K. Burak CODUR / email@example.com
The latest version of the Performance Report, which is published annually by the Defence and Aerospace Industry Manufacturers Association (SaSaD), was shared with the public on June 28. The report, which is prepared with the 2020 data and which reveals that the sector lags behind in the main parameters such as turnover, foreign sales revenue, and R&D expenditure compared to 2019, claims the effects of the COVID-19 outbreak as the reason for this situation.
The report, which is the only source open to the public in Turkey, is a reference for figures related to the development of the sector. The information in the report is compiled using the responses given by its members to the questionnaire prepared by SaSaD. SaSaD received feedback from 85 out of 182 member companies for 2020 data. The report states that “It is evaluated that the data reflecting 90% or more of the sector performance are collected and the data represents the sector’s activities in a healthy way when the participant profile is examined.”
The figures that stand out in the performance of the sector in 2020 are listed as follows according to the report:
- Turnover: $8.856 billion
- Orders Received: $6.175 billion
- Foreign Sales Revenues: $2.266 billion
- Imports: $2.161 billion
- Product and Technology Development Expenditure: $1.241 billion
- Sector Employment: 77,566
- Turnover per Capita: $114,171
- Foreign Sales Revenue per Capita: $29,212
The following decreases in figures are observed according to 2019;
- Turnover, from $10,884,081,347 to $8,855,799,282
- Foreign sales revenues, from $3,068,519,809 to $2,265,829,152
- Imports, from $3,088,465,821 to $2,161,265,932
- Product and technology development expenditure, from $1,672,052,468 to $1,240,798,564.
The decrease in turnover was recorded as 18.64%, the decrease in foreign sales revenues as 26.16%, the decrease in imports as 30.02%, and the decrease in product and technology development expenditure as 25.79%. Sector employment increased by 5.14% from 73,771 to 77,566.
Land Systems Remain as the Leader
Land systems became the sub-category with the highest share in the total turnover of the sector this year, just like last year. The distribution of the sub-areas within the turnover was as follows*:
- Land Systems: $2.574 billion, 29.06%
- Military Air Systems: $1.982 billion, 22.38%
- Civil Aviation: $1.324 billion, 14.95%
- Weapon, Ammunition, Missile: $855 million, 9.65%
- Naval Systems: $673 million 7.6%
- Maintenance, Repair, Overhaul: $636 million, 7.18%
- Others: $484 million, 5.47%
- Security: $328 million, 3.7%
The percentage shares of the sub-areas of the others category in the total figure are given as follows:
- KBRN-P: 0.02%
- C5ISR: 0.62%
- IT: 1.18%
- Logistic Support: 1.95%
- Space: 0.59%
- Foreign Currency Earning Services: 1.11%
The statement “Although we expect higher rates in the IT and C5ISR sub-sectors, unfortunately, we have not been able to make real measurement for a long time due to the fact that the data in these areas have been shifted to the accounts for platforms.” was made in the report.
$6.490 billion of the sector’s turnover was obtained domestically. Of this, $5.456 billion was from the end-user; 1.034 billion USD was from the defence and aerospace firms. The $1.476 billion portion of the $2.266 billion foreign turnover came from end-users and the $790 million portion came from defence and aerospace firms.
Leader of Exports is the Civil Aviation
The distribution of the turnover from abroad according to the sub-areas was as follows:
- Civil Aviation: $655 million, 28.92%
- Land Systems: $504 million, 22.25%
- Military Air Systems: $408 million, 18%
- Weapon, Ammunition, Missile: $274 million, 12.09%
- Naval Systems: $236 million 10.42%
- Others: $136 million, 5.99%
- Security: $39 million, 1.73%
- Maintenance, Repair, Overhaul: $14 million, 0.61%
The percentage shares of the sub-areas of the others category are given as follows:
- C5ISR: 0.26%
- Logistic Support: 1.37%
- Space: 0.02%
- Foreign Currency Earning Services: 4.35%
The Major Share in Imports Belongs to Aviation
The report shows that the share of civil aviation and military aerospace and maintenance, repair, and overhaul activities in the total figure is 67% when the import figures are examined. The share of land systems stands out as 21%.
The report includes the following assessment of the import figure: “It is interpreted that the main reason for the 30% decrease in imports compared to the previous year (2019) data is related to the decrease in production due to turnover.”
