A twin-engine fighter jet bearing Turkey’s red and white flag on its tail coasted down a runway at an air base near the capital Ankara in February. The aircraft — somewhat similar in style to an American F-22 or F-35 — picked up speed and lifted off.
When the fighter, dubbed Kaan, landed 13 minutes later, a mob of revelers flooded the flight line to celebrate with hugs, applause and cheers — not only for the jet but what it represented.
Turkey had flown its first homemade prototype fighter jet, which manufacturer Turkish Aerospace Industries says will have fifth-generation stealth capabilities and the weapons capacity to rival or surpass the F-35 Joint Strike Fighter.
Kaan’s debut came almost 13 years after Turkey began developing its own combat aircraft, and four years after the U.S. kicked Turkey out of the F-35 program over the country’s plan to buy S-400 air defense systems from Russia. That punishment failed to deter Turkey from pursuing the S-400, and instead of the F-35, the country focused on its own indigenous fighter jet.
Turkey’s efforts to go it alone have proved fortuitous for TAI. In Defense News’ latest Top 100 list, which ranks companies around the world by defense revenue, TAI jumped from 58th place to 50th as its defense revenue ballooned nearly 50% to $2.2 billion in fiscal 2023.
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TAI isn’t the only firm seeing rising revenues. As Russia presses its invasion of Ukraine, Israel attacks Hamas in the Gaza Strip, the U.S. and several allies fight Yemen-based Houthi rebels, and tension over Taiwan’s independence and disputed territory in the South China Sea proliferates, nations are increasing their defense spending — and businesses are seeing their revenues climb.
“There’s definitely a trend there,” said Stuart Dee, a European defense research leader at the think tank Rand. “This rapid and marked re-securitization with three fronts of potential geopolitical instability — Ukraine; Israel, Gaza and the Red Sea; and then Taiwan — what we’re seeing all at once is a whole lot of capability backfilling going on, right across the board.”
A piece of the pie
Defense News each year ranks the top defense contractors for its Top 100 list, by collecting and tallying information on firms’ revenues from the companies, earnings reports, analysts and other research.
Mega-firms based in the U.S., such as Lockheed Martin, RTX, Northrop Grumman, General Dynamics and Boeing, remain some of the largest defense companies worldwide, as reflected in this year’s list. But there are signs that non-U.S. businesses are playing greater roles across the sector.
For example, Aviation Industry Corp. of China is now ranked as the second-largest defense firm in the world, behind only Lockheed Martin. The Asian business saw its defense revenue jump by 45% from FY22 to FY23.
Over the last five years, the worldwide defense revenue share of Asia-based companies (including those in Russia) that have made the Top 100 rankings has fluctuated, but did increase from 16% to 21% from last year’s list to this latest version.
The share for U.S.-based firms also fluctuated over the last five years, but declined from 59% to 54% from last year’s list to this year’s iteration.
For Europe-based businesses, including Turkey and Ukraine, the defense revenue share didn’t change much over the last five years. In FY23, they took up 21% of the worldwide pie.
Notably, the Ukrainian Defense Industry’s defense revenue, which amounted to about $651 million in FY20, has skyrocketed to $2.2 billion. The company formerly known as Ukroboronprom jumped 16 spots on the most recent Top 100 list to 49th place.
‘Wartime footing’
The rising defense revenues among Asian and European firms likely reflect “an enhanced understanding of security challenges in the global environment,” according to Cynthia Cook, who leads a defense industry research team at the Center for Strategic and International Studies think tank.
Russia’s invasion of Ukraine pushed NATO members to spend more on military efforts, she told Defense News.
In 2014, the year Russia annexed Crimea from Ukraine, just three NATO allies met guidelines to spend at least 2% of their respective gross domestic products on defense; that number is expected to reach 23 this year, according to the alliance, which based its findings on 2015 rates.
And NATO Secretary General Jens Stoltenberg said in February that European members will spend a cumulative $380 billion on defense this year, reaching a new record. In comparison, using the same rates, European allies spent $250 billion in 2014.
“The increase in spending and the growth of European defense contractors is an important start for the rebuilding of their industrial base, which will be necessary in any future conflict,” Cook said. “European nations, especially places like Poland, are looking to the right — to the Russian threat on their immediate border. And [Russian President Vladimir] Putin has not ever said anything like: ‘Well, we’re just going to take over Ukraine and then sit tight.’ He’s pretty bold in his territorial ambitions. He’d like to do a Soviet reunion.”
And in Asia, Cook noted, Japan and South Korea are increasing their defense spending in light of potential threats from China and North Korea.
“China’s industrial base is on a wartime footing if you look at things like how many ships they’re producing and so forth,” she said.
But it’s not just American allies investing in defense, she added. After initial setbacks in Ukraine, Russia has poured money into reconstituting its military — with success that surprised some Western observers.
“Russia has ramped up its production,” U.S. Defense Secretary Lloyd Austin said in April. “All of their defense industry really answers directly to the state, so it’s easier for them to do that a bit quicker.”
