Josselin Droff, Lucie Béraud-Sudreau, Eva Szego, Julien Malizard ulien Malizard publishes the article « New Defence and defence industrial policy in Europe», in issue 22 of Defence & Industry, Journal of the Foundation for Strategic Research (FRS)
Josselin Droff, Eva Szego and Julien Malizard, researchers at the Defence Economics Chair - IHEDN, and Lucie Béraud-Sudreau, researcher at the International Institute of Strategic Studies (IISS).
The conflict in Ukraine has revealed a twofold requirement for the European defence industry: to rapidly increase the volume of military equipment while incorporating the technological innovations needed to deal with new threats. This dynamic calls for a rethink of the structure of the arms market in Europe, which is now characterised by a dichotomy between historic and emerging markets. The aim of this article is to determine the characteristics of the new industrial players, known as «New Defence», positioning themselves on the emerging armaments market and to analyse the implications for France and Europe.
To what extent are «New Defence» companies helping to redefine the shape of the European defence technological and industrial base (DTIB)? What are the main implications for both companies and governments in terms of defence industrial policy?
The authors propose a mapping of the «New Defence» sector. Based on a sample of 316 companies in six capability segments (UAV, UGV, naval drones, smallsats, HAPS), it highlights the dynamics of industrial transformation in Europe.
A DTIB with new players...
- In six segments, the authors observe a proliferation of players, particularly in small UAVs and mini-satellites. Barriers to entry are lower in these segments, favouring the emergence of innovative SMEs, often with civilian or academic backgrounds.
- The «New Defence» is not just about start-ups: many established SMEs are growing in strength thanks to AI, sensors and the civil-military duality.
- The dynamic is also geographical: new countries are emerging alongside the major traditional DTIBs.
... which calls for a rethink of the dynamics between firms
- The study confirms the «two markets» hypothesis. A historic, capital-intensive market, structured around major integrators and long cycles. An emerging «new defence» market, more open and competitive, based on short cycles, mass production and reduced costs.
- These markets are not strictly substitutable, but complementary. Heavy platforms retain decisive advantages, while «New Defence» systems respond to the logic of war on attrition, saturation and mass at reduced unit cost.
- Faced with this dynamic, the incumbent players are adopting a number of strategies: direct competition with low-cost products; targeted acquisitions to bring skills in-house; industrial cooperation; or refocusing on their core business.
... and questions industrial policy options
From the point of view of the public authorities, the emergence of the «New Defence» opens up unprecedented scope for manoeuvre:
- Competitive pressure on costs and the quest for greater «military-economic» efficiency;
- Possibility of implementing a high-low mix combining major platforms and attrition equipment;
- Faster innovation cycles and shorter feedback loops with end users.
But with these opportunities come risks:
- Real capacity for industrialisation still uncertain for many players;
- Announcements and media coverage can mask industrial weaknesses;
- Increased vulnerability to non-European acquisitions;
- The need to reconcile support for new entrants with the preservation of dynamic competition (to avoid premature crystallisation into «champions»).
