Defence Turkey: Dear Dr. Faik Eken, first of all we would like to thank you for this interview. How has the year 2016 been for Aselsan concerning domestic and international sales? What are your assessments?
In 2016, we worked with all our strength in order to fulfill our commitments to all our customers, the foremost being the Turkish Armed Forces. We have accelerated our deliveries and increased our turnover significantly compared to the last year’s performance. Export wise 2016 has been a year during which we have received a record level of international orders.
Defence Turkey: Dear Dr. Eken, based on its total sales, Aselsan has climbed 4 steps in the list of top 100 defense companies rising from the previous rank of 62nd in the year 2014 to the rank of 58th in the year 2015. While the increasing trend in ranking continues, we observe a recession in total sales figures and rates compared to previous years. In this context, what would you like to say on both the existing conditions in the world and factors specific to Aselsan regarding the strategies that would carry on this increasing trend in the future?
As Aselsan, in 2015, we considerably increased our delivery and TPL (tax procedure law) based turnover figures. Our priority in 2015 was to improve our free cash flow performance. To that end, we minimized our cash outflow within the year and therefore our sales figures based on the IAS (international accounting standards) declined slightly. At the year end, our free cash flow performance increased to a record level. The decline on IAS sales is a temporary situation and we expect that our IAS based sales will increase significantly in 2016.
Various surveys forecast that total defense sales in the world will continue increase in the near future. Surely, this depends heavily on the changes in the world. We will develop strategies according to the dynamics of each region and its relations with Turkey. We will be continuing our joint efforts with the platform manufacturers as well.
We envision that local defense industry companies will be emerging in the world while the existing ones will be strengthening. As the countries become more sensitive to the local content levels of the products they purchase, the companies will continue to support their domestic industries with the offset policies they implement. As a result, we believe that countries will be making purchases that are supportive of their own defense industries.
Defence Turkey: Besides the defense and security sectors, could you please evaluate your performance in Rail Transportation, Electric Vehicles, Civil Avionics, Telecommunication, Mobile Communication, Automation Systems etc. and assess your strategies for the near future?
Just as the Defense Industry, Transportation Systems, Energy Management Systems, and Healthcare Technologies are also significant and critical areas of technology that need to be developed nationally. We have recently established a business sector: UGES (Transportation, Security, Energy, Automation and Health) focusing on these subjects.
In 2016 we have cooperated with Ankara Metropolitan Municipality / EGO and modernized the outdated traction systems (including the electrical engines) on sample metro vehicles that were provided to us. Similarly , the traction systems of the first indigenous tramcar ‘İpekböceği’ manufactured by the Durmazlar Company is being provided by Aselsan through the cooperation of the two companies. By this means, the domestic contribution rate considering the vehicles will be increased to over 85 percent to be utilized in the national and indigenous underground, regional train, high speed train and locomotives.
In 2016, we have also completed the development on the first indigenous electric bus with our partner TEMSA. The new bus features fast charging (around 7 minutes) which will enable travel up to a distance of 70 km.
Within the framework of the energy systems, we have been working on achieving a trackable, manageable and measurable network infrastructure in Turkey through smart network systems activities and power control.
In the field of healthcare technologies, projects have been initiated for the development of medical imaging devices such as mobile X-ray and MR devices in line with the demands of the country.
Defence Turkey: Dear Dr. Eken, in your previous remarks you mentioned that you aimed to increase your export share within the total sales turnover to the level of 20% and even up to 30% within the next five-year period. Considering the current changes in the worldwide conjuncture including defense budget cuts and the financial recession, are these targets still valid in the defense sector in the midst of such fierce competition?
The fluctuation in the prices of oil and gas, which are the main revenue resources of the countries to which Aselsan makes the most exports, limits the defense spending in these countries. Our export targets are still valid and we will continue to work toward attaining the highest amount of exports within our capability.
Defence Turkey: In respect to exports, we observe that Aselsan has been increasing its impact further in the South American market in addition to the Middle East and Middle Asia regions. Could you please evaluate the ongoing activities and your impact in that region?
We increased our impact in South America in the last few years. We have recently made exports to Chile and Uruguay. Brazil, Colombia and Peru are the other primary countries where we are active.
We have signed four contracts in Uruguay since 2006. We fulfilled all our commitments related with the projects involving our systems towards border security and our communication systems. Our systems are successfully providing service to the Armed Forces of Uruguay.
Additionally, we have significant initiatives in Chile for the modernization activities of airborne and land platforms. Among them, Aselsan won the project for the procurement of the electronic warfare self-protection systems of the rotary-wing platforms of the Chilean Armed Forces.
The experience we gained in the region through the projects executed in Uruguay and Chile also contribute significantly to the activities we conduct in other countries of the region.
Another important point is the support from the government which is in fact quite essential in the defense sector. This is extremely important in the South America region. Intergovernmental communication is a prerequisite in the projects. All the branches of our government, primarily the Undersecretariat for Defense Industries, have really been providing great support to us.
Defence Turkey: In addition to the South America region, we see that Aselsan has recently been penetrating especially the Eastern Europe with a more effective marketing policy. How do you plan to position yourself in this region?
Eastern European and Balkan countries are amongst the countries that Aselsan exports. The main strategy of our company in that geography is a collaborative approach that can be summarized as promoting ”technology transfer and the effective inclusion of the local industries in these countries”.
