How Is Turkey’s Defense Industry Ecosystem Growing? A Look at Companies, Revenue, Employment and R&D

How the ecosystem is defined

The defense industry ecosystem is a layered structure spanning prime contractors, the subcontractors and SMEs that supply them parts and subsystems, universities and research institutes, clusters and technoparks. In Turkey, large, mostly public or foundation-linked prime contractors sit at the top, with thousands of private-sector firms at the base. A healthy ecosystem needs more than revenue growth — it needs supply-chain depth, expanding SME participation, and a steady flow of knowledge between research institutions and industry, and all these layers are growing simultaneously in Turkey’s case.

SASAD says it represents nearly the entire sector, bringing together seven clusters (BTSO, DASSAD, ESAC, HUKD, OSSA, SAHA Istanbul and TSSK) and 300+ manufacturing firms. SSB statements and news-agency compilations put total ecosystem firms above 3,500 — ranging from a handful of very large prime contractors, to mid-sized system producers, to a large number of small suppliers; how healthily growth is distributed across these layers is a key indicator.

Institutional timeline

Leading prime contractors

These firms feed hundreds of subcontractors and SMEs, forming the ecosystem’s load-bearing columns — one major UAV program alone can activate dozens of sub-firms, from airframe and composite suppliers to avionics-software and ground-station component makers, and this multiplier effect is how a single large order spreads revenue and jobs across the whole ecosystem.

Revenue and employment by year

SASAD’s Performance Report series shows a generally rising revenue and employment curve from 2018 to 2023 (figures in $ million; company-reported).

Dollar-denominated revenue dipped in 2020 (pandemic effect) before resuming growth from 2021; employment rose steadily except for a slight 2021 dip. Revenue per employee rose from $150,328 in 2022 to $165,681 in 2023, with 9,837 people added to the sector that year — meaning employment growth was not purely numerical, but reflected rising productivity and value-added, i.e. qualitative as well as quantitative growth.

Export and import trends

The sector’s share of Turkey’s total exports was 2.5% in 2023. Exports to the US rose to $1.33bn (+67%) and to Europe to $1.22bn (+84%), with the remaining $2.99bn going to the Middle East, Asia, Africa and South America. This shift toward developed markets — which carry higher technical and regulatory thresholds — signals rising competitiveness on quality and certification, not just price.

SMEs form the base

The ecosystem’s numerical weight sits not with prime contractors but with subcontractor SMEs. Most of the 3,500+ firms are small and medium enterprises supplying prime contractors with parts, subsystems, tooling, cabling, software and services — deepening the supply chain and serving as the actual carriers of the rising domestic-content ratio.

Orders flowing through the chain

SASAD’s 2023 data shows new orders reached $20.11 billion, up 128% year-on-year, with 72.67% ($14.62bn) sourced domestically.

Clusters bridge SMEs to primes

SME access to prime contractors runs largely through clusters. SAHA Istanbul, founded in 2015, brings together 1,200+ firms from 45 provinces and is the largest defense-aerospace cluster in Turkey and Europe, connecting small firms to the supply chain via certification support, B2B matchmaking events and joint R&D projects. Regional/sectoral clusters such as BTSO, DASSAD, ESAC, OSSA and TSSK play similar roles elsewhere in the country.

Deepening SME networks is the actual mechanism behind a rising domestic-content ratio: when a subsystem starts being made domestically, the import line drops and that value stays inside the ecosystem. This is not frictionless — SMEs’ limited capital, long supply cycles and high certification costs make scaling hard, and sustainable growth for this base depends on improving access to finance and skilled personnel.

R&D spending as the growth engine

Sustainable ecosystem growth is directly tied to investment in product and technology development. SASAD reports total 2023 R&D spending at $2.62 billion, 92% for product development and 8% for technology development.

Own funds vs. project support

Financing source is a clue to the ecosystem’s independence: in 2023, $2.05 billion came from project support and incentives while firms’ own-fund spending stood at $576 million — project incentive usage up 28.15% while own-fund usage fell 9.71%, showing R&D is predominantly financed through public project resources and incentives rather than firms’ own capital.

Technoparks and university links

Universities and research institutes underpin the ecosystem’s knowledge base. Joint projects with TUBITAK institutes (notably SAGE and BILGEM in defense technology), ITU, YTU and Sabanci University feed into firms via technoparks such as Teknopark Istanbul, which create physical proximity and collaboration space between SME R&D centers and prime contractors — accelerating knowledge flow through informal ties as well as formal contracts.