Strategic Supply Chains Why Europe's Defence Depends on Civilian Industry

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HENSOLDT Holding Germany GmbH

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Europe's defence capability stands and falls with a resilient industrial base. While new weapons systems are being developed and programmes worth billions are being launched, supply chains and vertical integration are becoming critical infrastructure. There is now a particular demand for companies that have previously produced purely for civilian purposes - and are prepared to integrate themselves into military value chains.

The turnaround in security policy has set Europe's procurement systems in motion - but many programmes, such as for the production of ammunition or new platforms, are not stalling due to a lack of political will, but due to a lack of industrial feasibility. An analysis by the EU Commission on the defence industry from June 2024 states: ‘European industry is currently only able to meet the requirements of a war economy to a limited extent.’

When Ukraine became the scene of a conventional war overnight in 2022, it became clear just how fragile Europe's defence industry is. Artillery ammunition, spare parts, electronic components: Many things were in short supply, some were unavailable - and not just because of political inaction, but also due to a lack of industrial depth. Decades of efficiency optimisation have replaced resilience.

For example, there is a lack of semiconductors, optical components and pyrotechnic propulsion systems for the construction of missiles. According to NATO, the demand for 155-calibre ammunition currently exceeds production capacities in Europe by a factor of 4. At the same time, critical precursors such as nitrocellulose (propellant powder) are heavily dependent on imports - including from India and China.

Civilian meets military: the new industrial backbone

As a result, defence ministries and large companies are opening up to new partnerships with civilian industry. These are companies from the fields of mechanical engineering, electronics manufacturing, software development, materials science and additive manufacturing. They have technologies at their disposal, but often lack knowledge of military specifications, export regulations or security clearances.

This is where the British start-up Isembard comes in: It is developing standardised production cells that are intended to build a bridge into the defence business for medium-sized companies - including certification, documentation and proof of quality. In Germany, companies such as Rohde & Schwarz and Hensoldt are demonstrating how dual-use technologies can be systematically developed for military applications - for example in the field of radio systems or radar.

The demand for specialised suppliers is also growing in the aerospace industry. The British company Space Forge wants to use its orbital return satellite ‘ForgeStar’ to manufacture high-tech materials such as silicon carbides and alloys in space for the first time - with a level of precision that is almost impossible to achieve on Earth. These developments could alleviate bottlenecks in heat-resistant or ultra-pure materials in the long term.

Funding and funding hurdles

A central problem: many SMEs shy away from entering the defence value chain - the legal hurdles seem too high, the procurement logic too opaque and the processes too lengthy. Programmes such as DIANA (Defence Innovation Accelerator for the North Atlantic) or the new EDF Work Programme 2025 (European Defence Fund) are intended to remedy this situation - with low-threshold calls, targeted funding and matchmaking between start-ups, research and industry.

There are also national initiatives such as the Bundeswehr Innovation Hub, the French counterpart Agence de l'Innovation de Défense and the British funding programme Defence and Security Accelerator (DASA). But reality shows that it takes more than money - namely processes that bring together the speed of innovation, small series production and regulatory complexity.

A strategic imperative

If you want to make Europe's defence fit for the future, you have to think about supply chains - strategically, technologically and structurally. This also means that armaments will not only come from Airbus, Rheinmetall & Co. but also from software start-ups, precision manufacturers and 3D printing providers in the future. They need visibility, support - and a clear role in the security policy system.

The first pilot projects - such as the establishment of a ‘European Defence Industrial Ecosystem’ by the EDA (European Defence Agency) or the participation of civilian manufacturers in military certification workshops - show how this can be achieved. But the process is still in its infancy.

What counts now is strategic orientation, industrial policy foresight - and the courage to rethink sovereignty. The debate about European defence capabilities is often conducted with a view to armaments projects - fighter jets, tanks, missiles. But without supply chains, without production, without expertise in the engine room, any promise of capability remains an illusion. Anyone who wants to strengthen Europe's security must open the doors to civilian companies - and enable them to become part of the strategic backbone. (mbf)