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By Sudhi Ranjan Sen 16 août 2020 à 18:00 UTC−4 Updated on 17 août 2020 à 04:58 UTC−4 India's move to ban the import of certain weapon systems will do little to boost local manufacturing and is sowing uncertainty at a time when the South Asian nation is trying to ramp up defenses on its restive borders with China and Pakistan, according to analysts. Prime Minister Narendra Modi's administration earlier this month announced curbs on $47 billion worth of imports that include communication satellites, conventional submarines and light machine guns. But defense experts said they didn't address critical issues such as the certification of systems and locally-made components, and won't prevent the military from making emergency purchases of equipment from foreign vendors. Modi has struggled to transform the world's second biggest arms importer into a defense manufacturing powerhouse since a 2014 proposal to produce indigenous equipment and systems worth $100 billion by 2020. The target has since been slashed in half and the deadline extended to 2027, while the need for more advanced weaponry grows more urgent following the most deadly border clash with China in four decades. Modi Backtracks on Free-Trade Vow With Import Curbs in India The ministry's ban on imports will have little impact beyond “measures already taken to localize defense production and reduce import dependency,” said Amit Cowshish, a consultant with the New Delhi-based Manohar Parrikar Institute For Defence Studies and Analyses and a former financial adviser on acquisitions in the Ministry of Defense. “The promotion of local manufacturing requires more cooperation between the military and domestic defense industry,” Cowshish said. “Mutual trust is missing, with everyone working at cross purposes.” While New Delhi is the world's third-biggest military spender, its air force, navy and the army are still equipped with weapons that are largely obsolete. ‘Self-Reliance Push' The push for locally-produced systems and hardware was a big step toward self-reliance in defense and creates an opportunity for the Indian defense industry to manufacture the items using their own design and development capabilities, the Ministry of Defense said in a statement on Aug. 9. A defense ministry spokesperson was not immediately available for a comment. Similar policy declarations to stem imports were made by India in 2013, under then prime minister Manmohan Singh, and also by Modi's administration in his first term in 2018, didn't significantly increase the ‘Made in India' products deployed by the military. “Time and access to technology is fundamental to such efforts -- currently a large proportion India's defense industry is little better than system integrators,” said Rahul Bedi, a New Delhi-based independent defense analyst. “A major dose of realism is needed.” The banned list is also vague on the position of joint-ventures between Indian and foreign manufacturers and license produced weapon systems, he said. Despite its drawbacks, India's nascent defense industry is cautiously optimistic about the new policy. “We are sure that this list will keep getting amended to add newer programs that lay a road map matching our nation's aspiration,” said Jayant Patil, senior executive vice president (defence & smart technologies), Larsen & Toubro Limited. https://www.bloomberg.com/news/articles/2020-08-16/india-s-tense-borders-threaten-plan-to-ban-some-weapons-imports

Reliance on foreign suppliers in the defense industrial base rose—notably in packaged software and IT services—even as calls for reshoring increase, according to a new report. Reshoring the defense supply chain may reduce national security risks, but a new report detailing a heavy dependency on goods and services from foreign countries like China shows reshoring may be easier said than done. Researchers at Govini, a decision science company supporting the defense industry, analyzed data from over 1,000 Defense Department vendors across 100 industries to show how supply chain reliance on products from foreign countries has increased over the past decade. According to the survey, the number of Chinese suppliers in DOD's base increased by a total of 420% since 2010. For cyber and information technology, two statistics stick out. The share of companies based in foreign nations in the supply chain grew the most in the packaged software and IT services between 2010 and 2019. Companies based in foreign countries made up 3% of the packaged software supplier base in 2010. That number rose to 7% in 2019. The numbers are similar for IT services: Companies based in foreign countries made up 3% of the IT services supplier base in 2010 and 7% in 2019. Tara Murphy Dougherty, CEO of Govini, told Nextgov increasing adoption of IT infrastructure is critical for the Defense Department, particularly as COVID-19 forced the agency's workforce into mass telework. But that means it is imperative DOD addresses supply chain concerns for information and communications technology. Murphy Dougherty said these two investment areas are only going to continue to grow, which means the department needs to act to clearly define its stance on IT supply chain security. “What are you doing, other than responding to some of the legislation that we've seen come out of the Hill mandating investigation of this?” she said. “It would be great to see more