include the merging of different sensor types into a single package; digitization and sensor fusion; hyperspectral and multispectral sensing; and a continual need for reduced size, weight, and power (SWaP) properties of systems. Traditionally, separate EO/IR systems will merge into single packages to increase efficiency. This trend has been mainly in the air domain but has increasingly been adopted by the naval domain. Increased automation has been driving this trend, based on improvements to artificial intelligence and a decrease in the SWaP of sensors. EO/IR sensors continue to be digitized and fused into singular packages. As the amount of sensors on a package increase, the volume of data needing to be analyzed will grow as well, thus leading to the higher requirement for artificial intelligence and Big Data technologies to be incorporated into packages to automate and enhance data analysis. Hyperspectral and multispectral sensing will likely be highly sought after within the naval domain, where the capability will drastically improve operations in littoral and high sea state environments.

This report covers the major trends and restraints experienced across the market, gained through both primary and secondary sources of information among industry and naval organizations. Importantly, the changing concepts of EO/IR systems and the future expectations that will be required by navies are explored in detail within this report. A key aspect that is considered in the changing requirements of the EO/IR market is the technological developments that are underway, with an analysis of their technological readiness and with current examples provided. Three major growth opportunities for companies to pursue are identified as follows: data processing capabilities, extended support to cater to operators with limited budgets, and image processing to enable information extraction in degraded environments.