TURKEY AEROSPACE & DEFENSE 2016 AEROSPACE TURKEY TURKEY AEROSPACE & DEFENSE 2016 Aerospace - Defense - Original Equipment Manufacturers Platforms - Clusters - Multinationals - Sub-Tier Suppliers Distinguished GBR Readers, Since the inception of the Undersecretariat for Defense Industries 30 years ago, significant steps have been taken to achieve the goals of having the Turkish armed forces equipped with modern systems and technologies and promoting the development of the Turkish defense industry. In the last decade alone, the aerospace and defense (A&D) sector's total turnover quadrupled, while exports have increased fivefold, reaching $5.1 billion and $1.65 billion in 2014, respectively. The industry's investment in research and development (R&D) reached almost $1 billion in 2014. The total workforce in the A&D industry reached 30,000 personnel, of which 30% are engineers. Even more remarkable, Turkey is now at the stage of offering its own platforms for both the local market and to international allies, and has commenced a series of follow up local programs. Although this progress has been achieved under the circumstances of a healthy and consistent political environment and in parallel with sustained growth in the Turkish economy, the proportion of expenditure for defense in the national budget and as a percentage of Turkey’s GDP has been stable. With the help of the national, multinational and joint defense industry projects that have been undertaken in Turkey by the undersecretariat, the defense industry has become a highly capable community comprising large-scale main contractors, numerous sub- system manufacturers, small- and medium-sized enterprises, R&D companies who are involved in high-tech, niche areas, research institutes, and universities. Thus, we can proudly say that we have a constantly growing and ambitious defense sector that looks ahead to achieving even greater things. Yours Sincerely, Prof. Dr. İsmail Demir Undersecretary Undersecretariat for Defense Industries, Republic of Turkey (SSM) CONTENT Introducing the Aerospace & Defense Making a Difference: Industry in Turkey Multinationals in Turkey 8. Ceaseless Search for Security: A Brief 44. Foreign Winds: International Players in Political and Economic Overview of Turkey Turkey 10. Interview with Undersecretariat for Defense 46. Interview with Investment Support and Industries, Republic of Turkey (SSM) Promotion Agency of Turkey (ISPAT) 11. On the Edge of Tomorrow: Turkey's 48. Interview with GE Aviation Aerospace and Defense Sector 49. Interview with Rolls-Royce 14. Interview with Turkish Armed Forces 50. Interview with Fokker Elmo Turkey Foundation (TAFF) 51. Interview with PFW Aerospace Turkey 15. Interview with Defense and Aerospace Industry Exporters’ Association of Turkey (SSI) and Turkish Defense Alliance (TDA) Securing the Supply Chain: 16. Expert Opinion by Global Risk Insights Turkey's SMEs 54. Into the Fray: The Importance of Sub-Tier Commanding from the Front: Suppliers Government, Clusters, and Associations 56. Interview with ASPILSAN 57. Interview with MilSOFT Software 20. Center of Gravity: The Role of Clusters Technologies Inc. and Associations in the Aerospace and 58. Interview with BITES Aerospace & Defense Defense Industry 59. Interview with ICterra Information and 23. Interview with Defense and Aerospace Communication Technologies Industry Manufacturers Association (SaSaD) 60. Interviews with Aycan Aviation and CNK 24. Interview with Teknokent Defense Industry Aerospace Ltd. Cluster (TSSK) 61. Interviews with Baturalp Taylan Ltd. and 25. Interview with OSSA Defense and Aviation Bodycote ISTAŞ Cluster Into the Future: Domestic Drive: Final Thoughts Turkey's Aerospace & Defense OEMs 64. Final Thoughts 28. Leveling Up: Turkey’s Major Platforms and 66. Company Index and Credits Systems 30. Interview with Turkish Aerospace Industries, Inc. (TAI) 31. Interview with TUSAŞ Engine Industries, Inc. (TEI) 32. Interview with ASELSAN A.Ş. 34. Interview with HAVELSAN Inc. 35. Interview with Alp Aviation 36. Interview with Baykar 37. Interview with Vestel Defense and AYESAS 38. Interview with FNSS Defense Systems 40. Interview with Istanbul Shipyard 41. Interview with Mechanical and Chemical Industry Corp. (MKE) This research has been conducted by Irina Negoita, Neha Ghanshamdas, Edward Barss, Edited by John V. Bowlus Graphic design by Gonzalo Da Cunha A Global Business Reports Publication For updated industry news from our on-the-ground teams around the world, please visit our website at gbreports.com, subscribe to our newsletter by signing up to our VIP list through our website, or follow us on Twitter: @GBReports TURKEY AEROSPACE & DEFENSE 2016 Exclusive Interviews Leaders from both the private and public sector delve into the nuances and nascent developments that are shaping the industry. 