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

Table of Contents

1. Introduction 7

1.1. What is this Report About? 7

1.2. Definitions 7

1.3. Summary Methodology 9

1.4. About Strategic Defense Intelligence 10

2. Executive Summary 11

3. Market Attractiveness and Emerging Opportunities 12

3.1. Current Market Scenario 13

3.1.1. Military Fleet Size 13

3.1.2. Procurement Programs 16

3.1.3. Key Drivers and Challenges 17

Switzerland’s defense neutrality challenging for defense foreign companies 17

Foreign enterprises can enter the Swiss market by acquiring or partnering with a national defense corporation 17

The country’s small defense budget is a challenges in terms of market entry 17

3.2. Defense Market Size Historical and Forecast 18

3.2.1. Swiss defense budget is expected to register a CAGR of

4.67% over the forecast period 18

3.2.2. Procurement of better defense systems and peace-support programs to drive defense expenditure 20

3.2.3. Defense expenditure as a percentage of GDP is expected to average

0.8% over the forecast period 21

3.3. Analysis of Defense Budget Allocation 23

3.3.1. Capital expenditure’s share expected to increase over the forecast period 23

3.3.2. Capital expenditure expected to grow at a CAGR of

7.86% over the forecast period 25

3.3.3. Per capita defense expenditure expected to increase over the forecast period 27

3.4. Homeland Security Market Size and Forecast 28

3.4.1. Swiss homeland security expenditure expected to increase at a CAGR of

0.91% over the forecast period 28

3.4.2. Organized crime and terrorist financing are the major threats to homeland security 30

3.4.3. Switzerland is at some risk from external and internal threats 31

3.4.4. Switzerland faces some level of threat from foreign terrorist organizations 32

3.4.5. Switzerland has a terrorism index score of

0.3 34

3.5. Benchmarking with Key Global Markets 35

3.5.1. Switzerland’s defense budget to increase at a CAGR of

4.67% over the forecast period 35

3.5.2. Switzerland military expenditure is low when compared to the largest defense spenders 37

3.5.3. The country allocates a lower percentage of GDP towards defense as compared to other top defense spenders globally 38

3.6. Market Opportunities: Key Trends 39

3.6.1. Top 10 Defense market sectors by value (US$ Million) – Projections over period 2018-2023 39

4. Defense Procurement Market Dynamics 40

4.1. Import Market Dynamics 41

4.1.1. Defense imports to be driven by modernization initiatives over the forecast period 41

4.1.2. Swiss defense sourced the majority of its arms from the US 42

4.1.3. Missiles accounted for the majority of defense imports during 2013-2017 43

4.2. Export Market Dynamics 44

4.2.1. Swiss defense exports peaked in 2014 and registered their highest since 2008 44

4.2.2. Switzerland supplies defense equipment to a diverse consumer base 45

4.2.3. Aircraft accounted for the majority of the country’s defense exports during 2013-2017 46

5. Industry Dynamics 47

5.1. Market Regulation 47

5.1.1. Offset policy requires suppliers to invest 100% of the contract value into the Swiss economy 47

5.1.2. Swiss defense industry open to foreign direct investment 47

5.2. Market Entry Route 48

5.2.1. Foreign defense companies enter the market via acquisitions or alliances 48

5.2.2. Establishment of subsidiary or operating unit in Switzerland 48

5.2.3. Entering into joint ventures 48

6. Competitive Landscape and Strategic Insights 49

6.1. Competitive Landscape Overview 49

7. Business Environment and Country Risk 50

7.1. Economic Performance 50

7.1.1. GDP Per Capita 50

7.1.2. GDP, Current Prices 51

7.1.3. Exports of Goods and Services (current LCU Billion) 52

7.1.4. Imports of Goods and Services (current LCU Billion) 53

7.1.5. Local Currency Unit per US Dollar 54

7.1.6. Market Capitalization of Listed Companies (US$ Billion) 55

7.1.7. Market Capitalization of Listed Companies (% of GDP) 56

7.1.8. Government Cash Surplus/Deficit as a Percentage of GDP (LCU) 57

7.1.9. Goods Exports as a Percentage of GDP 58

7.1.10. Goods Imports as a Percentage of GDP 59

7.1.11. Services Imports as a Percentage of GDP 60

7.1.12. Service Exports as a Percentage of GDP 61

7.1.13. Foreign Direct Investment, net (BoP, current US$ Billion) 62

7.1.14. Net Foreign Direct Investment as a Percentage of GDP 63

7.1.15. Mining, Manufacturing, Utilities Output LCU Billion 64

8. Appendix 65

8.1. About SDI 65

8.2. Disclaimer 65

List of Tables

Table 1: Swiss Army Strength 13

Table 2: Swiss Air Force Strength 15

Table 3: Swiss Ongoing Procurement Programs 16

Table 4: Swiss Future Procurement Programs 16

Table 5: Swiss Defense Expenditure (CHF Billion & US$ Billion), 2014-2023 18

Table 6: Swiss GDP Growth vs. Defense Expenditure as a Percentage of GDP, 2014-2023 21

