THE EVOLUTION OF THE GLOBAL DEFENSE INDUSTRY / GEOPOLITICAL FUTURES

The Evolution of the Global Defense Industry

New threats create new economies. 

By: Andrew Davidson

The global defense industry is undergoing a profound transformation driven by rapid technological advancement and growing concern over supply chain resilience. 

The changes underway reflect not only short-term responses to immediate crises but deeper structural shifts in how nations perceive their security imperatives and navigate the complexities of the international system. 

They are also reshaping the ways nations conduct conflict.

In some ways, this evolution is normal; the global defense industry has consistently adapted to new and different power dynamics and evolving security threats. 

During the Cold War, for example, the arms race between the United States and the Soviet Union fueled massive industrial expansion, with U.S. defense spending supporting the development of a vast nuclear arsenal and the production of thousands of aircraft, including the F-4 Phantom II and the B-52 Stratofortress. 

This era prioritized high-end platforms and large-scale industrial production to support deterrence and power projection. 

After the Soviet Union collapsed, crisis response and peacekeeping operations became more strategically urgent, thus leading to a drawdown in conventional forces. 

Global military spending contracted accordingly. 

The so-called war on terror (2001–14) reoriented defense priorities toward counterterrorism and asymmetric warfare, which necessitated a new set of technologies and weapons systems. 

U.S. spending surged as Washington, to list just one example, funded the production of over 27,000 mine-resistant ambush-protected vehicles to counter improvised explosive devices and the deployment of drones like the MQ-1 Predator. 

This development fundamentally altered battlefield awareness.

Now that smaller, regional conflicts have replaced terrorism as many nations’ primary security threat, there has been a steady pivot away from asymmetric warfare toward symmetric warfare. 

Russia’s annexation of Crimea in 2014 and subsequent invasion of Ukraine, China’s assertiveness in the Indo-Pacific, the India-Pakistan standoff and many other conflicts have once again elevated global defense spending, which stood at nearly $3 trillion in 2024, a 9.4 percent increase from 2023. 

In this era of regional conflict, European NATO members have raised their budgets from a collective $235 billion in 2014 to $380 billion in 2024. 

Crucially, these funds are being used not just to modernize existing platforms but also to develop new ones to counter new threats. 

Germany, for example, is involved in the IRIS-T hypersonic defense project, which means to create a missile defense system capable of intercepting hypersonic weapons.

One of the more important features of the current era of regional conflict is the fusion between conventional and unconventional warfare. 

Hybrid conflicts increasingly integrate state and non-state actors, conventional military operations, cyber warfare and disinformation campaigns. 

Advances in technology have made sophisticated weaponry and cyber capabilities more widely available to actors who were previously unable to afford them. 

Non-state actors and smaller nations now possess drones, cyber weapons and AI-driven systems once exclusive to major powers. 

This has allowed non-state actors to conduct disproportionately large operations that, in addition to the physical damage they inflict, challenge established military hierarchies and doctrines.

By themselves, these developments would fundamentally reshape the defense industry. 

What complicates things is that they are taking place as the U.S. reassesses its foreign commitments and reduces its presence in certain regions. 

Its (limited) withdrawal has created power vacuums that state and non-state actors alike have tried to fill, creating a more multipolar and complex threat environment.

Now as always, technological innovation demands new equipment, training and doctrines. 

The current breakthroughs in artificial intelligence are enhancing targeting systems, cyber capabilities, logistics and battlefield management, enabling faster decision-making and expanding access to sophisticated tools. 

U.S.-based Anduril Industries has developed multiple AI-driven drones as well as the Fury, an unmanned fighter jet capable of executing complex missions. 

AI has also been integrated into Ukraine’s air defense via Sky Sentinel, a device that creates improved situational awareness as AI systems process data to enable more informed command decision-making.

Indeed, autonomous platforms are reshaping force structures, demanding integration of autonomous systems to process vast amounts of real-time data. 

The U.S. Defense Department is currently implementing initiatives such as the Joint All-Domain Command and Control strategy, which allows seamless data sharing between the various military branches. 

The changes in military force structure are further demonstrated by China’s AI-driven autonomous swarms, which can overload air defense systems and quickly communicate to coordinate movements and attacks. 

Multiple attacks can occur in a day without risking troops and high-end equipment or exposing flanks. 

Put simply, attacks are getting cheaper, more precise and safer for military personnel.