options.” A key mandate from Congress related to supply chain was supposed to take effect on an interim basis Thursday. Section 889 (a)(1)(b) of the 2019 National Defense Authorization Act bans agencies from contracting with companies that do business with five Chinese firms, including Huawei and ZTE. But according to a Defense News report, the Pentagon received a temporary waiver from the Director of National Intelligence pushing back the compliance date until September 30. Defense Undersecretary for Acquisitions and Sustainment Ellen Lord said at a Professional Services Council webinar Thursday she needs feedback from industry on what's working and what's not when it comes to implementing the rule. “I know we're all aligned in that we do not want adversaries in our supply chain. We don't want further theft of intellectual property. We don't want these nefarious actions going on,” Lord said. “But how do we get the language into the contracts, how do we practice the behaviors of ensuring we understand what we have in our supply chains for telecommunications equipment? What we need to do is continue to hear from you.” It's not yet clear how the brief deadline extension will affect the implementation process. Regardless, visibility down the supply chain remains a key concern. Murphy Dougherty said there needs to be more transparency in supply chains if the industry is going to address security risks. The Govini report focuses on firms in the mid-tier of the supply chain, with less visibility than a large company like Boeing. For companies further down the supply chain, U.S.-based companies make up less than half of the supplier base, according to the report. Chinese companies make up anywhere from 5% to 9% of the supplier base in the middle to lower ranges of the supply chain. Murphy Dougherty said it's going to take time to see changes in the data. How to address the industrial base at a structural level remains an unanswered question, she said, and collaboration between DOD and industry will be critical in coming up with a new system to ensure supply chain security. “It begs the question of do we have the right models in place today and the right framework for the department to get all of the goodness and partnership it possibly can out of the American commercial economy,” Murphy Dougherty said. https://www.defenseone.com/threats/2020/08/number-foreign-companies-within-defense-supply-chain-grew-over-past-decade-report-says/167767/

We think that p-LEO is a big deal. And there's got to be a revolution that has to hit the ground segment, says Phil Carrai, president of Kratos's space, training and cyber division. By THERESA HITCHENSon August 17, 2020 at 1:20 PM WASHINGTON: As DoD and commercial industry scramble to develop small satellite constellations in Low Earth Orbit for everything from high-speed communications to near-real time Earth observation, Kratos is quietly working to solidify a central role providing the new ground systems required to make them work. While there is enormous military and commercial interest in the proliferation of small LEO satellites, known as p-LEO, not nearly as much attention has been paid to the radically different ground-based infrastructure to support those constellations. But the necessary changes in ground architecture will be monumental, and extremely lucrative for those companies at the crest of that wave. “We think that p-LEO is a big deal. And there's got to be a revolution that has to hit the ground segment,” says Phil Carrai, president of Kratos' space, training and cyber division. “We think this is kind of our play for the next many years. ... We've been making some substantial investments in that, in the sense of taking what was analog and stovepiped and moving it into a digital, dynamic, cloud infrastructure.” Kratos, headquartered in San Diego, is a mid-tier company with $750- to $800 million in annual revenue, and is perhaps best known in the defense arena right now for its low-cost attritable drones. Its XQ-58A Valkyrie is one of the top contenders for the Air Force's high-profile Skyborg program to build autonomous drones that can mate with piloted aircraft for a variety of missions; it also is providing an airframe, based on its Mako UTAP-22, as a subcontractor to Dynetics in DARPA's Gremlins program to develop drone swarms. But space-related work is the firm's bread and butter. Kratos' space, training and cyber Division is the company's biggest, Carrai said, with a large, but often behind-the-scenes, footprint in both the military and commercial satellite communications markets. Indeed, while Valkyrie's role in the Air Force's Advanced Battle Management System (ABMS), which is developing new technologies to support command and control of future all-domain operations, has been well documented, Kratos space-related comms systems and ground equipment are actually playing a bigger part as subsystems within many other company's offerings, company officials explained in a teleconference with Breaking D. “Our space portfolio really is all about communications and the ground segment, if you will, so that's been our heritage,” Carrai said. “Probably 90 percent of US satellite missions use our technology in one form or fashion. So, we are rather unique in the sense that we can claim the US Air Force and SMC [Space and Missile Systems Center] as one of our largest customers, and, probably in our top 10 or top five, Intelsat