Establishing Large Defense Companies Is The Wrong Path for Beginners

The key to the defense industry is not large companies, but SMEs (small and medium-sized enterprises).

During my time working in the defense industry, I dealt with small companies, and I believe that was the most important experience that allowed me to understand the secrets of this industry and the side that many people don’t see.

I am talking about a small workshop, or a space no larger than 60 square meters, inside a technology business incubator at a university. For example, the technology zone affiliated with the university where I studied includes nearly 400 start-ups working in the fields of research and development.

They have student interns to reduce costs, and the entire team consists of young people, usually no more than five or ten individuals. Each team is responsible for a specific task in a particular component within a large system produced by a major company.

That is what sets them apart: they specialize in a very narrow sector that serves the Turkish company they work with, while at the same time exporting the same component to other companies outside Turkey.

The idea of looking at a country like Turkey and seeing large companies such as Baykar or Aselsan and then saying, “I will establish a large company like that in my country” is a mistake that indicates a lack of understanding of the nature of the industry or a lack of complete vision of what makes these countries successful.

These large companies are not entities existing in a vacuum, but rather represent the tip of the iceberg, beneath which lie thousands of small and medium-sized enterprises that manufacture sensors, microcircuits, software, composite materials, and testing systems.

The bulk of global technology and exports come from small and medium-sized enterprises (SMEs) that do not appear on the lists of large companies in any country, nor are they mentioned in the news, but are in fact the backbone of the industry.

If you focus on building a giant company from the top down without establishing a base of small companies underneath it, you will create a fragile entity that looks big on paper but depends on the outside world for everything that is essential and sensitive. The right path starts from the bottom up, not from the top down.

As I wrote previously about the UAE’s defense industries: it is true that the figures are very strong, but we cannot say that it has a real defense industry, which is precisely why I said that the UAE’s figures are fragile.

The big, well-known companies are the last link in the chain. Defense industries are not the first stage, but simply the top of the technological pyramid, and you cannot build them if your economic, educational, and industrial base is weak.

Those who dream of missiles, drones, and advanced radar systems without building the foundation on which they rest are like those who want to build a skyscraper on sand. It will collapse at the first gust of wind, if they can build it at all.

The idea is simply that advanced defense industries, especially those with high export value, are not just assembly plants or operating licenses, because in the end, you are exporting technology.

And building technology is a cumulative process that requires continuous learning, specialized training, high competencies, and real investment in small and medium-sized companies that produce innovation and the precision components that go into any defense system.

If no country in the world can build strong defense industries without this foundation, how can you do so?

Singapore, for example, has more than 60 local defense companies other than ST Engineering, focusing on precision areas such as anti-drone systems through small and medium-sized companies such as Flare Dynamics. The government there requires foreign companies to transfer technology to build local capabilities. It also has an integrated industrial ecosystem capable of exporting dual-use products globally.

India, meanwhile, has defense exports of $2.76 billion and more than 16,000 small companies manufacturing electronics. The Make in India programs connect these small companies with large companies. They still face challenges related to quality and product life cycle management, but the most important lesson to be learned is that investing in small companies has doubled exports, rather than building a single large company and relying solely on it to enter the defense industry.

Turkey, which before 2004 relied on the military and limited production, now has more than 3,500 companies in the defense sector. Most of these companies are small and medium-sized enterprises (SMEs), operating within global supply chains, which has led to their defense exports in 2025 exceeding $7.45 billion in just the first 11 months. Five Turkish companies are now among the world’s 100 strongest defense companies, but an analysis of exports shows that the bulk of these come from companies that are neither large nor well-known.

The Defense Industries Agency (SSB) supports small and medium-sized companies through soft loans; last year alone, the agency helped 25 companies with $25 million, in addition to training and integration programs with large companies such as Baykar and Aselsan. As a result, small and medium-sized companies are now manufacturing electronics, radars, and components for drones that are exported to 180 countries.

It is no coincidence that Haluk Gorgun, head of the Turkish Defense Industries Agency, states that one of their main goals is to integrate small and medium-sized companies into global supply chains with high export value, because these companies are simply the solid foundation of any real defense industry.

South Korea, meanwhile, aims to become the fourth largest arms exporter by 2030. What has it done? It has increased its defense R&D budget and launched the Defense Startup Open Innovation Challenge program, which awards 60 million won to each startup, along with training and partnerships with major companies such as KAI and LIG Nex1.

As a result, small and medium-sized Korean companies have begun to enter major exhibitions such as LIMA 2025 in Malaysia, offering fiber optic connectors for missiles at prices 70% lower and with faster delivery times.

The Israeli model is based on small and flexible startups and SMEs. In 2025, the number of startups in the defense sector reached 312, an increase of 95% in one year, and they received billions of dollars in investments for their project ideas.

The Israeli Ministry of Defense has allocated 10% of its research and development budget to support startups, not large companies, and programs such as iDEX allow these small companies to enter the market quickly. For this reason, companies such as UVISION are selling suicide drones to NATO for hundreds of millions of dollars, while small and medium-sized companies are working with the German company Rheinmetall. All of this is based on an education and training system capable of transforming ideas into exportable products within months, not years.

All these countries confirm one economic reality: No country that is weak in education and training and does not have small and medium-sized companies has been able to build an advanced defense industry with export capacity.

Turkey has invested in 2,400 companies and 100,000 trained employees.

Israel has turned war into a platform for innovation through 300 start-ups.

Korea and Singapore have built integrated industrial ecosystems based on training and incentives.

The common factor among all of them is their focus on small and medium-sized enterprises.

Now take this final touch: if you say you will focus on small and medium-sized enterprises, I will tell you that you cannot do so without a strong education system that encourages innovation and produces students who understand both scientific theories and industrial applications.

Education is what creates small and medium-sized enterprises in the first place.

What does that mean?

It means that when you have a strong education system that connects engineering, design, scientific research, and practical application, you will find that young graduates don’t just go looking for a job and peace of mind, but instead start highly specialized small businesses; one company working in the manufacture of sensors, another developing control software, and a third focusing on composite materials or artificial intelligence.

These small companies are the real laboratories of innovation; every experiment, every mistake, and every small project turns into cumulative experience over time, through which you develop a complete industrial ecosystem capable of competing globally.

Without real education, there are no skills, and without skills, there are no small companies, and without small companies, it is impossible to build a sophisticated defense industry from the ground up.

The whole chain is interconnected:

Education gives you skills,

skills create small and medium-sized enterprises (SMEs),

these companies produce technology,

technology opens the door to exports,

and ultimately, giant companies are created that manufacture products with high export value.