The Norwegian manufacturer of the well-known NASAMS air defense systems used in Ukraine - Eric Li, president of Kongsberg Defense & Aerospace, told Euractiv that as demand for defense equipment grows, maintaining diverse global supply chains is necessary to keep production going.
The interview was conducted before Donald Trump announced that he would impose a 25% tariff on EU goods.
EURACTIV: Do you foresee deeper cooperation with Ukraine in the next few months?
We are establishing a company in Ukraine. We are in close contact with Ukrainian industry and are discussing the establishment of a joint venture. Our main priority is to increase the production of missiles for our air defense system in Ukraine, based on Ukrainian technology. We are talking about mass production of missiles, hundreds of them. We expect to create joint ventures within a few months.
Some companies mention the security risks of establishing a presence in Ukraine and the fear of governments that such a move would be perceived by Russia as an escalation, why are you going there?
Security is very important. At Kongsberg, we want to use the potential of the Ukrainian industry. In the long term, when the war is over, Ukraine can be part of the missile supply chain for our air defense systems.
What growth opportunities do you see after peace is established in Ukraine?
There is a lot of innovation happening in Ukraine right now, we will be part of that. It is important for us to be there.
Kongsberg built its production capacity around the same time that the war in Ukraine started three years ago. What advantages do you see now from the relocation?
Before the war in Ukraine, we saw an increase in demand, especially for missiles and air defense systems, so we built up significant capacity. The decision was related to external factors, based on purely commercial terms. We invested quite heavily in production facilities in Norway, the United States and Australia. Having regional production sites gives us sustainable production capacity. Our idea for this is to have multiple supply chains.
Supply chains can always break down, where does the risk come from?
In Europe, we see increased demand, we see long-term increased defense spending. We have received a lot of orders; we currently have a record number of outstanding orders. None of these contracts are unexpected, but they may have happened earlier than expected because of the situation in Ukraine. There are also tensions in the Pacific region.
In terms of supply chain, I'm sure warehousing plays a significant role in that. When you see the US talking about trade and tariffs, how does that affect your approach to warehousing and supply chains?
This is an area that we need to watch. No industry wants to fight trade wars. Our response to that is to mitigate the risk by having a manufacturing facility in the US with local employees and a supply chain in the US, which will counteract that problem.
So it will be more complicated to counteract the effects in Europe?
It will also depend on how much protection is affected. We need to monitor developments and try to mitigate that as much as we can.
Apart from tariffs, where do you identify bottlenecks in your supply chains?
For example, it is risky when we have a single source of supply or if everyone goes to the same supplier; we need inventory to increase our production capacity. That is the most important thing. We can also have more regional suppliers in a given area.
What components are you looking at in this regard for your well-known NASAMS short-to-medium range air defense systems?
I can't go into detail, but there are definitely some and they are not just commercial suppliers of off-the-shelf products. That is why we need to ensure that we have priority in the supply chain. We do that by providing suppliers with visibility with multi-year contracts.