Future of the Finnish Defense Industry – Market Attractiveness, Competitive Landscape and Forecasts to 2023

Table of Contents

1 Introduction 8

1.1 What is this Report About? 8

1.2 Definitions 8

1.3 Summary Methodology 10

1.4 About Strategic Defense Intelligence 11

2 Executive Summary 12

3 Market Attractiveness and Emerging Opportunities 14

3.1 Current Market Scenario 15

3.1.1 Primary threat perception 15

3.1.2 Military Doctrine and Strategy 16

3.1.3 Military Fleet Size 18

3.2 Procurement Programs 21

3.2.1 Ongoing procurement programs 21

3.2.2 Future procurement programs 22

3.2.3 Top Procurement Programs By Value (US$ Million) 2018-2023 23

3.2.4 Social, political and economic environment and support for defense projects 24

3.2.5 Political and strategic alliances 25

3.3 Defense Market Size Historical and Forecast 26

3.3.1 Finnish defense budget to grow at a CAGR of

11.25% during 2019-2023 26

3.3.2 Modernization programs, international peacekeeping missions, and a perceived security threat from Russia are the main factors driving Finnish defense expenditure 28

3.4 Analysis of Defense Budget Allocation 30

3.4.1 Defense expenditure as a percentage of GDP to reach

1.3% by 2023 30

3.4.2 Revenue expenditure allocation expected to increase during the forecast period 32

3.4.3 Capital expenditure expected to grow at a CAGR of

10.80% over the forecast period 34

3.4.4 Per capita defense expenditure expected to increase during the forecast period 36

3.5 Homeland Security Market Size and Forecast 37

3.5.1 Homeland security expenditure is expected to grow at a CAGR of

3.82% during the forecast period 37

3.5.2 Homeland security expenditure in Finland is mainly driven by organized crimes and maritime security threats 39

3.5.3 Finland considered a moderate risk country for terror activities 40

3.5.4 Finland faces moderate level of threat from foreign terrorist organizations 41

3.5.5 Finland faces minimal threat from terrorists 43

3.6 Benchmarking with Key Global Markets 44

3.6.1 Finnish defense budget to increase at a CAGR of

11.25% during 2019-2023 44

3.6.2 Finnish defense expenditure is small compared to the leading spenders 46

3.6.3 Finland trails European states in defense spending 47

3.7 Market Opportunities: Key Trends and Drivers 48

3.7.1 Top 10 Defense market sectors by value (US$ Million) – Projections over period 2018-2023 48

3.7.2 Fighters and Multi-Role Aircraft 49

3.7.3 Land Based C4ISR 50

3.7.4 Corvettes 51

4 Defense Procurement Market Dynamics 52

4.1 Import Market Dynamics 54

4.1.1 Defense imports are expected to increase during the forecast period 54

4.1.2 European countries including Italy, Sweden, and France were the major suppliers to Finland during 2012-2016 55

4.1.3 Aircraft, missiles and sensors constitute the majority of Finnish arms imports 56

4.2 Export Market Dynamics 57

4.2.1 Finnish exports decline over the period 2012-2016 57

4.2.2 EU countries account for the majority of Finnish defense exports 58

4.2.3 Armored vehicles are the largest exported defense hardware 59

5 Industry Dynamics 60

5.1 Bargaining power of supplier: High 61

5.2 Bargaining power of buyer: Medium 61

5.3 Barrier to entry: Medium 61

5.4 Intensity of rivalry: low to Medium 61

5.5 Threat of substitution: low to Medium 61

6 Market Entry Strategy 62

6.1 Market Regulation 62

6.1.1 The government encourages offsets in order to develop a domestic defense industrial base 62

6.1.2 Finnish defense sector is open to foreign direct investments 63

6.2 Market Entry Route 64

6.2.1 Budgeting Process 64

6.2.2 Procurement Policy and Process 65

6.2.3 Partnerships with domestic defense firms offer attractive market entry route 66

6.2.4 Foreign OEMs gain industry access through joint R&D programs 67

6.2.5 Foreign military sales to Finnish defense market 67

6.2.6 Collaborations provide market entry opportunities 67