and SES are also very large customers.” The advent of 5G mobile telecommunications networks, and its promise of hyper-connectivity through the Internet of Things including from space, has mesmerized DoD and the Intelligence Community, as well as industry. The chief benefit of tying together satcom and wireless and terrestrial networks, for both national security and commercial communications, is expanded reach to hard-to-access areas. For example, satellite signals have trouble penetrating areas like ‘urban canyons'; laying fiber and erecting cell-towers in rural and harsh terrain such as mountainous regions is very costly if not impossible, but satellite communications is relatively simple. The challenge is integrating currently incompatible (in more ways than one) and heavily stovepiped networks in a seamless fashion that allows near-instantaneous roaming among them. That is why the ground system issue is so important. “We think that there's a substantial change that needs to take place from the ground perspective,” Carrai said. Not only will there need to be “way more sites” to connect to fast-moving LEO satellites due to the simple laws of physics, but satellite ground stations will need to be configured more like terrestrial communications nodes with machine-to-machine operations ensuring the best link to any one satellite at a given place or time. Chris Badgett, Kratos VP for Technology, explained that this kind of “dynamic resource allocation or that dynamic situational awareness” is particularly important to military users in order to provide jam-proof communications. In essence, this would allow a military radio to ‘jump' from one frequency being jammed to another that is open. Today, if ‘changing the channel' is possible, it is up to a solider or sailor or Marine to figure that out and manually flip switches. The ultimate goal is to automate that frequency and network ‘hopping' capability so that users don't even notice that it's being done. The mess that is the world of DoD satcom terminals is a long-standing sore-thumb for operators, particularly in the Army. As Breaking D readers know, DoD currently maintains 17,000 terminals with “approximately 135 different designs,” as the Government Accountability office found. Those terminals operate across diverse platforms—such as ships, backpacks, vehicles and aircraft — all with differing system requirements, so that for the most part each terminal system (i.e. each type of radio) is tied to only one satellite network and one type of platform. And while fixing the current problem is already a Herculean task, it could be a show-stopper to Dod's vision of future all-domain operations, linking sensors and shooters provided by all the services together via a Joint All-Domain Command and Control (JADC2) network. “The major obstacle that we have from a ground system standpoint is the current ground architectures have all been designed and developed in a very stove-piped and mission-specific sense. And so each ground system was designed for the mission that it was supporting,” said Frank Backes, senior VP for Kratos Space Federal Solutions. “Where we're going now with a joint, or combined, capability is the integration of those ground systems. And therein lies the complexity. “How do you take a legacy-based architecture that was very stovepipe designed and integrate it together into a common system that gives you enterprise-wide control of the infrastructure, and also gives you the awareness of all the systems? It's very easy to become overwhelmed in the information that a combined system provides,” Backe added. As Breaking D readers know, sorting out those answers is what Gen. Jay Raymond, head of the Space Force, set out to do with his Vision for Enterprise Satellite Communications (SATCOM). That is aimed at creating a seamless network of military and commercial communications satellites in all orbits, accessible to troops, vehicles, ships and aircraft via ground terminals and mobile receivers that would automatically “hop” from one satellite network to another. Carrai said Kratos believes that ultimately the “current analog stovepipe infrastructure that exists today” must simply be replaced. What is needed for integrated satcom is “a roaming modem or a roaming terminal,” and the ability to integrate satellite-provided imagery into the network, a “kind of a virtual antenna.” “If you don't have that capability, you're not going to be resilient, it's going to cost a lot of money, and you're going to create a huge exposure because everybody's going to know what antennas are used for what purpose,” he added. All that said, Carrai opined that partly because of push from the Space Force, the stovepipe problem with milsatcom networks is beginning to change. “It's still a struggle,” he said, because “there's a lot of drive from the spacecraft manufacturers to link the ground system with it. You know, that's what makes it a multibillion dollar system.” In addition, he said, the scramble by commercial satcom operators to get on the 5G bandwagon is forcing them to figure out how to open up proprietary networks. “Commercial operators all see that 5G and data is their future, not broadcast, he said. “The commercial operators are going to lead if not the defense side because they have to interoperate with the telecom operators if they're going to survive.” https://breakingdefense.com/2020/08/kratos-targets-ground-system-revolution

