In the wake of ongoing global conflicts and unprecedented technological advancements, the defence industry is undergoing transformative changes. According to insights from the Estonian Defence Industry Association and Trade Estonia, several key trends are set to redefine the landscape of the defence sector in 2025. 

As a leader in enhancing international security and defence capabilities, Estonia’s defence industry is agile and adaptive, ensuring a swift and effective response to evolving global threats. Estonia is ranked #1 in the EU for cybersecurity on the Global Cybersecurity Index, hosts the Cyber ​​Defence Center of Excellence, and serves as the home base for the world’s largest international cyber exercises: Locked Shields and Crossed Swords.

“The defence industry is undergoing a period of rapid transformation. By embracing innovation, fostering collaboration, and prioritizing resilience, Estonian defence companies are well-positioned to thrive in this dynamic environment.”
Rene Ehasalu, cluster manager, The Estonian Defence Industry Association

The future of warfare: key trends driving defence innovation

“The past year has seen a dramatic acceleration of defence technology development,” said Rene Ehasalu, cluster manager, The Estonian Defence Industry Association. “We are witnessing a convergence of technologies, with a strong emphasis on autonomous technology, artificial intelligence, and cyber security.”

Key trends in defence sector identified by The Estonian Defence and Aerospace Industry Association include:

• Rise of autonomous systems: The use of autonomous systems, such as drones and robotic platforms, is rapidly increasing on the battlefield. These systems are becoming more sophisticated, with enhanced capabilities for surveillance, reconnaissance, and even offensive operations. Examples of Estonian companies in this sector include Milrem Robotics, Lendurai, Asax Innovation, and Vegvisir.
• Focus on electronic warfare and counter-UAS systems: The importance of electronic warfare is growing significantly as adversaries seek to disrupt communication and control systems.  Also, drones have had significant impact on the battlefield. This has led to increased investment in technologies to protect against electronic attacks and drones to develop new offensive capabilities in this domain. Examples of Estonian companies in this sector include Rantelon, Marduk Technologies, and Frankenburg Technologies.
• Emphasis on supply chain resilience: The war in Ukraine has highlighted the critical need for resilient and secure supply chains. The Estonian Defence Industry Association emphasizes the importance of domestic production and reducing reliance on foreign suppliers, particularly those in adversarial nations. Estonian companies, with their focus on domestic production and innovative technologies, are well-positioned to seek business alignment and cooperation with partners seeking to protect their defence manufacturing from foreign influence. Examples of Estonian companies in this sector include Threod Systems, KrattWorks, Maru Defence, and 5.0 Robotics.
• Integration of AI and machine learning: Artificial intelligence and machine learning are increasingly being integrated into defence systems, enabling faster decision-making, improved situational awareness, and more effective targeting. Examples of Estonian companies in this sector include Defsecintel Solutions, SensusQ, and Nortal.
• Increased global collaboration and partnerships: The complexity of modern defence systems necessitates increased collaboration between companies, research institutions, and government agencies. The Estonian Defence Industry Association is actively fostering partnerships within Estonia and internationally to accelerate innovation and develop cutting-edge defence technologies.

“The defence industry is undergoing a period of rapid transformation,” continued Ehasalu. “By embracing innovation, fostering collaboration, and prioritizing resilience, Estonian defence companies are well-positioned to thrive in this dynamic environment.”

From cyber to combat: the industries driving defence evolution in Estonia

The Estonian Defence Industry Association spearheads several strategic initiatives to establish connections with U.S. partners, build valuable relationships, and seize opportunities in one of the world’s most vibrant economies.

The Embassy of Estonia opened its first U.S. business hub in 2024, while its Defence Attaché Office in Washington DC has been operational for several years.  A delegation of Estonian defence industry innovators has participated in the annual AUSA conference for several years and plans to do so again this year.

Estonia pledges over 3% of its GDP to defence investment and works closely with NATO and other international partners as an active participant in the EU’s Common Security and Defence Policy (CSDP). Estonia is also one of Ukraine’s key supporters since 2022, providing war aid exceeding 1.4% of its GDP, and multiple Estonian companies are exporting advanced defence technologies to Ukraine.

Estonian defence companies develop advanced technology-based solutions and innovative systems to address national and international security challenges. The country’s defence sector includes, but is not limited to, companies operating in cyber defence, robotics, autonomous systems, sensors, communication technologies, surveillance, electronics, equipment, and vehicle maintenance.

Estonia is known as the “Unicorn Nation,” boasting the highest number of unicorn companies per capita in Europe and twice as many AI startups per capita than even the U.S. Estonia is also hailed by many as the world’s most advanced digital society.  For new businesses, it takes 15 minutes to establish a company and three minutes to file taxes.

Estonia is also actively engaged in NATO’s Defence Innovation Accelerator for the North Atlantic (DIANA) to support NATO’s mission of maintaining technological superiority and enhancing collective defence capabilities.  This digitally advanced ecosystem has accelerated innovation and growth for Estonian companies, supporting exporting products and services to over 120 countries worldwide.

This content is funded by the European Union – NextGenerationEU.

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