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1.9.3 Security: General Market Description

Brief Market Description

From the European Security Research Agenda[1]:

Since the end of the Cold War, the threat of large-scale military aggression has subsided and been substituted by new threats which are multifaceted, interrelated, complex and increasingly transnational in their impact. These were laid out in the European security strategy to include organised crime, terrorism, state failure, regional conflicts and proliferation of weapons of mass destruction.

This array of new security threats has re-shaped the security industry, essentially unifying previously disparate elements such as customs and border control, policing, emergency response, and critical infrastructure protection under the name ‘civil' or ‘homeland' security. The ESRAB report groups these elements by mission[2], which include:

• Border Control
• Protection against terrorism and organised crime
• Critical Infrastructure Protection
• Restoring Security in Case of Crisis

Civil security also represents a market for a wide range of technologies and services, from detection of harmful substances to forensic investigation.

Estimates of the size of the security market range from €30bn to €50bn. The CEO of Thales is quoted as saying that it is believed to be between 30 and 35 billion Euros, of which 25% (€7.5bn - €8.75bn) is in Europe[3]. This equates to roughly 0.07% of European GDP.  Epoc Messe Frankfurt GmbH (organisers of the Intersec conference), project that homeland security revenues will reach $178bn (€142bn) by 2015. This projection places the current global market value at nearer €47bn.

The German Ministry for Education and Research, in its Research for Civil Security programme, has placed the value of the German market for security technology and services at "€10bn in 2005, with growth rates of 7%-8%[4]." The variation in market size estimates is likely due to the difficulties in drawing the boundaries of this market; the US definition of homeland security only includes activities like policing and fire services in so far as they come under ‘disaster response'.

Reliable estimates of the number of people employed in the security industry in Europe are similarly varied. In terms of direct employment impact, Thales, for example, one of the largest European security industry firms, has 19 323 employees in its security business in 2007, of which well over half were based in the European Union.

The security industry is also an area in which Europe-headquartered companies play an important role, with leading industrial players including EADS, BAE Systems, Finnmechanica and Thales.

Nanotechnology Impact

Nanotechnology has the potential to impact a number of security applications. ESRAB looked at technology development in terms of the capabilities required to perform specific missions. Taking protection against terrorism and organised crime as an example, the capabilities required include:

Note that this is an abbreviated list. There are over 30 capabilities required for this mission - this list highlights those most affected by developments in nanotechnology. A number of these capabilities also apply to other missions; CBRNE detection is also a capability required for a border control mission, for example.

CBRNE detection is one of the capabilities which may be enhanced with nanotechnology. This is covered in more detail in chapter 3.1 but briefly, developments in chemical sensing are likely to include optical fibres, cantilever-based sensors, chemresistors using carbon nanotubes, and chemicapacitive sensors, to mention just a few. These will enable more accurate detection, smaller devices, lower cost production, and ultimately single platform detection of multiple substances.

Drivers and Barriers to Innovation

Drivers of Innovation

New Security Threats

As previously stated, the emergence of new or increased security threats has significantly changed the security landscape. To take one example, the risk that weapons of mass destruction fall into the hands of terrorists or criminal gangs will only be solved on a policy level - increasing international cooperation and information sharing - but the risk can be mitigated to some extent by new technology. The ability to scan every vehicle at a border crossing would allow the interception of this material, but to avoid disproportionate economic costs, this would require high-throughput screening, high accuracy with low false positive rates, and a reasonable total cost of deployment and use.

The Role of Government

The mechanism by which these new security threats drive innovation highlights the role of government. New security market needs are often a direct result of government policy; new regulations for airport security or quality standards for the national water supply necessitate the development of new scanning equipment and monitoring tools.

Government also creates security markets through public procurement. The UK's e-Borders project, which has a budget of GBP 1.2bn, aims to join up the various UK border control systems in order to provide ‘an intelligence led approach to operating border controls'.[5] A substantial element of this project for the development of these information systems was awarded to the Trusted Borders consortium, led by Raytheon. This in turn requires the development of technologies for collecting and record biometric data from UK residents and visitors.

Military procurement also drives the development of technologies for civil security. A number of the technologies in this domain are dual use; a chemical weapons detector developed for the military could also have applications in detection of harmful substances in the civilian sphere.

Research Intensity of Firms

The ‘Aerospace and Defence' industry (which is not the same as the security industry, but has significant overlaps) spends an average of 4.9% of its turnover on research and development. Whilst this is behind healthcare (13.4%) and electronics (7%), it is substantially ahead of the automotive industry, general industrials, consumer goods, chemicals and energy.

The historical reason for this is that the industry was expected to generate a military advantage for it's customer by developing technology which was substantially more capable than alternatives. In terms of civil security, it is still the case the products are likely to be developed to the specifications of particular customers. Governments often understand that the technologies that they are procuring are not ‘off-the-shelf' and require development

Barriers to Innovation

Fragmented Market

The corollary to the centrality of governments is that this renders the security market highly fragmented. The bulk of security policy and procurement is still handled by national governments, which are likely to generate different requirements, to have differing budgets, and generally render it difficult to scale security technology. Whilst some large players can be identified (such as the FBI, Border Control or Custom agencies) for the most part this market is divided into local or regional emergency services, ports and airports, and public transport systems.

Preservation of Civil Liberties

As Industry Commissioner Günter Verheugen states, "We must enhance security but we must also avoid 'big brother is watching you' solutions."[6] There is a very understandable concern amongst civil society about the development of security technologies, particularly those which are perceived to be more invasive. This category includes sensing and scanning technologies which are capable of passively scanning a crowd or area - without someone necessarily knowing that they are being observed.

Societal acceptance can be improved if the technology can demonstrate effectiveness in proportion to the threat posed; people are willing to sacrifice a degree of privacy if they can be convinced that it is necessary (and allowed to make an informed choice).

Relevant Sector Segmentation and Applications

The first year economic report looks at three applications of nanotechnology for civil security:

• CBRNE Detection
• Anti-Counterfeiting and Authentication
• Forensics (Fingerprint Analysis)

These broad application categories have been chosen as the most appropriate point at which to describe the impact, requirements and current products that are enabled by nanotechnology. Each of these areas has more specific end user applications: e.g. CBRNE detection for ports. These may be considered in more detail in future years.

Possible Future Products and Time Range

[1] Meeting the challenge: A European Security Research Agenda, Report from the European Security Research Advisory Board, September 2006

[2] Meeting the challenge: A European Security Research Agenda, Report from the European Security Research Advisory Board, September 2006

[3] http://uk.reuters.com/article/UK_SMALLCAPSRPT/idUKN1451503520080514?sp=true

[4] Research for Civil Security, Programme of the German Federal Government, 2007, http://www.bmbf.de/pub/research_for_civil_security_.pdf

[5] http://www.trustedborders.com/press_release_14_11_07.shtml

[6] http://www.euractiv.com/en/science/eu-security-research-seeks-respect-civil-liberties/article-175851