UPDATE 2-Boeing's new avionics group aims to cut costs, boost quality

(Adds detail about current suppliers, analyst comment)

NEW YORK, July 31 (Reuters) - Boeing Co said on Monday it has set up an avionics group to make flight controls and other electronics currently made by outside suppliers for its commercial and military aircraft, aiming to bring the products into service after 2020.

The move by the world's largest plane maker appeared to be a direct attack on suppliers such as Rockwell Collins Inc, United Technologies Corp and Honeywell International Inc .

The three companies, which make electronics used on current Boeing jets, did not immediately respond to requests for comment.

In recent years, Boeing has brought propulsion, carbon fiber manufacturing and other key capabilities in-house to better control both technology and intellectual property. That strategy followed outsourcing of major systems to suppliers for the 787 Dreamliner that led to billions of dollars in cost overruns.

Boeing said it has already started developing systems that would be lower cost, higher quality alternatives to existing products made by suppliers, and would deliver more services revenue to Boeing after a plane is sold.

Boeing aims to "further drive cost down and value up for our customers, in all phases of a product's life cycle," Boeing Chief Executive Dennis Muilenburg said in an internal statement to employees that was seen by Reuters.

While Boeing owns some intellectual property on electronic systems in its jet cockpits, current contracts with suppliers likely would not let Boeing take aftermarket business away on those planes, said analyst Robert Stallard.

However, suppliers could lose significant business on future aircraft, Stallard said.

Boeing is talking about creating a new mid-sized aircraft that would enter service around 2025, and would need to create a successor to its best-selling 737 model after that.

Boeing shares were up 1 percent at $243.72 in midday trading. (Reporting by Alwyn Scott; Editing by Meredith Mazzilli and Diane Craft)