The Canadian and American defence industrial bases are highly integrated, an arrangement that stretches back to the Second World War. With this relationship now in a period of unprecedented uncertainty, the Canadian government has committed to sourcing more defence goods and services domestically, while diversifying how and where it buys equipment abroad.
The Canadian defence sector will need to adjust in tandem, taking its cues from government in what remains a highly managed market. In this article, three local defence firms share how they are adjusting and preparing for what may come next.
CCX Technologies
How has the trade war affected your business and how are you planning for the next few years?
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The trade war has catalyzed strategic shifts at CCX Technologies, not disrupted our operations. Anticipating a Canadian government shift toward prioritizing domestic technology and capabilities, we’re increasing investment and effort in R&D initiatives to position ourselves as a key partner for the government’s future technology needs.
We’re also strengthening our U.S. market position by strategically partnering with established U.S. companies to ensure sustained growth within this complex market and facilitating reciprocal market access by leveraging our Canadian presence to enable our U.S. partners’ entry into the Canadian marketplace.
Finally, we’ve accelerated European expansion and are actively pursuing government-supported initiatives to establish a strong market presence.
Our strategy for the coming years involves a calculated expansion into new international markets, building upon the momentum gained in Europe, while reinforcing our core business through strategic partnerships and a heightened focus on Canadian innovation.
What can all levels of government do to support businesses like yours in the short and medium term?
To bolster 100 per cent Canadian SMEs like CCX Technologies, governments should implement a definitive strategy focused on prioritizing and investing in domestic technological capabilities — beyond standard procurement reforms.
Specifically, that will mean procurement policies that actively favour Canadian-owned enterprises with unique technologies and expertise, ensuring domestic capabilities are the primary consideration.
Canada also needs dedicated investment funds aimed at scaling and expanding Canadian capabilities. This funding should prioritize Canadian-owned entities to ensure IP and economic benefits remain within Canada. In tandem, we should develop incentives and frameworks to galvanize a robust domestic investment community focused on Canadian innovation.
Over a longer timeline, defence spending and investment in Canada’s defence industry look poised to increase. What might those new investments mean for your business?
Increased Canadian defence spending presents a significant opportunity for CCX Technologies and Canada’s defence sector. As a 100 per cent Canadian-owned SME in platform security, we offer sovereign solutions that keep critical data and IP within Canada.
Anticipating defence priorities outlined in initiatives such as “Our North, Strong and Free,” CCX Technologies is strategically advancing Canadian technologies in secure RF, networking and communications. This proactive development positions us as a key domestic partner ready to meet Canada’s evolving defence needs and we urge Canada to prioritize Canadian solutions.
Calian
How has the trade war affected your business and how are you planning for the next few years?
We are fortunate in that only about five per cent of our business involves cross-border flows of equipment and material. Our Canadian operations deliver mostly for customers in Canada and likewise our operations in the U.S., U.K. and in Europe. Our approach of delivering for global customers with teams embedded in those markets has reduced the impact across the organization.
We have been paying very close attention to our supply chains and each new announcement to identify any new affected areas and are seeking to minimize our risk profile.
Planning for the future is about understanding the market forces and trends as best we can and making investment decisions based on those trends. The uncertainty in the Canada-U.S. relationship is making anticipating that trend very difficult and we have been looking at where Canada is seeking to sustain relationships, especially in Europe. NATO members, Canada and partners in the Indo-Pacific are all increasing their defence and national security spending, so we certainly see opportunity in those spaces to invest, identify potential M&A opportunities and expand existing delivery.
What can all levels of government do to support businesses like yours in the short and medium term?
The biggest thing that all orders of government can do is to prioritize buying Canadian. The governments of Ontario and New Brunswick are taking clear action to prioritize Canadian suppliers for all their needs, which is encouraging. Where there is no Canadian supplier, governments will need to make trade-offs. Where a Canadian solution is ready, governments should absolutely be buying from Canadian companies and strengthening domestic suppliers and supply chains. Buying Canadian delivers benefits to communities across the country, strengthens our domestic industry and helps sustain innovation and commercialization to make Canadian companies competitive internationally.
Over a longer timeline, defence spending and investment in Canada’s defence industry look poised to increase. What might those new investments mean for your business?
Prioritizing buying Canadian is clearly something we hope to see from the incoming government as it seeks to increase defence spending. Canada should be buying in Canada wherever it can on defence, especially as it is poised to spend tens of billions in new investment between now and 2030.
As a Canadian company, Calian stands ready to mission-critical solutions for any upcoming capital defence program. Canada has clear ambitions: Arctic sovereignty and space programs; addressing personnel shortages; and buying a series of generational platforms. Calian is ideally suited to deliver for the people part though training and health services and for capital programs through systems integration, advanced manufacturing and IT, data, cybersecurity and emissions security solutions.
Nortac Defence
How has the trade war affected your business and how are you planning for the next few years?
The trade war has deepened our commitment to manufacture domestically within Canada. Our current international and domestic business, led by services, will be largely unaffected since the tariffs only target goods. Some hardware may be subject to increased U.S. tariffs. For example, certain component prices within our manufactured Nortac Wave product may increase due to tariffs imposed by Canada on U.S.-made parts.
We will continue with our core strategy in global and domestic markets. Nortac’s established international relationships and domestic government contracts underpin the company’s resilience and we expect growth to be strong over the next few years. The utility of Nortac Defence’s developed product portfolio in the current security and defence environment is increasingly apparent. The products are dual-use and the company is pushing into non-military markets worldwide under the Nortac brand name, adding additional resilience to the business model.
What can all levels of government do to support businesses like yours in the short and medium term?
The Canadian government supports Nortac Defence very well in its international growth initiatives through its trade commissioners and defence attachés in its embassies worldwide. The Canadian Commercial Corporation (CCC) is proving invaluable to support larger transactions with government-to-government initiatives. Clearly, technology development is an expensive business with investment front-loaded in advance of sales.
An observation is that Canada has a strong SME sector for defence technology but these companies operate, in the main, in isolation. To leverage the innovation, cost effectiveness and utility of these SMEs to satisfy government defence requirements and increased collaboration between them would be beneficial, as well as the government making the defence procurement process quicker, cheaper and simpler.
Future competitive advantage at the national security level will be leveraged by those countries who prioritize engaging their SMEs. Canada is poised to take the lead in its interactions with smaller defence technology firms.
Over a longer timeline, defence spending and investment in Canada’s defence industry look poised to increase. What might those new investments mean for your business?
Increased defence spending is clearly positive for Nortac Defence so long as its products have a market fit. As for all tech companies, retaining relevance and remaining at the leading edge of product development and innovation is an expensive challenge. So long as SMEs are embraced in the procurement structures for increased defence spending, then this will be a huge opportunity for innovation and growth of SMEs in the defence sector in Canada.