August 17, 2020 Many nations have suffered significant financial losses as a result of the COVID-19 crisis. Will next-generation combat aircraft programs be delayed by future defense budgets cuts? Aviation Week's Executive Editor for Defense and Space, Jen DiMascio, answers: Even though defense budgets are likely to remain stable in the U.S. during the coming year, relief funding to combat the COVID-19 pandemic is likely to put pressure on spending over time. As a result, projects such as the U.S. Air Force's Next-Generation Air Dominance (NGAD) program could be slowed. Pentagon spending was already predicted to level off in the next few years, and the economic drop-off caused by the novel coronavirus and the torrent of debt the government is taking on to combat the pandemic adds even more pressure. The situation today is even more extreme than during the 2008-09 global economic crisis, according to Craig Caffrey, senior aerospace industry analyst for forecast and MRO at the Aviation Week Network. Caffrey forecasts that COVID-19 could shrink the global economy by 4-6% over the next five years, sending worldwide defense spending down 5%, or $70-80 billion. What all that means for next-generation fighter programs is difficult to say. The U.S. is already sacrificing NGAD funding for near-term needs. A bill to provide $700 billion for defense in fiscal 2021 in the House of Representatives would approximately halve funding for NGAD by $500 million for fiscal 2021 to offset an Air Force shortfall in fighter availability. Could such cutbacks slow development of next-generation efforts? It is hard to say, but constraints on spending are unlikely to ease. In Europe, the UK is aiming to field its next-generation Tempest in 2035. So far, £2 billion ($2.6 billion) has been allocated for technology development and maturation, but Caffrey foresees strong economic headwinds over the next five years. “I don't see where the money comes from for the full scope of Tempest as currently envisaged,” he says. The French-German Future Air Combat System (FCAS) may have more breathing room because the program is not expected to enter service until 2040. In the near-term, France, Germany and their new partner, Spain, are providing government aid to such high-tech programs to retain jobs during the COVID-19 pandemic. The real test will be whether funding can be sustained in 2022-23. Airbus CEO Guillaume Faury is lobbying for efforts such as EuroDrone and FCAS to continue, saying they will be required in the future. “We have the DNA to make them successful,” Faury told Aviation Week's Jens Flottau recently. “Europe feels the need to prepare for the sovereignty of the future, which includes the air and space power to protect your territory from the skies. I am very happy and optimistic that this is moving forward.” https://aviationweek.com/defense-space/budget-policy-operations/will-us-defense-cuts-delay-next-gen-combat-aircraft-programs

ByDylan Malyasov Aug 17, 2020 U.S. and fighter jets will be conducting will conduct air defense exercises in the Arctic region, according to the North American Aerospace Defense Command. The details were given in a media release, to announce North American Aerospace Defense Command will conduct an air defense exercise from August 17-21, ranging from the Beaufort Sea to Thule, Greenland. The exercise will include Royal Canadian Air Force CF-18 fighter aircraft, CP-140 long-range patrol aircraft, and a CC-150T air refueler; as well as United States Air Force F-15 fighter aircraft, KC-10 refueler, and C-17 transport aircraft. The exercise will be based out of 4 Wing Cold Lake, Alberta; and Yellowknife, Northwest Territories. Exercise flights will be conducted over sparsely populated Arctic areas and at high altitudes. The public is not likely to see or hear the exercises; however, there will be increased flight activity at Yellowknife. This exercise is in no way related to the Government of Canada or United States' response to COVID-19. NORAD routinely conducts exercises with a variety of scenarios including airspace restriction violations, hijackings and responses to unknown aircraft. NORAD carefully plans and closely controls all exercises. This air defense exercise provides us the opportunity to hone our skills as Canadian and U.S. forces operate together with our allies and partners in the Arctic. NORAD has implemented preventative measures including regular hand sanitation, physical distancing, and wearing of face masks in situations where physical distancing is not possible to mitigate potential risk of exposure to novel coronavirus (COVID-19) by military members and the local population. In addition, participating U.S. military personnel require two negative COVID-19 tests prior to arriving in Canada, and all military personnel positioned at forward operating locations will be isolated on the base. For more than 60 years, NORAD has identified and intercepted potential air threats to North America through the execution of the command's aerospace warning and aerospace control missions. NORAD also keeps watch over Canadian and U.S. internal waterways and maritime approaches under its maritime warning mission. https://defence-blog.com/news/u-s-and-canadian-fighter-jets-will-conduct-military-training-in-the-arctic.html