Hypersonic weapons, including Russia’s Avangard and China’s DF-17, are meanwhile challenging traditional missile defenses, while the U.S. Navy’s unmanned vessels and Turkey’s drones highlight the growing adoption of autonomous platforms. 

Even so, high-end platforms remain essential, so the transition to new technologies will still require traditional platforms and systems able to integrate with AI applications. 

Toward this end, defense industries are embracing modular design, additive manufacturing and digital engineering to enhance production agility. 

The Defense Department’s FLEETWERX initiative collaborates with private companies on the development of field-deployable additive manufacturing solutions such as mobile 3-D printing units to produce essential parts on demand in contested environments.

Contributing to the global changes underway is the emergence of more exporters, most notably Turkey, South Korea and Japan, whose entrance into new markets was made possible by their pursuit of defense self-sufficiency as well as their production of cost-effective products. 

By leveraging lower production costs and support, they have been able to compete on price while scaling capacity.

Recent events like the COVID-19 pandemic may have reminded the world how fragile supply chains can be, but these nations laid the foundation of their budding defense industries years ago. 

South Korea implemented its heavy and chemical industries development plan in the 1970s to wean itself off the U.S., and as of 2024, it sold $9.5 billion in defense exports, including to countries that have historically purchased supplies from Russia. 

Turkey, meanwhile, started to go it alone shortly after the 1974 Cyprus Peace Operation (often referred to by Greece and Greek Cypriots as the Turkish invasion of Cyprus), which exposed vulnerabilities related to reliance on defense imports, and established state-backed enterprises like ASELSAN and TAI. 

Many other private entities soon followed, and Turkey now produces some of the most cost-effective products in the world. 

(The Bayraktar TB2 drone is especially popular.) 

Turkish defense exports stood at $7.1 billion in 2024, fueled by drone sales and coproduction initiatives. 

And as with South Korea, Turkish defense industries have gained ground in places heretofore dominated by Russia, especially in Africa. 

While Russia's exports accounted for 21 percent of the African market in 2020-24, down from 34 percent in 2010-15, Turkey’s share has grown by about 11 percent.

Japan has been steadily reorienting its defense posture from one of self-defense to one of offense for some time now. 

This has allowed it to increase defense sales considerably, reaching $10 billion in 2023 thanks in part to Mitsubishi Heavy Industries’ technological pushes such as the upcoming AIRIS satellite. 

Growth also owes to high-end platforms such as MHI’s upgraded Mogami-class frigate. 

Though Japan remains a significant importer of U.S. military equipment, it is strengthening its defensive position by strategically balancing its ties to the U.S. defense industry while advancing its own defense manufacturing capabilities.

The bottom line is that many nations – even those with more established industries – are prioritizing domestic production, fostering innovation and reshaping partnerships in an increasingly competitive global environment. 

In response to the influx of new suppliers, countries such as the U.S. and Germany are investing in modernization initiatives to revitalize their defense industrial capabilities. 

The U.S. has promoted efforts to boost domestic semiconductor production to support advanced defense systems. 

It also allocated over $500 million in 2024 to the Defense Innovation Unit to accelerate the integration of AI and advanced drones into frontline operations. 

Germany is overhauling its military forces, increasing spending and investing in modern tanks, frigates and air defense systems. 

It has also invested heavily in the Eurodrone project to develop indigenous UAVs.

A good example of the changes underway in global defense is the recent 2025 India-Pakistan conflict. 

India’s Operation Sindoor leveraged BrahMos cruise missiles and Israel-made loitering munitions, while Pakistan responded with its own drones and missile strikes, including Turkish and Chinese systems. 

The conflict highlighted the growing importance of unmanned systems and the need for robust counter-drone technologies and platform integration. 

States that successfully integrate these technologies into their command-and-control systems, operational doctrines and force structures will shape future conflict environments. 

These shifts are redefining how states plan for defense, manage alliances and pursue strategic objectives, signaling a move toward a more complex, competitive and decentralized security landscape.

The global defense industry is experiencing a transformation marked by a renewed focus on technological innovation, industrial autonomy and the rise of a multipolar security environment. 

Changes in the economics of defense are coming, too, as supply chain resilience, technological integration and flexible production become increasingly more important to national security. 

Emerging exporters and industrial decentralization will continue to challenge established suppliers, driving a more complex global defense market.