Asia-Pacific Defense Market Size & Share Analysis - Growth Trends and Forecast (2026 - 2031)

Asia-Pacific Defense Market Trends and Insights

Strategic Pivot to Contested Indo-Pacific Sea Lanes

Freedom-of-navigation operations in the South China Sea and Taiwan Strait have redirected budgets from land armor to maritime strike, mine countermeasures (MCM), and anti-submarine warfare (ASW). China commissioned eight 10,000-ton coast guard cutters in 2025, blurring the lines between civilian and military roles and prompting neighbors to upgrade their frigates and offshore patrol vessels. Japan added Mogami-class frigates with vertical-launch cells, while Australia reallocated USD 7.20 billion from armored vehicles to destroyer upgrades and MH-60R helicopters. The Philippines and Vietnam accelerated the acquisition of patrol ships and the development of logistics hubs to sustain more extended deployments. A USD 9.90 billion US Pacific Deterrence Initiative for pre-positioned stocks further drives the adoption of common data links across allied navies.^{[1]U.S. Department of Defense, “Pacific Deterrence Initiative Budget,” defense.gov}

Indigenous Defense-Industrialization Policies

Revised offset schemes now emphasize intellectual-property co-development over screwdriver assembly. India reserves 68% of capital spending for “Buy Indian” categories and blocks exports of co-developed platforms without local majority content, pushing Lockheed Martin and GE to transfer wing-box and engine hot-section know-how. South Korea mandates 70% local content on the KF-21, enabling the production of domestic AESA radar that halves the unit cost compared to Western alternatives. Japan relaxed export curbs on jointly built systems, positioning Mitsubishi Electric to sell air-defense radars region-wide. Australia’s Sovereign Guided Weapons Enterprise establishes a southern-hemisphere missile hub, while Indonesia’s tank program with Turkey highlights the risk of execution when local maturity is lower.

Proliferation of Unmanned and Autonomous Systems

Lessons from the combat in Ukraine are pushing quadcopter swarms, loitering munitions, and extra-large unmanned underwater vehicles (XLUUVs) into core procurement plans. India fielded Nagastra-1 loitering rounds along the Himalayas, delivering squad-level precision strike without artillery coordination. South Korea demonstrated 50-drone swarms maneuvering in GPS-denied zones, and Australia’s Ghost Shark UUV achieved 60-day submerged endurance at a fraction of crewed-sub costs. Japan and Singapore integrate AI target recognition on unmanned surface and aerial platforms, reducing analyst workloads and enhancing time-sensitive targeting.

AI-Enabled C4ISR and Decision Platforms

Tier-1 militaries compress kill-chain cycles by integrating satellite, airborne, and maritime sensors into a shared operating picture. China’s Integrated Network Electronic Warfare architecture links early-warning radars and cyber units, reducing decision loops to under ten minutes. Japan’s destroyers fire SM-6 missiles guided by F-35 data, decoupling sensors from shooters. Australia’s JP9102 upgrade consolidates Link 16, MADL, and SATCOM feeds, thereby reducing the risk of friendly fire in coalition drills. India’s nationwide IACCS now governs S-400 batteries, Akash missiles, and fighters under an AI threat-prioritization engine.

Export-Control Squeeze on Chips and Advanced Weapons

US and allied curbs on gallium-nitride semiconductors and AI accelerators have pushed back the schedules for next-generation fighters and missiles by up to three years. India’s Uttam AESA radar slipped when 7 nm RF modules were blocked at TSMC, and Japan’s F-35 sustainment costs climbed 22% as spare parts awaited export licenses.^{[2]Demetri Sevastopulo, “Chip Curbs Hit Asian Weapons,” ft.com} Australia’s Loyal Wingman drone has been equipped with commercial GPUs, accepting lower processing speeds to meet its schedule, as reported by. South Korea undertook a costly indigenous IMU program after US suppliers declined to export, meeting ITAR specifications.

Budget Pressure from Post-Pandemic Debt Loads

Indonesia, Thailand, and the Philippines redirect funds to economic recovery, lowering defense outlays as a share of GDP and deferring frigate and fighter buys into the 2030s. Indonesia cut its defense spending to 0.74% of GDP in 2025, canceling extra Rafale jets and extending KF-21 payments. Thailand shelved a second Type 26 frigate to finance flood-control works. The Philippines’ USD 4.1 billion budget leaves little for air-defense modernization.