Mark Pomerleau WASHINGTON — As Lockheed Martin works on the U.S. Army's first ground-based integrated signals intelligence, electronic warfare and cyber system, the company is placing a heavy focus on coalition interoperability. The Army awarded Lockheed a $6 million other transaction authority contract — a highly flexible contracting tool — in May to build the first phase of the Terrestrial Layer System-Large. Boeing subsidiary Digital Receiver Technology also won an award for the program for $7.6 million. The two companies will build and outfit their systems to Stryker vehicles during the 16-month-long phase one, while also participating in operational assessments, after which the Army will choose one company to move on. John Wojnar, director for cyber and electronic warfare strategy at Lockheed, told C4ISRNET in a July interview that the company had a keen eye toward integrating its system with international partners as well as the Army, given the U.S. military doesn't fight alone. “Being able to bring in our coalition partners, maybe starting with the Five Eyes first and in particular the U.K., and aligning the architecture that we provided ... really drove us to the architecture that we came up with,” he said. He added that Lockheed examined the building blocks of the U.K.'s cyber and electromagnetic activities to help inform the offering. Being in close partnership with coalition members is key, he said, so whatever architectures the company designs should be interoperable with partners to maximize effectiveness on the battlefield. Lockheed's system was an internal research and development project that is a companion of sorts to its aerial cyber/electronic warfare system Silent Crow, which the Army awarded a year ago for its Multi-Function Electronic Warfare-Air Large system. Wojnar said the ground system went through testing in September at the Army's Cyber Blitz event, which helps the service understand how to mature cyber and electronic warfare operations with traditional units through actual experimentation with emerging technologies and soldiers at Joint Base McGuire-Dix-Lakehurst. “Based on lessons learned from those tests as well as the other activities that have been underway tied to Silent Crow IRAD, we were able to leverage the best of the best to then come up with our TLS-Large system offering,” he said. The work that will be ongoing between now and next summer when the first phase of TLS wraps up, Wojnar added, includes ensuring all the component parts developed internally and externally have been acquired and integrated into the ground vehicles, as well as conducting a variety of software drops. https://www.c4isrnet.com/electronic-warfare/2020/08/17/lockheed-develops-electronic-warfare-tools-with-eye-toward-multinational-interoperability/

By: Mike Gruss The adage is that it is difficult for an aircraft carrier to turn on a dime. The same could be said for the defense industry or Pentagon budgets and as such, the Defense News Top 100 list. Changes are slow and can take time to appear on our list. For example, for the first time, this year's list reflects the result of the L3-Harris merger. L3, ranked 18th on last year's list, and Harris, ranked 26th a year ago, merged to form what everyone expected: one of the world's largest defense corporations in L3Harris Technologies, ranked 9th on our list. Next year, observers will see the results of the merger between Raytheon, ranked 5th on this year's list, and United Technologies Corp., ranked 10th on this year's list. Thematically, the shifts that defense and military leaders have spent years discussing are becoming fully reflected in industry. China's heavy investments in defense are becoming evident by the inclusion of Aviation Industry Corporation of China (6th), China North Industries Group Corporation Limited (8th), and China Aerospace Science and Industry Corporation (11th) on this year's list. The role of integration and communication tools is becoming more important, as is evidenced by Leidos, Peraton and Perspecta's inclusion. Medium-sized businesses are becoming increasingly critical players. And, for years, U.S. military leaders have heard from Silicon Valley startups that it remains too difficult to break into the defense market in a meaningful way. Advocates will likely point by how few are in the list. Other companies have complained that the big primes have too much of a lock on Pentagon contracts, perhaps seen in how the top five bring in more than twice the revenue of the next five. Each year, the Defense News Top 100 is part art, part science. Every year, the Defense News team tries to push it a bit closer to science. This year's list, like years past, is a snapshot of what's happening in defense markets and maybe, just maybe, a hint of what's to come. https://www.defensenews.com/top-100/2020/08/17/the-list-is-here-find-out-how-global-defense-companies-performed-in-fy19/