The Difference Between “Large-Scale Company” and “SME”
The report also included the breakdown of turnover and export figures according to the distinction between “Large-Scale Company” and “SME” for the first time this year. Large-Scale Companies received a share of $8.485 billion (95.8%) from the sector turnover whereas SMEs had a share of $371 million. Unlike the general table, the breakdown of the share of SMEs by sub-sectors was as follows:
- Weapon, Ammunition, Missile: 30.11%
- Naval Systems: 23.33%
- Land Systems: 19.41%
- Military Air Systems: 11.11%
- Others: 9.86%
- Security: 4.48%
- Maintenance, Repair, Overhaul: 1%
- Civil Aviation: 0.69%
Large-Scale Companies had a share of $2.104 billion (92.85%) whereas the share of SMEs was $162 million on the export side. These figures show that the share of exports in the turnover of Large-Scale Companies is around 24.8% whereas this rate increases to approximately 43.7% in SMEs. It is also noteworthy that Naval Systems have a share of 41.76% in the exports of SMEs.
Orders Received Unleash Future Challenges
The sector received $10.871 billion of orders in 2019; however, this figure decreased to $6.175 billion in 2020. Considering that the industry’s 2020 turnover is $8.856 billion, this figure is also below the 1-year turnover and stands out as an issue to be considered for the future of the sector. The report includes the following assessment: “It is considered that industry players should focus on neighbouring sector needs (medical devices, automation, homeland security, cyber security, etc.) as well as making intense efforts to increase the internal and external order of defence and aerospace products, considering that defence and aerospace priorities will decrease for at least one more period in the budgetary priorities of countries after the COVID-19 pandemic.”
54% of the orders received came from within Turkey. 16% originated in the United States, 8% originated in European countries, and 21% originated in other countries. 71% of domestic orders were from the end-users and 29% from defence and aerospace companies; however, these rates were 70% and 30% for international orders, respectively.
The breakdown of the orders received according to the sub-areas was as follows:
- Civil Aviation: $1.370 billion
- Land Systems: $1.351 billion
- Military Air Systems: $1.237 billion
- Naval Systems: $863 million
- Weapon, Ammunition, Missile: $773 million
- Military Maintenance, Repair, Overhaul Activities: $180 million
- Security: $134 million
- Others: $267 million
Weight of Public Support in Product and Technology Development Expenditure is Clearly Seen
The report includes the following statements about the decline in expenditure on product and technology development: “It is seen that the state support in product and technology development expenditures decreased significantly compared to the previous year (25.79%) and this is the main factor in the decrease in total expenditures. It is seen that a support of $325 million was provided from the equity of the sector in 2020 compared to $331 million in 2019. It is very important because the main source of the decline in product and technology development expenditures is the shrinkage in state support. Continuing state support to product and technology development works at the previous level and even more intensive is an indispensable condition for the sector to continue without losing its competencies and even developing them.”
Sector Hopeful for the Future
The report also includes the results of the Future Expectation Analysis with SaSaD members. The participants’ responses to the question, “What do you think about the development and growth of your business for the next 24 months?” and the percentage of each response are listed as follows:
- “I do not know whether it will develop or grow. On the contrary, I expect a shrinking.” (5.6%)
- “I think it will remain at the level of the previous 12 months.” (15.5%)
- “I am sure that it will develop and grow.” (78.9%)
SaSaD Foresees a Challenging Period
The preface of the report is signed by Öner Tekin, who served as the Chairman of the Board of Directors in the previous period. The following statements stand out in Tekin’s preface: “It will also be seen from the data in the report that 2020 was a really difficult year. Our Association coordinated with its members and made due diligence and determined the recommendations and shared them with the relevant government authorities in order to complete the difficult year with minimal damage. We were happy to see that many of the issues in the document shared were implemented.
Government authorities, in particular our Presidency of Defence Industries, have ensured that our sector is always among the priority and we are exempted from many restrictions; special implementations have been provided by considering the criticality of our sector and the effects of the geography in which it is located in order to obtain new jobs. Therefore, I would like to take this opportunity to express our gratitude on behalf of the sector.
We have a difficult period ahead of us, and our sector players will overcome this period by both receiving state support and making sacrifices themselves. In particular, the protection of our existing markets and the creation of new markets should be the goals of the approaching period.”
The report (in Turkish) is available on SaSaD’s website.
*The sum of some of the number groups listed in the report may not reach 100 due to the rounding of the given figures. For example, when the percentage slices of the sub-areas of the turnover figures are added up, they add up to 99.99%.