6.3 Key Challenges 68

6.3.1 The Finnish Government prefers Nordic and European countries for defense trade 68

6.3.2 Defense budget deficit may lead to a reduction in the overall military budget 68

7 Competitive Landscape and Strategic Insights 69

7.1 Competitive Landscape Overview 69

7.2 Key Foreign Companies 72

7.2.1 Elektrobit Corporation: overview 72

7.2.2 Elektrobit Corporation: products 72

7.2.3 Elektrobit Corporation: recent announcements and strategic initiatives 73

7.2.4 Elektrobit Corporation: alliances 74

7.2.5 Elektrobit Corporation: recent contract wins 74

7.2.6 Kiitokori Oy: overview 75

7.2.7 Kiitokori Oy: products 75

7.2.8 Kiitokori Oy: recent announcements and strategic initiatives 75

7.2.9 Millog Oy: overview 76

7.2.10 Millog Oy: products and services 76

7.2.11 Millog Oy: recent announcements and strategic initiatives 76

7.2.12 Millog Oy: alliances 77

7.2.13 Millog Oy: recent contract wins 77

7.2.14 Nammo Lapua Oy: overview 78

7.2.15 Nammo Lapua Oy: products and services 78

7.2.16 Nammo Lapua Oy: recent announcements and strategic initiatives 79

7.2.17 Nammo Lapua Oy: recent contract wins 79

7.2.18 Patria: overview 80

7.2.19 Patria: products and services 80

7.2.20 Patria: recent announcements 80

7.2.21 Patria: Recent Contract Wins 81

7.2.22 Patria: alliances 82

7.2.23 Patricomp Oy: overview 83

7.2.24 Patricomp Oy: products and services 83

7.2.25 Patricomp Oy: recent announcements and strategic initiatives 83

7.2.26 Patricomp Oy: recent contract wins 83

7.2.27 Temet Oy: overview 84

7.2.28 Temet Oy: products 84

8 Business Environment and Country Risk 85

8.1 Economic Performance 85

8.1.1 GDP per capita at constant prices 85

8.1.2 GDP at current prices (US$) 86

8.1.3 Exports of goods and services (current Local Currency Units (LCU) billion) 87

8.1.4 Imports of goods and services (current LCU billion) 88

8.1.5 Gross national disposable income (US$ billion) 89

8.1.6 LCU per US$ (period average) 90

8.1.7 Market capitalization of listed companies (US$ billion) 91

8.1.8 Market capitalization of listed companies (% of GDP) 92

8.1.9 Government cash surplus/deficit as a percentage of GDP (LCU) 93

8.1.10 Goods exports as a percentage of GDP 94

8.1.11 Goods imports as a percentage of GDP 95

8.1.12 Services imports as a percentage of GDP 96

8.1.13 Service exports as a percentage of GDP 97

8.1.14 Foreign direct investment, net (Balance of Payments (BoP), current US$ billions) 98

8.1.15 Net foreign direct investment as % of GDP 99

8.1.16 Mining, Manufacturing, Utilities Output (LCU billion) 100

9 Appendix 101

9.1 Contact Us 101

9.2 About SDI 101

9.3 Disclaimer 101

List of Tables

Table 1: Finnish Army Strength 18

Table 2: Finnish Navy Strength 19

Table 3: Finnish Air Force Strength 20

Table 4: Finnish Ongoing Procurement Programs 21

Table 5: Finnish Future Procurement Programs 22

Table 6: Top Finnish Defense Procurement Programs by Value (US$ Million) 2018-2023 23

Table 7: Finnish Defense Expenditure (EUR Billion and US$ Billion), 2014-2023 26

Table 8: Finnish GDP Growth vs. Defense Expenditure as Percentage of GDP Growth, 2014-2023 30

Table 9: Finnish Defense Budget Split Between Capital and Revenue Expenditure (%), 2014-2023 32

Table 10: Finnish Defense Capital Expenditure (EUR Million and US$ Billion), 2014-2023 34

Table 11: Finnish Per Capita Defense Expenditure (US$), 2014-2023 36

Table 12: Finnish Homeland Security Expenditure (EUR Billion and US$ Billion), 2014-2023 37

Table 13: Terrorism Index, 2018 41

Table 14: Benchmarking with Key Markets: 2014-2018 vs. 2019-2023 44

Table 15: Top 10 Finnish Defense Market Sectors by Value (US$ Million) – 2018-2023 48

Table 16: Offset Regulations in Finland 62

Table 17: Offset multiplier categories 62

Table 18: Finnish Budget Formation Timetable: 64

Table 19: Top Defense Suppliers in Finnish Defense Industry – By Value (US$ Million) 2018-2023 69

