Europe is about to create a new generation of defence giants

Europe is about to create a new generation of defence giants. That was my biggest takeaway from Molly O’Shea’s conversation on Sourcery with Aistis Šimaitis from Onodrim Industries, George H. and Bruno Jan Wejchert.

Ukraine has exposed a structural problem in Europe’s defence industry. We can develop sophisticated systems. We cannot always manufacture them quickly or cheaply enough.

Volume is becoming a competitive advantage

Modern warfare increasingly requires systems in the tens of thousands, hundreds of thousands, and potentially millions. A technically superior product that takes years to manufacture can be less useful than a slightly less sophisticated system that can be produced at scale.

The bottleneck is moving down the supply chain

The opportunity is not limited to companies building complete defence systems. If primes and emerging defence companies are going to scale, they need the industrial infrastructure underneath them:

• Components

• Sensors and electro-optics

• Electronics

• Manufacturing

• Communications

• Robotics

• Specialised suppliers

Technology and manufacturing are splitting

Defence technology and defence manufacturing are becoming 2 different businesses. One company can build the software, AI or autonomous system. Another can build the components and industrial capacity required to produce it at scale. The winners may be the companies that understand this division and build around it.

The most interesting question for European defence therefore is not simply who has the best technology. It is who can actually deliver millions of systems.

Watch the full conversation on Sourcery.