Table 7: Swiss Defense Budget Split Between Capital and Revenue Expenditure (%), 2014-2023 23

Table 8: Swiss Defense Capital Expenditure (CHF Billion & US$ Billion), 2014-2023 25

Table 9: Swiss Per Capita Defense Expenditure (US$), 2014-2023 27

Table 10: Swiss Homeland Security Expenditure (CHF Billion & US$ Billion), 2014-2023 28

Table 11: Terrorism Index, 2018 32

Table 12: Benchmarking with Key Markets – 2014-2018 vs. 2019-2023 35

Table 13: Top 10 Swiss Defense Market Sectors by Value (US$ Million) – 2018-2023 39

Table 14: Offset Regulations in Switzerland 47

Table 15: Competitive Landscape of the Swiss Defense Industry 49

List of Figures

Figure 1: Swiss Defense Expenditure (CHF Billion), 2014-2023 19

Figure 2: Swiss Defense Expenditure (US$ Billion), 2014-2023 19

Figure 3: Swiss GDP Growth vs. Defense Expenditure as Percentage of GDP Growth, 2014-2023 22

Figure 4: Swiss Defense Budget Split Between Capital and Revenue Expenditure (%), 2014-2023 24

Figure 5: Swiss Capital Budget Allocation (CHF Billion), 2014-2023 26

Figure 6: Swiss Capital Budget Allocation (US$ Billion), 2014-2023 26

Figure 7: Swiss Per Capita Defense Expenditure (US$), 2014-2023 27

Figure 8: Swiss Homeland Security Expenditure (CHF Billion), 2014-2023 29

Figure 9: Swiss Homeland Security Budget (US$ Billion), 2014-2023 29

Figure 10: Terrorism Heat Map, 2018 31

Figure 11: Terrorism Index, 2018 34

Figure 12: Benchmarking with Key Markets – 2014-2018 vs. 2019-2023 36

Figure 13: Defense Expenditure of the World’s Largest Military Spenders (US$ Billion), 2018 and 2023 37

Figure 14: Defense Expenditure as a Percentage of GDP of Largest Military Spenders (%), 2018 38

Figure 15: Swiss Defense Import Trend (US$ million), 2013-2017 (TIV values) 41

Figure 16: Swiss Defense Imports by Country (%), 2013-2017 42

Figure 17: Swiss Defense Imports by Category (%), 2013-2017 43

Figure 18: Swiss Defense Exports Trend (US$ Million), 2013-2017 44

Figure 19: Swiss Defense Exports by Country (%), 2013-2017 45

Figure 20: Swiss Defense Exports by Category (%), 2013-2017 46

Figure 21: Swiss GDP Per Capita at Constant Prices (US$), 2015-2025 50

Figure 22: Swiss GDP, Current Prices (US$ Billion), 2015-2025 51

Figure 23: Swiss Exports of Goods and Services (current LCU Billion), 2005-2014 52

Figure 24: Swiss Imports of Goods and Services (current LCU Billion), 2005-2014 53

Figure 25: Local Currency per USD, 2015-2024 54

Figure 26: Swiss Market Capitalization of Listed Companies (US$ Billion), 2005-2012 55

Figure 27: Swiss Market Capitalization of Listed Companies (% of GDP), 2005-2012 56

Figure 28: Swiss Government Cash Surplus/Deficit as a % of GDP (LCU), 2005-2011 57

Figure 29: Swiss Goods Exports as a % of GDP, 2005-2014 58

Figure 30: Swiss Goods imports as a % of GDP, 2005-2014 59

Figure 31: Swiss Services Imports as a % of GDP, 2005-2014 60

Figure 32: Swiss Service Exports as a % of GDP, 2005-2014 61

Figure 33: Swiss Foreign Direct Investment, net (BoP, current US$ Billion), 2005-2014 62

Figure 34: Swiss Net Foreign Direct Investment as a % of GDP, 2005-2014 63

Figure 35: Swiss Mining, Manufacturing, Utilities Output (LCU Billion), 2005-2014 64