A key goal for the Australian Government over the next decade is growing Australian defence industry supply chains at the right pace and scale so that it can support the required delivery of high-quality Defence capabilities. Achieving this goal requires continued concerted actions from Government and industry to increase the involvement of Australian businesses in local defence supply chains and support businesses to scale-up and become medium and large sized enterprises.
Entering into supply chains requires forming new client relationships and adapting to new value networks. In some cases, it requires developing new products and services while adhering to rigorous security and quality standards.
Accessing defence supply chains not only provides direct benefits in terms of income from a specific project but can also increase the ability of businesses to scale-up operations. In some cases, participation in a defence supply chain may lead to opportunities in other defence projects or opportunities in defence exports and civil sectors. These opportunities allow defence manufacturers to undertake further development and capability improvements, and can support improved access to upper parts of the value chain.
Through detailed analysis, public consultation, drawing on industry experts’ views and reports, this road map outlines the key growth opportunities that defence manufacturers can seize.
To unlock and maximise these opportunities, defence manufacturers will need to invest in advancing their capabilities, including productivity, skills, innovation and regulatory and standards compliance.
Key areas of opportunity
Key areas of opportunity can be summarised into 3 categories.
Defence: Leveraging investments and commitments to integrate emerging technologies and scale manufacturing of products and components supporting ADF priorities, such as:
- drones/unmanned aircraft
- special military equipment including night vision goggles and combat protection.
International: Expanding capabilities to service new and existing export markets with strategic partners (subject to regulations) in products and components such as:
- armoured vehicles
- advanced radar systems
- patrol boats.
Cross-sector applications: Diversifying to cross-sector applications such as:
- space domain awareness equipment, including sensor networks
- medical countermeasure including diagnostic tools and personal protective equipment.
Enablers of growth include: IP ownership, Industry 4.0 technologies, cyber security and promotion of existing Government support programs.
This opportunity will seize on the extensive Government investment in the defence sector and opportunities to manufacture goods to supply the ADF with capabilities identified by the Government and Defence such as the Sovereign Industrial Capability Priorities.
The manufacturing opportunities will build on the extensive Government funding and existing defence policies to support Defence to achieve its objectives, while building greater capacity and capabilities in our manufacturing sector.
Examples of Defence market opportunities for manufacturers
Australian Defence manufacturers can leverage the large Defence investments and long term commitments to scale their capabilities in the manufacture of products and components contributing to Defence priorities such as:
- advanced materials: To maintain a warfighting advantage it is necessary to develop and integrate advanced materials, protective element technologies, and advanced multi-functional textiles. This is primarily delivered through protective technologies in the form of helmet systems, soft insert technologies, and hard armour plates, and using materials such as advanced ceramics, composites and advanced textiles.
- design and integration: The ability to integrate advanced, multi-functional materials into the design of the soldier combat ensemble will allow for stronger, lighter, and more durable materials, coupled with cheaper, lower-energy production and manufacturing methods.
- signature reduction: The ability to develop signature reducing multi-spectral fabrics, coatings and materials. This includes the continued exploitation of protection equipment and advanced textiles to integrate signature reducing technologies.
- precision specialist machining: Precision specialist machining, treatments and coatings of components using advanced lightweight materials to support the assembly and sustainment of small arms and ancillaries.
- protection technologies: Design, development and industrialisation of survivability and signature reduction material technologies and processes for land combat and protected vehicles.
- sustainment: The ability to forecast land combat and protected vehicles maintenance requirements; undertake platform, system and sub-system maintenance; and vehicle upgrades and updates. This is enabled by data, a highly skilled technical workforce, and fit-for-purpose Australian infrastructure.
- tactical sensor integration: Integrate tactical sensor hardware and software with host platforms, other sensors and control systems (including combat management systems) and certify integrated sensor networks for operational use.
- high frequency sensor technologies: Design, develop, and sustain active and passive high frequency sensors for long-range persistent air and maritime surveillance, including advanced adaptive algorithms for resilience and assured performance in degraded conditions.
- secure communication technologies: Design, develop, modify, and upgrade software and hardware that enable secure communication across the Joint Force.
- platform signature management test and evaluation capabilities: Ability, skills and equipment across industry to test and evaluate signature management technologies, including physical and electronic signatures of military platforms, in all operating environments.
Exporting defence products to strategic international partners
Exporting provides Australian defence manufacturers with greater certainty of demand and investment to support growth and innovation. Australia is well placed to continue building a strong export sector and utilise our existing strengths:
- world class research base
- trusted trading partner
- geographic location supporting advanced communications
- existing advanced manufacturing expertise in adjacent sectors which can support defence manufacturing such as automotive and shipbuilding
- well regarded cyber security standards
- expertise in robotics and automation, especially in autonomous systems and remote asset management stemming from expertise in mining operations
- expertise in remote medical capabilities, especially relevant to medical countermeasures.