By: Joe Gould 5:00 AM WASHINGTON ― Defense revenues of the top 100 defense companies in the world climbed for a fourth straight year, pushed upward by U.S. defense spending growth combined with strong foreign military sales. Fiscal 2019 defense revenues recorded in Defense News' Top 100 list totaled $524 billion, up about 7 percent from $488 billion in fiscal 2018, according to numbers compiled by Defense News as part of the annual Top 100 list. “The single most striking thing about these data is the year-over-year growth, the median of which is 7 percent,” said Atlantic Council Senior Fellow Steven Grundman. “For an industry generally regarded as mature, revenue growth that runs at two times global GDP is downright sporty.” The defense industry remained top heavy, as the top 10 firms accounted for 50 percent of total defense revenue on this year's list, and the top 25 companies accounted for about 75 percent of the total. Geographically, U.S. firms made up seven of the top 10, and 10 of the top 25. The combined defense revenue of the 41 U.S. firms in the Top 100 list comprised more than half of the total defense revenue. China this year had five firms in the top 15 companies versus six last year. Eight Chinese firms made the Top 100 list this year, with a combined $95 billion in defense revenue for FY19 ― which is $11.7 billion shy of the list's total for Europe and Turkey. The Aviation Industry Corporation of China, which appeared with other Chinese firms for the first time last year, fell from No. 5 to No. 6, though its defense revenue grew by a percentage point over last year. China South Industries Group Corporation fell from No. 11 to No. 18, as its revenue declined 26 percent, from about $12 billion to around $9 billion. China is unquestionably a defense giant in the Asia-Pacific region, dwarfing its nine neighbors (excluding Russia) on the list. Their 2019 defense revenues totaled $21 billion. The combined revenues of the Chinese firms marks the country as the rising superpower it's billed to be in political and strategic circles, said Daniel Gouré, a senior vice president with the Lexington Institute. “For all the discussions we have been having over the last weeks and months about China as a potential threat and challenges, they are building all kinds of blue-water ship classes that mirror the U.S. Navy,” he said. “For a country that was once thought of as a continental or near-shore power, it's amazing the stuff they're building, and its reflected in these companies.” From Europe and Turkey, a NATO ally, there were 35 firms across the list. The combined defense revenue there comprised roughly 20 percent of the Top 100 total. Seven Turkish firms made the list, with FNSS Savunma Sistemleri A.S., and Havelsan A.S. joining the list at No. 98 and No. 99 respectively. For Russia, some past participants declined to provide data this year for unknown reasons. The two that participated made it into the list: Almaz-Antey placed 17th, with $9.2 billion in defense revenue for 2019, and Tactical Missiles Corporation JSC placed 35th, with $3.5 billion in defense revenue. The annual Defense News Top 100 list relies for the most part on self-reporting from companies, many of whom provide estimates rather than definitive data for their defense percentages. That means that while the list is the industry standard, the numbers come with some variance. Heritage firms dominate Lockheed Martin was a lock for No. 1, for the 21st year in a row, with defense revenue that represents nearly 11 percent of the total. Its defense revenue jumped 12 percent between FY18 and FY19, from $51 billion to $57 billion ― with Boeing trailing at No. 2 at $34 billion in defense revenue for FY19. Within the top five, General Dynamics climbed back from No. 6 last year, passing both Raytheon and Northrop Grumman. Northrop fell from No. 3 to No. 4, likely based on a full-year accounting of its acquisition of Orbital ATK in 2017, said analyst Roman Schweizer, managing director of Cowen and Company. GD led Northrop by $912 million in defense revenue, with Raytheon (5th place) trailing Northrop by $1.2 billion in defense revenue. Ten companies increased their defense revenue by $1 billion or more, and Lockheed Martin led the pack with a $6 billion boost. The merger between L3 Technologies (18th place last year) and Harris Corp. (26th place last year) saw a new entry, L3Harris Technologies, take the No. 9 spot, with $13.9 billion in defense revenue ― just ahead of United Technologies Corp., which acquired Rockwell Collins in 2018 and whose merger with Raytheon should be reflected in next year's list. At the same time, the data doesn't support the argument that the defense industry is growing progressively more concentrated, according to Grundman. “The top-quartile of firms account for exactly three-quarters of the revenue both in 2018 and 2019,” he said. “Looking back at the data for 2013, the top quartile took 73 percent of the revenue, but that's not appreciably less than last year.” Still, despite the Pentagon's push to work with nontraditional suppliers, the top of this year's list, and the list overall, is almost like the automotive sector, it's so dominated by familiar names, said Byron Callan, an analyst with Capital Alpha Partners. “The interesting thing is just the relative stability of this,” Callan said. “For all of DoD's emphasis to get new entrants into the sector, and reach out to innovative suppliers, you just don't see it. When you compare it to the technology sector, we're all using things made by companies that weren't even household names 10 years ago. ... Where is the Tesla [of the defense sector]?” It's not out of the question that the list changes over the next five years, if the U.S. Department of Defense and foreign militaries make good on their promises to boost innovation, Callan said. For all the DoD's discussion of the growing role of software, artificial intelligence and machine learning, there's no company known for those things on the list, Gouré observed. Beyond General Dynamics, which completed