Shopping local
Global military spending has skyrocketed in recent years, reaching a record $2.4 trillion in 2023, according to an April report from the Stockholm International Peace Research Institute. That was the ninth straight year in which defense spending increased.
“Defense spending is up,” Rand’s Dee said. “But at the same time, what that is being spent on is increasingly national supply chains [and] local champions” so nations can be more self-reliant.
Take Turkey, for example. In the past, he said, the country would have bought more off-the-shelf military equipment from foreign providers, primarily from the U.S. But as Turkish President Recep Tayyip Erdoğan’s administration pivots away from dependence on the U.S. as a supplier, the nation has invested more into its domestic industrial base, Dee added.
This is resulting in Turkey taking a “quite interesting hedged relationship” with the U.S. when it comes to military imports, he said. Turkey still relies on foreign military sales for much of its “bread and butter” military capabilities, he added, while also investing in next-generation capabilities with an eye on exports.
“If you went back 10 years ago, Turkey was an outright defense capability importer,” Dee said. “You’re starting to actually see Turkey transition to being a defense exporter for the first time.”
Five Turkish firms made the 2024 list, with Dee specifically pointing to TAI and the missile manufacturer Roketsan as notable examples of local growth. The latter jumped from 80th place on the list to 71st.
And while drone maker Baykar did not respond to Defense News’ requests for data, nor did it publicly share revenue figures by press time, the company touts its abilities as an exporter to 34 nations — including Ukraine, whose use of the Bayraktar TB2 drone was an early success story in its war against Russia.
A similar pattern is playing out in the United Kingdom, Dee noted. While the U.K. military flies Boeing and Lockheed Martin aircraft, such as Chinook helicopters and F-35s, its sixth-generation fighter program, dubbed Tempest, is largely a British effort.
U.K.-based BAE Systems is taking the lead among industry participants, which also include MBDA, Rolls-Royce and Leonardo. BAE Systems landed at the 7th spot on the Top 100 list; Rolls-Royce the 23rd; and Leonardo the 14th.
“A lot of the [British] next-generation capability investment across the board is going to … developing indigenous capability, which is directly benefiting BAE Systems, Rolls-Royce, as examples,” Dee said.
For its part, South Korea’s industrial base has always been robust, Cook said, and is also a notable exporter of military equipment.
In 2022, Poland struck a $5.8 billion deal to buy Korea Aerospace Industries-made fighter jets, tanks from Hyundai Rotem Co., and howitzers and vehicles from Hanwha Defense. Also in that year, South Korean President Yoon Suk Yeol pledged to make his nation one of the top weapons suppliers in the world.
Three South Korean firms made the list, with Hanwha ranked in 19th place; LIG Nex1 in 58th; and Hyundai Motor Co., of which Hyundai Rotem is an affiliate, in 73rd.
And it’s not only local economic and military issues that are driving further globalization of the defense market. Political turmoil in Washington, which for months stalled U.S. rearming of Ukraine, jolted some European allies into investing more in their own defense industries, according to Saab CEO Micael Johansson.
Johansson in February described America’s wavering on Ukrainian support as “quite scary to see,” adding that Europe must fill any gaps. He called for European governments to make long-term financial commitments with local defense firms to build new production sites and capacity — and not let indigenous capabilities wither, as occurred after the Cold War.
“I am prepared to take risk, but it has to be in some sort of handshake with governments if I’m going to do more in terms of new sites, high capacity,” Johansson said. “We can’t afford to dismantle things once more.”
Saab’s defense revenue grew 18% in FY23 to nearly $4.4 billion, bolstered by a $102 million deal with Boeing to build fuselages for the T-7 trainer aircraft and a $1.2 billion contract to an undisclosed customer to provide Carl-Gustaf recoilless rifles. The Swedish firm made the Top 100 list at 29th place.
In nearby Norway, Kongsberg’s defense revenue jumped 23% to $1.7 billion in FY23. The company, which ranked 59th, builds National Advanced Surface-to-Air Missile Systems, which have been sold or donated to Ukraine to bolster its defense against Russia.
A worldwide defense industry that relies less on U.S. firms could be an overall positive development — even for American companies, Dee said.
The defense-industrial base, while vast, only has so much capacity. For instance, the sector has struggled to produce munitions, such as 155mm shells, at the rate of demand. And so, more companies serving as major players can lead to more capacity, he explained, and more competition.
“The relative lack of competition in the defense market is one of the primary causes that is often pointed out for consistent cost overruns,” Dee said. “More competition, within the confines of export control capacity, is a good thing.”
But a more globalized defense-industrial base could create problems if systems and ammunition created in different countries can’t function well together, Cook noted.
“We want systems to interoperate, and we want ammunition made in one country to fit into the systems of others,” she said. “That is just hard. You have to set joint requirements, you have to set standards. What do you do with the older systems that may require specific ammo? Do you retrofit them? There’s a lot of questions to think about.”
Stephen Losey is the air warfare reporter for Defense News. He previously covered leadership and personnel issues at Air Force Times, and the Pentagon, special operations and air warfare at Military.com. He has traveled to the Middle East to cover U.S. Air Force operations.