10, 14, 23, 30, 46, and many more Editorial TOTAL TURKEY AEROSPACE & DEFENSE SECTOR EXPORTS BY COUNTRY, 2014-2015 TOTAL TURKEY AEROSPACE & DEFENSE Source: SSM. SECTOR EXPORTS BY COUNTRY, 2015 2014 2015 Source: SSM. 0 100,000,000 200,000,000 300,000,000 400,000,000 500,000,000 600,000,000 $547,677,784.82 United States Content $556,455,534.94 $120,076,047.46 Malaysia $121,641,740.83 $27,610,081.69 Saudi Arabia Global Business Reports’ journalists provide $106,638,291.03 $49,595,273.92 Germany on-the-ground analysis of the trends that are $103,024,587.29 $60,094,745.02 France $88,663,546.70 $106,580,591.78 shaping Turkey’s aerospace andU.A.E defense industry. $76,732,468.95 $77,194,948.51 % Azerbaijan $57,886,751.63 United States 33.6 Malaysia 7.3 $87,746,508.37 Saudi Arabia 6.4 Spain $53,967,305.53 Germany 6.2 France 5.4 $77,108,051.53 Italy U.A.E 4.6 $53,254,751.01 Azerbaijan 3.5 $454,414.48 Spain 3.3 Kuwait Italy 3.2 $37,666,617.44 Kuwait 2.3 $35,525,587.92 UK 2.3 UK $37,318,899.96 Kazakhstan 1.9 Pakistan 1.5 $11,231,296.64 Bahrain 1.4 Kazakhstan $30,885,312.08 Tunusia 1.2 Others 15.9 8, 11, 20, 28, $21,896,696.03 44, 54 Pakistan $24,696,926.40 $18,729,883.40 Bahrain $23,427,481.62 $25,671,368.51 Tunusia $19,607,958.71 24˚ $380,605,285.31 Others 26˚ $263,883,759.16 28˚ 0 100,000,000 200,000,000 300,000,000 400,000,000 500,000,000 600,000,000 30˚ 32˚ Quantitative 34˚ 42˚ 36˚ 38˚ 40˚ 42˚ Data and Maps 44˚ 46˚ 48˚ Quantitative data help readers better understand İstanbul the position of Turkey, especially relative to its 40˚ global competitors. 42˚ Eskişehir Kazan Ankara 38˚ İzmir 40˚ 36˚ 9, 11, 12, 13, 21 38˚ Supply 34˚ 26˚ 36˚ 28˚ Chain 30˚ 32˚ 34˚ 36˚ Over 2,000 SMEs are operating in Turkey’s 38˚ 40˚ 42˚ 34˚ aerospace and defense sector. GBR goes 44˚ in-depth to describe how these companies are 46˚ supporting manufacturers. 54-61 Future Outlook Aerospace and defense is at the cutting edge of technology and risk. Turkey’s established and emerging players share their visions for the future of the industry. 64-65 Image: Vestel Defense and AYESAS. GBR • Industry Explorations • TURKEY AEROSPACE & DEFENSE 2016 INTRODUCING THE AEROSPACE & DEFENSE INDUSTRY IN TURKEY “The Turkish aerospace and defense industry produces roughly 60% of its own needs for defense, while 40% comes from international sources. TAFF aims to improve the share of local production within the next five years, including supporting Roketsan and Havelsan, so that they can become one of the top 100 global companies like Aselsan and TAI.” - Orhan Akbaş, Lieutenant General (Retired), General Manager, Turkish Armed Forces Foundation (TAFF) EDITORIAL B lack Sea Kırklareli Sinop Edirne Bartın Zonguldak Artvin Ardahan Tekirdağ Samsun İstanbul Karabük Kastamonu THE CEASELESS Trabzon İzmit Düzce Rize Bolu Ordu Giresun Kars Adapazarı Çankırı Amasya SEARCH FOR Gümüşhane Bursa Çorum Tokat Çanakkale Bilecik Bayburt Iğdır Ankara Ağrı Erzurum SECURITY Eskişehir Kırıkkale Yozgat Erzincan Sivas Balıkesir A Brief Political and Economic Kütahya Kırşehir Tunceli Bingol Overview of Turkey Manisa Muş Uşak Afyonkarahisar Kayseri Van İzmir Elazig Aksaray Nevşehir Malatya Bitlis Siirt Diyarbakır Denizli Niğde Aydın Isparta Konya Adiyaman Batman Şırnak Hakkâri Burdur Kahramanmaraş Mardin Sanliurfa ğ Karaman Mu la Osmaniye Gaziantep Antalya Adana Mersin Killis Hatay 0 50 100 Km M editerranean Sea Since the beginning of the Cold War, Tur- TURKEY VISION 2023 - Selected National Targets for 2023 by Sector key has been a bulwark of stability in a dangerous and fracturing world. The Unit- ECONOMY ed States began in 1947 to provide aid to Become Top-10 Economy in World Turkey under the Truman Doctrine, as part $ € of its grand strategy to contain the Soviet Acheive $500 billion in Exports Union and guard against Soviet encroach- ¥ Grow GDP to $2.064 trillion ment on the Middle East and the Mediter- Grow GDP Per Capita to $25,076 ranean. The end of the Cold War, however, did not reduce Turkey’s importance. As DEFENSE the United States opened a much wider Develop national rifle, cannon, tank, presence in the Middle East starting with helicopter, fighter aircraft the Persian Gulf War in 1990, Turkey re- mained a critical ally for regional security. Today, Turkey’s neighborhood is perhaps AVIATION more dangerous than ever before, as fires Domestically produce plane emanate from Syria and Iraq throughout Establish two aviation maintenance the Middle East while a revanchist Russia flexes its military muscles. and training centers It is unclear what consequences Syria will Establish Turkish Space Institute have on the region, but Turkey’s role as a stabilizing force in the Middle East is un- est economy, according to the IMF, and has Russian fighter plane in November 2015 likely to change. Turkey stands out in a re- ambitions to reach the top ten by 2023, the are hurting Turkey’s exports and tourism gion of weak states because of its territorial centennial of the Republic.