its acquisition of IT services giant CSRA in 2018, “AI, software, IT aren't there because they're still subcontractors,” Gouré said. “Microsoft and Amazon Web Services, they aren't anywhere on the list.” That's not to say there isn't massive spending on all of the above, but it remains a subcomponent within companies, and therefore not captured on the list, Gouré said. “If we keep saying it's the kill chain, the network matters and the country with the best AI will win, are we not investing enough, are we doing the right thing?” Gouré wondered. “There are more questions than answers.” (Booz Allen Hamilton, No. 26 this year, did win an $800 million Pentagon artificial intelligence contract. But as that occurred in May 2020, it will likely impact future lists.) For now, the large, multiplatform firms dominate and should continue to do so, even if government defense spending declines, Gouré said. “These guys are showing it's good to have a finger in many pies.” Furthermore, the data tend to contradict the conventional wisdom that defense is an industry of mostly large-scale, pure-play firms, according to Grundman. “In fact, the median [defense] revenue of the top 100 is only $2 billion. And on average, only slightly more than half each firm's revenue ... derives from defense sales,” he said. Flat-budget future? The consensus among analysts is that government defense spending will level off amid the coronavirus pandemic, and its effects as well as the result of the upcoming U.S. presidential election in November will be reflected in future lists. “Successful years of investment spending growth appears to be ending, but outlays are still growing due to the surge in spending over the last three years. But they are starting to taper significantly after this year,” Schweizer said. Schweizer sees foreign spending softening, at least in the short term due to COVID-19, but he predicts defense budgets, backlogs, outlays and foreign military sales will hold together for at least 12-18 months to help defense firms weather the unprecedented damage visiting the commercial aerospace sector. The biggest risk is the U.S. budget trajectory, which is likely to be flat, at best, or decline in mid-single digits, at worst, over the next five years, Schweitzer added. He anticipates a drop of 3-5 percent, but with the Pentagon's eye on Russia and China, the department will likely make trade-offs to protect core modernization areas. As global growth rates slow, future lists may see some familiar companies grow leaner. “These companies are going to figure out what their growth businesses are so they can shrink to grow,” Callan said. “They all say they're well positioned [for slower defense spending], but what the hell does that mean? They can't all be right.” Other notable moves included Reston, Virginia-based engineering and construction company Bechtel, which fell to No. 47 from No. 31 last year; the firm's defense revenue declined 39 percent, from $3.7 billion to $2.3 billion. In France, Safran's defense revenue jumped from $1.6 billion in FY18 to $4.4 billion in FY19, bumping it from No. 56 to No. 28. However, the company told Defense News that it attributes the large rise to a difference in calculation for this year's list. Since 2015, the data from Safran were made up of Safran Electronics & Defense activities. This year, the firm changed its approach by adding the military activities of the group's other subsidiaries. Also in France, Dassault nearly doubled its revenue from $2.9 billion in FY18 to $5.7 billion in FY19 ― jumping from No. 38 to No. 22. Japan's Mitsubishi Heavy Industries vaulted back onto the list to No. 21, with $6.6 billion in defense revenue. However, it's worth noting that defense revenue numbers reflect awards made by the Japanese Ministry of Defense, which leads to more year-over-year volatility among Japanese firms. The three Israeli companies on this year's list — Elbit Systems, Israel Aerospace Industries and Rafael Advanced Defense Systems — moved up in the ranking. The sole South American company on the lsit, Embraer, also moved up, from No. 84 to No. 79. Meanwhile, the only non-U.S. North American company on this year's list — Canada's CAE — dropped four spots to No. 74, but its defense revenue grew by a percentage point. https://www.defensenews.com/top-100/2020/08/17/arms-trade-momentum-globalization-and-us-defense-spending-drive-defense-industry-growth

By: Mike Yeo MELBOURNE, Australia — South Korea has over the past decade become a defense industry powerhouse in its own right, and it's seeking to widen its reach, with progress in international markets in recent years marking the maturity of its defense articles. This year's Defense News Top 100 list of the biggest defense companies in the world features four South Korean businesses. They are Hanwha (ranked 32rd), Korea Aerospace Industries (55th), LIG Nex1 (68th) and Hyundai Rotem Company (95th), all of which made last year's list. Continued reform The strong performance of South Korean defense companies comes in the wake of a series of reforms over the past decade, with the latest designed to consolidate industrial gains and create momentum for growth. The defense industry reforms are part of President Moon Jae-in's Defense Reform 2.0 program announced in 2018 — a complement to efforts seeking to create a slimmer, yet more efficient South Korean military that is less reliant on foreign defense