Visibility, supply chain, innovation: What defence executives need from Europe

Euronews

16-02-2025

Europe's defence industry is ready to ramp up production to secure the Old Continent but it needs governments to be faster and smarter with procurement practices to address potential shortages issues, top executives at Kongsberg told Euronews.
The EU is in the midst of a deep rethink of its defence strategy with leaders hammering out how to inject the €500 billion the bloc needs over the coming decade to upgrade its military capabilities and plug the gaps in its defence that the conflict in Ukraine has starkly exposed. Neighbouring countries and allies, including the UK and Norway, are doing the same.
Among the capabilities EU leaders have repeatedly put at the top of their wish lists are air defence systems and ammunition — which the bloc's failure to fulfill its pledge last year to deliver one million rounds of ammunition to Ukraine within 12 months made all the more urgent.
'We are not the limiting factor in producing air defence systems,' Eirik Lie, President of Kongsberg Defence & Aerospace AS, told Euronews in an interview on the sidelines of the Munich Security Conference.
'We can produce two NASAMS batteries per month so that's not the problem. The problem is to have the long-lead items and the supply chain providing these items,' he added.
The Norwegian company, which produces two different types of air defence systems, including the NASAMS, as well as strike missiles among other capabilities, reported operating revenues of €4.35 billion in 2024, a 20% increase on the previous year, and finished the year with a record order backlog worth €11.39 billion.
According to a ranking of global defence companies released by SIPRI in 2023, it ranks 80th in the world in terms of revenues.
In 2024, it struck procurement contracts for air defence systems with Spain, Lithuania and the Netherlands, among others.
Some long-lead items required for the sophisticated systems can require up to a year to source meaning the earlier the defence company knows a contract is coming the better the better, Kongsberg's Lie said.
Norway and the US are among countries that have ordered long-lead items months before actually finalising the procurement contract, allowing companies to put the orders in early and therefore cutting the delivery time of the final product.
'I think it's a matter on the contracting side, it's a matter of speeding up the procurement side,' Lie said, urging governments to simplify the acquisition process, aggregate procurements so orders don't drip through slowly, and give companies 'long-term visibility'.
This visibility is also necessary to help the smaller companies in the supply chain — which might struggle to access financing — ramp up in turn to match demand.
Another challenge facing the industry, Lie said, is the need to diversify supply sources.
The NATO military alliance published in December 2024 a list of 12 critical raw materials that are crucial for the defence industry which include aluminium, graphite, gallium, germanium, and lithium.
China controls significant shares of the global mining and processing of a number of these materials — including lithium, gallium, and germanium. In 2024, the country announced export controls on the exports of the latter two, even banning shipments to the US at the end of the year.
Reduced access to these critical raw materials and some electronic components is not currently an issue, Lie said, but it is: 'a risk for the future'
'We don't expect that to happen in the near future, but we need to be secure, to have our eyes open to see if there are any disruptions in that area,' he told Euronews.
Finally, European companies need to be given the means to innovate more and one area where the Old Continent can differentiate itself is by better building on civilian technology, Geir Håøy, president and chief executive officer at Kongsberg, told Euronews.
'We need to utilise commercially available technology and then you need to militarise it as required. That way you can speed up and you can take down the cost as well,' he added, arguing that it would also help to standardise technologies and systems, which allies have flagged as a key goal.
But another area where Europe cannot miss the ball is on autonomy, meaning, unmanned technology, and Artificial Intelligence through the use of datasets to help troops quicken the decision-making process.
"I think that's going to change the battlefield going forward,' Håøy said.
The European Commission will release its on March 19.
The paper will detail what the EU's executive believes the bloc should invest in in terms of capabilities and how it should finance it. Leaders are expected to take decisions at a summit in late June.