Segment Analysis

By Armed Forces: Navy Outpaces Land Forces

Naval programs represent 45.23% of spending in 2025 and grow at a 4.76% CAGR as littoral states reinforce sea-lane security and undersea cable protection. The Asia-Pacific defense market size for naval platforms is set to overtake incremental land-system budgets by 2029. Army systems remain sizable, driven by artillery upgrades along the Himalayas and South Korean armored-vehicle recapitalization, yet see only 3.68% growth. India’s USD 2.80 billion Future Infantry Combat Vehicle (FICV) order and Japan’s 105-strong F-35 fleet illustrate ongoing investments in both ground and air capabilities, but the strategic narrative favors blue-water denial capabilities.^{[3]Dinakar Peri, “India Orders Future Infantry Combat Vehicles,” economictimes.indiatimes.com}

The adoption of nuclear propulsion under SSN-AUKUS, Li-ion submarine batteries in South Korea, and F-35B carriers in Japan signals a shift toward distributed maritime strike. Australia’s eight SSN-AUKUS boats, valued at AUD 368 billion (USD 246.14 billion), will transform regional undersea balances, while South Korea’s Dosan Ahn Changho subs add vertical-launch strike options. India’s Project 75I lags in offsets, yet the commissioning of the BrahMos-armed INS Imphal underscores indigenous progress. Smaller ASEAN navies are pursuing offshore patrol vessels and mobile coastal defense missiles to quickly close capability gaps.

Note: Segment shares of all individual segments available upon report purchase

By Type: Unmanned Systems Disrupt Legacy Platforms

Weapons and ammunition commanded 31.25% of the Asia-Pacific defense market share in 2025, underpinned by missile stockpiles along flashpoints. Growth moderates as export controls bite, while unmanned platforms earn the fastest 5.98% CAGR. Swarm drones, loitering munitions, and autonomous surface craft are shifting force-structure doctrine and consuming 8-12% of new capital budgets by 2028. C4ISR and electronic-warfare (EW) systems, which already account for 22% of spending, are expected to rise steadily through the use of AI-enabled sensor fusion. Space and cyber systems, though small today, receive priority as militaries seek resilient communications and spectrum dominance.

Demand for precision artillery sustains South Korea’s K9 howitzer exports and India’s BrahMos missile orders, yet planners increasingly pair these with AI targeting from low-Earth-orbit (LEO) satellites. Japan’s FPS-7 radar and Australia’s LAND 400 Phase 3 programs show continued sensor and vehicle refresh. At the same time, India’s Ghatak UCAV and Australia’s Ghost Shark UUV mark the transition from manned to autonomous strike assets.

By Domain: Space Emerges as Fifth Warfighting Arena

Land capabilities remain the largest slice at 42.67% in 2025, but space assets exhibit the highest 5.65% CAGR as joint operations demand secure positioning, navigation, and reconnaissance. China’s 38 military-satellite launches in 2025 compelled Japan to accelerate Quasi-Zenith augmentation and Australia to invest in protected SATCOM. Air and naval domains converge around multi-domain command nodes, adding pressure for spectrum and cyber resilience. Cyber commands in Japan and microwave counter-drone weapons in South Korea demonstrate that electromagnetic effects are now core mission areas.

Note: Segment shares of all individual segments available upon report purchase

By Procurement Nature: Indigenous Production Gains Momentum

Indigenous programs accounted for 47.03% of spending in 2025 and are expected to rise at a 5.52% CAGR, narrowing the gap with foreign purchases. The Asia-Pacific defense market size tied to local manufacturing grows as India’s Tejas Mk1A ramp-up, South Korea’s KF-21 localization, and Australia’s missile enterprise mature. Foreign procurement continues for nuclear submarines and tankers, where the regional industry lacks depth. However, joint-venture models, such as the Lockheed-Tata wing box and the Raytheon-Australia missile co-production, now dominate, ensuring that technology remains local and export approvals become less contentious.

Geography Analysis

China contributed 48.43% of regional spending in 2025, but budget expansion slowed to 3.2% CAGR as the PLA prioritized nuclear propulsion and hypersonic R&D over force-structure growth. India is expected to accelerate at a 4.24% CAGR, driven by indigenous procurement, with a capital outlay of USD 28.6 billion in 2026, and channeling 75% of the funds to domestic suppliers under stringent offset penalties for foreign primes. Japan’s USD 320 billion multi-year plan funds stand-off missiles and cyber forces that reverse seven decades of purely defensive posture.

Australia undertakes the region’s largest single program with AUD 368 billion (USD 246.14 billion) for SSN-AUKUS submarines, but gaps remain until deliveries begin in 2040, prompting interim leases of the Virginia-class. South Korea leverages export momentum, USD 17 billion in 2024, selling howitzers and aircraft to NATO allies and ASEAN partners at aggressive price points. ASEAN collectively spends 12% of the regional total yet grapples with fiscal constraints. Singapore tops the list in per-capita spending, purchasing F-35Bs and Invincible-class submarines, while Indonesia, Thailand, and Vietnam defer large programs due to debt pressures. The Philippines breaks the trend with BrahMos missiles to offset delayed US Foreign Military Sales (FMS).