Australian businesses can also take advantage of the significant market opportunities that exist within the international supply chains of the prime contractors. Successful Australian businesses who have contributed to Australian Defence acquisitions have become an integral part of the responsible prime’s supply chain and continued to sell their products to large international projects.
Supporting Australian defence exporters
Australian defence exports are defined as any defence-specific or dual-use goods or services that are intended for a defence or national security end-user in a foreign country.
The Australian Government has set a strategic goal to increase defence exports which are currently valued at approximately $1.5–2.5 billion per year. The Defence Export Strategy brings together all of the levers available to governments, Defence and industry to provide end-to-end support for defence exporters, from building export readiness, to identifying export opportunities, and ultimately realising export outcomes. While the pursuit of defence exports is a joint endeavour between industry and governments, defence exports themselves are driven by commercial considerations of industry.
The Australian Defence Export Office established as a key initiative of the Defence Export Strategy, leads whole of government efforts to support Defence industry to export.
Beyond income from direct exports, overseas investment particularly from key global companies including primes, continue to help the Australian defence industry to grow in size and capability, as well as providing new supply chain opportunities.
Austrade is the lead Australian Government agency for investment attraction, and in the 2019-20 financial year, Austrade facilitated 23 foreign direct investment outcomes across defence, advanced manufacturing and space, $23 million of which were announced. These include new industrial capabilities, partnerships with existing Australian companies, and investments in R&D. In the 2019-20 financial year, Austrade helped over 300 defence, advanced manufacturing and space exporters through business advice, general assistance, and support in country.
Current priority and export opportunity markets for Australian defence manufacturers include close like-minded partners, and emerging markets across the Indo-Pacific region.
Canada, New Zealand, the United Kingdom (UK) and the United States (US) represent Australia’s highest defence export market priority, due to Australia’s close relationship with those countries and their ability to strengthen Australia’s export market.
Australia is also strategically positioned to export to key regional partners, notably Japan and the Republic of Korea. South East Asian countries are rapidly developing, presenting opportunities for Australian defence manufacturers to export defence products as well as participate in sustainment projects.
Involvement in global programs such as the F-35 Cooperative Partnership provide opportunities for Australian defence manufacturers to build a strong sovereign manufacturing capability. To date, more than 50 Australian companies have shared in over $2.7 billion in F-35 production and support contracts. In fact, there are Australian-produced parts on every F-35 in operation around the world. This is an important part of the Australian Government’s commitment to building a robust Australian defence industry capability, and efforts continue as the F-35 Program transitions into the sustainment phase.
Case in point, BAE Systems Australia’s (BAESA) selection as the F-35 Air Vehicle depot for the South Asia-Pacific region not only means that BAESA will conduct maintenance, repair, and overhaul on Royal Australian Air Force F-35A aircraft in Australia; it also positions the company to potentially host aircraft from other nations in the future. BAESA has also been selected to host the F-35 Asia-Pacific Regional Warehouse, which is planned to store and manage parts for the international F-35 fleet as part of the Global Support Solution.
Europe’s defence market is a priority market for Australian exporters as well. However, the Defence Export Strategy notes that it is a challenging market for Australian businesses, with high barriers to entry and significant domestic competition.
Examples of international market opportunities for manufacturers:
Expanding capabilities to service existing and new export markets with strategic partners including:
- production of energetic materiel: Developing and manufacturing energetic materiel, including high explosives, propellants and primers, using current technologies and future alternatives.
- load, assemble and pack capability: The ability to fill and load, assemble and pack designated explosive ordnance products inclusive of handling high explosive fill and use of advanced/lightweight components and parts.
- sustainment of advanced radar systems: Skills, equipment and facilities necessary to maintain and provide ongoing assurance of leading radar systems.
- active and passive radar design and production: Researching, designing, assembling, integrating and upgrading advanced radar technologies that offer scalable and capable radars for use in the maritime, land and air environments.
- execution of maintenance, repair and overhaul activities: The application of fleet management techniques and supply chain optimisation to maximise operational aircraft availability and the ability to perform entire platform deeper maintenance cycles. This includes:
- platform maintenance, repair, overhaul and upgrade in a timely and cost-effective manner
- deeper maintenance of elements below the platform level, such as engine and propulsion systems, major mechanical and hydraulic components, avionics, and mission system components
- advanced surface coating and finishes at the platform and component level.