Table 20: Competitive Landscape in Finnish Defense Market 70

Table 21: Elektrobit Corporation – Product Focus 72

Table 22: Elektrobit Corporation – Alliances 74

Table 23: Elektrobit Corporation – Recent Contract Wins 74

Table 24: Kiitokori Oy- Product Focus 75

Table 25: Millog Oy – Product Focus 76

Table 26: Millog Oy – Alliances 77

Table 27: Millog Oy – Recent Contract Wins 77

Table 28: Nammo Lapua Oy – Product Focus 78

Table 29: Nammo Lapua Oy – Recent Contract Wins 79

Table 30: Patria – Product Focus 80

Table 31: Patria- Recent Contract Wins 81

Table 32: Patria- Alliances 82

Table 33: Patricomp Oy – Product Focus 83

Table 34: Patricomp Oy – Recent Contract Wins 83

Table 35: Temet Oy – Product Focus 84

List of Figures

Figure 1: Finnish Defense Expenditure (EUR Billion), 2014-2023 27

Figure 2: Finnish Defense Expenditure (US$ Billion), 2014-2023 27

Figure 3: Finnish GDP Growth vs. Defense Expenditure as Percentage of GDP, 2014-2023 31

Figure 4: Finnish Defense Budget Split Between Capital and Revenue Expenditure (%), 2014-2023 33

Figure 5: Finnish Capital Budget Allocation (EUR Million), 2014-2023 35

Figure 6: Finnish Capital Budget Allocation (US$ Billion), 2014-2023 35

Figure 7: Finnish Per Capita Defense Expenditure (US$), 2014-2023 36

Figure 8: Finnish Homeland Security Budget (EUR Billion), 2014-2023 38

Figure 9: Finnish Homeland Security Budget (US$ Billion), 2014-2023 38

Figure 10: Terrorism Heat Map, 2018 40

Figure 11: Terrorism Index, 2018 43

Figure 12: Benchmarking with Key Markets, 2014-2018 vs. 2019-2023 45

Figure 13: Benchmarking with World’s Largest Defense Spenders (US$ Billion), 2018 and 2023 46

Figure 14: Benchmarking with Large Defense Spenders as % of GDP – 2018 47

Figure 15: Fighters and Multi-Role Aircraft (US$ Million), 2018-2023 49

Figure 16: Land Based C4ISR (US$ Million), 2018-2023 50

Figure 17: Aircraft Simulation Systems (US$ Million), 2018-2023 51

Figure 18: Finnish Defense Procurements In Terms Of Their Supplier Relationships 53

Figure 19: Finnish Defense Imports (US$ million), 2012-2016 54

Figure 20: Finnish Defense Imports by Country (%), 2012-2016 55

Figure 21: Finnish Defense Imports by Category, 2012-2016 56

Figure 22: Finnish Defense Export Trend (US$ Million), 2012-2016 57

Figure 23: Finnish Defense Exports by Country (%), 2012-2016 58

Figure 24: Finnish Defense Exports by Category, 2012-2016 59

Figure 25: Industry Dynamics – Porter’s Five Forces Analysis 60

Figure 26: Finnish GDP Per Capita at Constant Prices (US$), 2015-2025 85

Figure 27: Finnish GDP at Current Prices (US$ Billion), 2015-2025 86

Figure 28: Finnish Exports of Goods and Services (LCU Billion), 2005-2014 87

Figure 29: Finnish Imports of Goods and Services (LCU Billion), 2005-2014 88

Figure 30: Finnish Gross National Disposable Income (US$ Billion), 2005-2013 89

Figure 31: Finland LCU per US$, 2015-2024 90

Figure 32: Finnish Market Capitalization of Listed Companies (US$ Billion), 2005-2012 91

Figure 33: Finnish Market Capitalization of Listed Companies (% of GDP), 2005-2012 92

Figure 34: Finnish Government Cash Surplus/Deficit as % of GDP (LCU), 2005-2012 93

Figure 35: Finland – Goods Exports as a % of GDP (%), 2005-2013 94

Figure 36: Finland- Goods Imports as a % of GDP (%), 2005-2013 95

Figure 37: Finnish Services Imports as a % of GDP (%), 2005-2013 96

Figure 38: Finnish Service Exports as a % of GDP (%), 2005-2013 97

Figure 39: Finland – Foreign Direct Investment, net (BoP, current US$ billion), 2005-2013 98

Figure 40: Finland- Net Foreign Direct Investment as a % of GDP, 2005-2013 99

Figure 41: Finnish Mining, Manufacturing, Utilities Output (LCU billion), 2005-2014 100