Asia: A Land of Opportunity for European Defense Companies - When Major Groups and SMEs Join Forces

As the global geopolitical landscape becomes increasingly complex, Asia is emerging as a key defense player. With military spending reaching $575 billion in 2023, an increase of 5% on the previous year, this region is becoming fertile ground for defense companies looking to extend their reach. We're finding that both large groups and small and medium-sized enterprises (SMEs) can find their place in Asia, particularly through strategic industrial partnerships. This article explores in depth how defense giant Thales and several innovative European SMEs have successfully penetrated Asian markets, and how these successes can be replicated.

1. The context: an expanding Asian market

Before delving into concrete examples, it's crucial to understand why Asia has become such an attractive market for European defense companies. We are witnessing an upsurge in military capabilities in Asia, underpinned by growing spending on national defense and security. Asian countries, particularly NATO allies such as South Korea and Japan, are seeking not only to modernize their armed forces, but also to develop cutting-edge technologies to meet growing threats, from cyberspace to maritime security.

This dynamic offers unique opportunities for European companies, who can contribute their technological expertise while teaming up with local partners to adapt their solutions to the specific needs of Asian markets. Industrial partnerships not only provide access to these markets, but also enable the co-development of innovative solutions that benefit both European companies and their Asian partners.

2. Thales in South Korea: a large-scale industrial partnership strategy

To illustrate the impact of industrial partnerships on success in Asia, let's take the example of Thales, one of the world's leading defense companies. Thales recognized early on the strategic importance of South Korea, a key NATO ally in East Asia. The country has a robust defense industry and a growing need for cutting-edge technologies to ensure its security in the face of regional threats.

Thales has set up a partnership strategy with LIG Nex1, a South Korean defense leader. This collaboration has enabled Thales to integrate its technological expertise into South Korean systems, particularly in the fields of defense electronics and secure communications. Working together, for example, they have developed advanced communications systems for the South Korean armed forces, combining European know-how with in-depth knowledge of local requirements.

The results of this cooperation are impressive: not only has Thales consolidated its position in the Korean market, but it has also been able to extend its presence in Asia, by participating in defense projects in other countries in the region. This success is proof that major European groups can penetrate Asian markets through strong local partnerships, enabling them to share risks, access local skills, and develop tailor-made solutions for their Asian customers.

3. European SMEs: Innovation Champions for Asian Markets

Although large groups like Thales have vast resources at their disposal, European SMEs in the defense sector also have a crucial role to play in Asia. Their smaller size often enables them to be more agile and respond more quickly to the specific needs of local markets. However, these companies face significant challenges when trying to establish themselves in Asia, particularly in terms of market knowledge, regulatory compliance, and establishing local networks.

3.1 ECA Group: Defense Robotics adapted to Asian needs

Take ECA Group, a French SME specializing in robotics and autonomous systems for defense and maritime security. ECA Group has chosen to focus on Southeast Asia, a region where maritime threats such as piracy and territorial disputes are of particular concern. The company has established partnerships with several local players to develop robotic solutions adapted to the region's specific maritime conditions.

One of ECA Group's most noteworthy projects has been its partnership with an Indonesian company to co-develop underwater drones designed to monitor territorial waters. Thanks to this partnership, ECA Group has not only penetrated a hard-to-reach market, but has also contributed to strengthening maritime security in Southeast Asia. This success demonstrates how a European SME, by leveraging technological innovation and local partnerships, can have a significant impact on Asian markets.

3.2. SILKAN: Military Simulation for Japan

Another example is SILKAN, a French SME specializing in defense simulation solutions. To penetrate the Japanese market, where precision and reliability are paramount, SILKAN chose to team up with a Japanese defense systems integrator. Together, they developed training simulators for the Japanese Self-Defense Forces, taking into account local safety and performance requirements.

This partnership has enabled SILKAN to overcome cultural and regulatory obstacles, while benefiting from the expertise of its Japanese partner to adapt its simulation technologies to the specific needs of the market. We see that this approach has not only strengthened SILKAN's position in Japan, but has also opened up new opportunities in other Asian countries.

4. The concrete advantages of industrial partnerships in Asia

Industrial partnerships in Asia offer undeniable advantages for European companies, whether large groups or SMEs. These can be summed up in several key points:

1. Access to local markets: Partnerships help overcome barriers to entry into Asian markets by relying on local players who are familiar with the regulations, specific needs and business culture in their country.
2. Sharing risks and costs: By partnering with local companies, European businesses can reduce the costs of entering new markets, and share the risks inherent in developing new technologies or adapting existing products.
3. Development of customized solutions: Partnerships enable the co-development of solutions tailored to the specific needs of Asian markets, by combining European technological expertise with local knowledge.
4. Enhancing competitiveness: By collaborating with Asian partners, European companies can access new technologies, improve their production processes, and develop more competitive products on the global market.
5. Building long-term relationships: Industrial partnerships pave the way for lasting business relationships, based on mutual trust and respect for each other's skills.

Conclusion: An Expansion Strategy for All

Whether you run a large group or an SME, we firmly believe that Asia offers unrivalled opportunities for European defense companies. The examples of Thales, ECA Group and SILKAN show that, whatever the size of your company, industrial partnerships are an essential lever for success in Asia. We encourage you to explore these opportunities and consider strategic collaborations with local partners to develop your business on this fast-growing continent.

We can help you identify the right partners, understand the specifics of Asian markets, and develop tailor-made strategies to ensure your success. Asia is a demanding market, but with the right approach, you can not only succeed there, but also play a key role in strengthening ties between Europe and this strategic region.

Bertrand Bord