- aerospace platform structural integrity: The ability to perform engineering analysis and testing of structures to inform the effective management of aerospace platforms ensuring they are operational, safe and fit for purpose throughout their service life. Specific areas of focus include:
- airframe and propulsion system life certification
- fatigue testing and analysis
- non-destructive testing for composite and advanced material repairs
- developing non-standard repairs for metallic and advanced composite structures
- designing, developing and repairing parts through additive manufacturing processes.
- naval shipbuilding and design: Developing and manufacturing shipping components and products.
Opportunity: Cross-sector applications
The defence industry sector has traditionally played a pivotal role in facilitating the development and commercialisation of advanced technologies with cross-sector applications. The sector has also provided a platform for manufacturers to develop global connections in industries like aerospace and automotive. Shared capability requirements, such as remote operation, automation, robotics and specialised steel manufacturing; and cross-pollination of ideas and innovations lead to strong connections with other industry sectors and technologies including:
- Artificial Intelligence (AI)
- Mining Equipment, Technology and Services (METS)
- Advanced manufacturing.
These linkages also provide an avenue for further commercialisation of advanced technologies. Perhaps the best-known products of defence R&D—the Global Positioning System (GPS) and the black box flight recorder—are now in world-wide civilian use.
However the technology exchange goes both ways, from military to civilian, and civilian into military applications. For example virtual reality (VR) technology typically associated with gaming is now diversifying into the military sector. VR has the potential to simulate a range of environments and provide new ways of training, from language and cultural training, to peacekeeping and joint operations.
Adjacent sectors and activities with potential to supply defence (including both components and finished products), and where Australia has competitive advantages or existing strengths, include:
- resources or mining technologies
- medical products and healthcare
- space capabilities
- land vehicles
- unmanned systems in maritime and aerospace, including surveillance aircrafts and underwater vehicles.
Examples of technology exchange and diversification opportunities for the defence industry
- Space: Investments in space capabilities were significantly strengthened in the 2020 Force Structure Plan, providing new opportunities for the emerging space manufacturing sector.
- Resources Technology & Critical Minerals Processing: Technology exchange between resources and Defence has a long tradition. Spin-offs from Defence Science and Technology Group work on sonar sensors to detect activity at sea created products for the civilian seismic industry.
- Medical Products: Medical and Defence manufacturers are working to commercialise nutraceuticals and countermeasures (for example, the DMTC diagnostic tool to rapidly test for infectious diseases in remote areas).
- Clean Energy: Power systems (for example, batteries and fuels) to increase efficiency and power assets are a Defence focus. For example, battery technology developed for mining vehicles is now applied to military vehicles.
Examples of cross-sector applications market opportunities
Diversifying defence manufacturing to cross-sector applications (spin-offs), or applying non-defence civil technologies to Defence (spin-ins) with products such as:
- space domain awareness: designing, developing and sustaining integrated sensor networks for persistent surveillance of space objects and phenomena that can be certified and operated as part of a global network shared with our international partners.
- space-based surveillance technologies: designing, developing and sustaining integrated orbital sensor networks for Earth observation that can be certified and operated as part of a global network shared with our international partners.
- space-enabled Earth observation technologies: to support more efficient emergency response systems and weather monitoring (for example, GPS and satellite systems to monitor weather and climate, detect environmental disasters, and assist in crop management, urban or environmental planning).
- medical countermeasures: developed for protection of military and civilian personnel against Chemical, Biological and Radiological (CBR) threats, emerging infectious diseases and pandemics and include diagnostic tools, personal protective equipment and treatment for infectious diseases and radiological threats.
- C4I integration: integrate tactical sensor and persistent surveillance technologies operating at multiple security levels into ADF and Five Eyes command, control, communications, computing, and intelligence (C4I) systems.
- unmanned aerial/maritime vehicles: trusted autonomous systems to enable increased situational awareness, surveillance and enhanced decision making in complex environments.
- advanced remote monitoring systems/mobile robotics with a capacity to be applied in defence.
20 Note: the example lists in each of the opportunities sections draws heavily from the critical industrial capabilities in the Sovereign Industrial Capability Priority (SICP) Implementation Plans that have been released to date. These were chosen as they represent Australian Government’s agreed priorities for the defence industry base. This list is current at the time of writing, and is subject to change as future SICPs and Implementation Plans are announced and released. ↵
21 Defence Connect: Global Supply Chain Program success for Aussie SME, 2019, accessed 1 March 2021. ↵
23 Support in country means identifying partners for Australian businesses, identifying customers, providing support for in-country visits and helping establish an overseas presence. ↵
25 Department of Defence, 2020 Defence Strategic Update, p. 38-39; Innovation and Science Australia, Australia 2030: prosperity through innovation, 2017, p. 67; DMTC Annual Report 2020, p. 26; @AuManufacturing: 3ME battery technology headed for battlefield, 17 September 2020, accessed 1 March 2021. ↵