technology. The push for further self-reliance is most prominent in Korea Aerospace Industries' KF-X program. KAI is developing a next-generation fighter for the South Korean Air Force. Although an American GE F414 turbofan will power the aircraft, its avionics will primarily be indigenous. These include the active electronically scanned array radar under development by Hanwha and the country's Agency for Defense Development, with support and some components supplied by Israel's Elbit Systems. Defense Reform 2.0 also puts emphasis on defense industry investment, and it comes as little surprise that the domstic market still takes up the biggest share of the pie where sales are concerned, backed up by the steady growth in defense spending: South Korea's defense budget grew 20 percent from 2009 to 2017, reaching $43 billion. Export success The reform program also places an increased priority on defense exports. The country is already successful in this area, with research by the Stockholm International Peace Research Institute think tank showing the country was the 11th biggest arms supplier in the world in 2017, with sales totaling $5.5 billion. In a further indication of how much South Korea's industry has grown, SIPRI also noted in a 2018 report that the country's defense exports grew 94 percent in the 10 years prior, a growth figure only bettered by Turkey for the same period. This growth has been underpinned by two of the highest-profile South Korean defense exports in the past decade: the KAI T-50 Golden Eagle family of trainer and light combat aircraft, and the Hanwha K9 Thunder self-propelled howitzer. The T-50 was earmarked by the Air Force as its mainstay advanced trainer and light combat aircraft. Despite losing a number of trainer competitions, including in Poland, Singapore and the United States, the Golden Eagle has since scored a number of notable contracts for export. Compared to its rivals in the trainer market, such as the Leonardo M-346 and the Boeing T-7, the main draw of the T-50 family is its combat capability in the form of the TA-50 and FA-50 equipped with sophisticated combat capabilities in the form of radars and precision weapons employment capability. This makes the aircraft attractive to nations unable to afford a high-end trainer with a light attack capability, and the list of the type's customers bears this out, with Indonesia, Iraq, the Philippines and Thailand operating the type in their respective air forces. The Philippine Air Force used its FA-50PH fleet to attack Islamic State militants in the southern part of the country in 2018. Meanwhile, Hanwha's K9 Thunder has carved a niche for itself in the global market for self-propelled howitzers. The 52-caliber, 155mm system has been selected by a number of NATO nations, beating out the similar Panzerhaubitze 2000 by Germany's Rheinmetall in Estonia, Finland and Norway. Turkey is building the K9 under license as the T-155 Firtina. The system has also been selected for license production by India and Poland, and had previously been selected by Australia in the early part of the 2010s only to be canceled following budget issues caused by the global financial crisis. Hanwha is also one of two companies left in the running to supply the Australian Army with a new infantry fighting vehicle. The AS21 Redback, which is based on the K21 vehicle operated by the South Korean Army, is to take part in an evaluation program against the Rheinmetall KF41 Lynx to supply 450 vehicles to replace M113 armored personnel carriers. The evaluation will see three of each vehicle delivered to Australia for testing, with the first two Redbacks due to reach Australia at the end of August, having left South Korea by ship late last month. Post-pandemic support Like much the rest of the world, the COVID-19 pandemic has hit South Korea hard, though the worst appears to be over for the country. The local defense industry was forced to adjust financially and operationally, and it remains unclear how revenue will be hit by the events of 2020. The pandemic has claimed at least one sale for the South Korean defense industry, with Argentina, which had appeared set to be the next customer for the T-50 family, deciding in April to put off the acquisition indefinitely. The South American country is yet to sign a contract, despite choosing the aircraft for purchase in July 2019. However, the South Korean government is not waiting for foreign action. Defense Minister Jeong Kyeong-doo has unveiled plans for the country to spend more on locally produced defense articles, partly as a move to help curtail the effects of the pandemic. Jeong said during a mid-June meeting with industry CEOs that his ministry plans to adjust spending plans to continue its drive to spend more on indigenous products, and move delivery timelines to reflect the reality of schedule delays while also waiving penalties for late payments. He also plans to expand an existing strategy aimed at establishing “defense industry innovation clusters”; this move adds to the first one established in April with an initial government investment. As a result, more funding will be made available to industry and research institutes, and will be used to support regional collaboration in defense-related research and development as well as manufacturing. https://www.defensenews.com/top-100/2020/08/17/reform-efforts-in-south-korea-create-ecosystem-for-defense-industry-growth