Recently, the regions of Eastern Europe and Balkans are showing increasing interest in Aselsan’s wide variety of products, exclusive experience, facilities and capabilities.
One country where we are active and conducting variety of activities is Poland. We have already delivered various products from night vision equipment to the radars that Poland needed as part of its border security.
The 30 mm Remote Controlled Artillery Systems delivered by our Defense Systems Technologies Business Sector to the Croatian Naval Forces, to be used in the Coast Patrol Boats. The contract for the procurement was signed in April 2015. Besides, in Macedonia, the Mini TASMUS contract, led by our Communication & Information Technologies Business Sector, has entered into effect.
On the other hand, I would like to emphasize that the facilities and capabilities of our company are not limited merely to the defense area. As an example, deliveries are being made as part of the Electronic Toll Collection Systems contract signed with the Macedonian Highway Administration.
Defence Turkey: You have local companies in countries such as Jordan, United Arab Emirates, Kazakhstan, Azerbaijan, Saudi Arabia in line with your joint production, joint development strategy. We observe that Aselsan is well established especially in the Middle East and Middle Asia through this growth strategy. How would you evaluate the performance and activities of your active companies in this region in 2016? Could you please tell us about the recent status of the programs currently conducted particularly in Kazakhstan, Jordan and Azerbaijan?
Aselsan-BAKU Company located in Azerbaijan was established in 1998 by Aselsan with 100% share. The company is representing Aselsan in the domestic market, sales of civil communication systems with high technology and providing after-sales services. Until today, the sales of Software Defined Radios, Squad Radios, Intra-communication System, Professional Communication Devices and IP Encryption Device were realized and related deliveries were completed. New contracts were signed at the end of 2015 and in 2016 as well. The contracts for the Dismountable Radio-link System, Electro-Optical Systems, HF Land Radio and Airborne Platforms/Tower Communication Systems were signed and have entered into effect.
The KAE LLP Company, jointly established by the Republic of Turkey and Kazakhstan, represents the strategic importance of the existing mutual trust between the two countries. The KAE LLP Company currently conducts its production activities in an 8,500m² indoor area in the Astana Free Economic Zone.
KAE initially started its manufacturing activities with the production of Night Vision Weapon Sights/Goggles, Day Vision Sights, Thermal Weapon Sights, Laser Range Finders, Surveillance Reconnaissance Devices and expanded its activities to the areas of helicopter modernization, remote controlled stabilized weapon systems, tank modernization, and air defense systems. Lastly, as part of the technology transfer from Aselsan, our professional radios will be manufactured in these facilities as well. Our efforts towards equipping the artillery in the Kazakhstan Armed Forces with modern fire support automation systems in the upcoming period are ongoing.
Aselsan Middle East Private Shareholding Company Limited (AME) was established in 2012 by the partnership between Aselsan and King Abdullah II Design and Development Bureau (KADDB), a state organization of Jordan. Night Vision Weapon Sights/Goggles and Binoculars, Day Vision Sights and Thermal Camera/Weapon Sights manufactured by AME were delivered to the Jordan Armed Forces. Moreover, the orders received from the Gulf countries were manufactured and delivered to the customers. Activities are being carried out to extend the product portfolio of the AME in the near future and to turn it into a significant production and technology base of the region in defense electronics sector, primarily to meet the needs of the Jordan Armed Forces.
In 2016, Aselsan partnered with Saudi Arabian Taqnia Defense and Security Technologies to form a Joint-Venture company focusing on radar, electronic warfare and electro-optics in Saudi Arabia.
Defence Turkey: In the beginning of 2016, an agreement for the establishment of a joint venture which would enable the design, development, production and sales of the Radar, Electronic Warfare and Electro-Optical technologies in the defense sector was signed between Aselsan and TAQNIA Defense and Security Technologies (DST), a state-owned company of Saudi Arabia,. Could you please inform us on the establishment, building progress, capacity and capabilities of this joint venture and the opening schedule of the factory?
The legal setup of the company in Saudi Arabia was recently completed. We envision the factory’s construction to begin in the second half of 2017. Our aim is to have the facility in Saudi Arabia to be similar to Aselsan’s Gölbaşı facility which has advanced technological infrastructure and equipments. This new enterprise will fulfill the demands of Saudi Arabia and the region by allowing the design, development, production and sales of the radar, electronic warfare and electro-optical technologies.
Defence Turkey: Could you please inform us also on the latest status of the programs conducted at your radio factory operating in Saudi Arabia?
Our activities for meeting the tactical communication needs of the Saudi Arabian Armed Forces were executed in line with the ‘technology transfer and local production’ model. As a result of the intensive efforts conducted since year 2009, the cooperation for the technology transfer/local production of our radios, the performance of which were certified by the Saudi Arabian Armed Forces, between Aselsan and the Military Industries Corporation (MIC) under the Saudi Arabian Ministry of Defense, was initiated in 2011. On October 1st, 2013 the contract for the Technology Transfer and Local Production of the Aselsan Software Defined Radios was signed.
The Military Industries Corporation (MIC) facility to produce software defined radios has been completed and inaugurated in 2016. As part of the contract, the installation of the envisioned production line at this facility and training of the MIC staff were also completed in 2016.
At this facility, which has become ready for production, initially pilot production and afterwards ‘Capacity Verification Production’ activities were completed. Following these efforts, the MIC staff accomplished Pilot Production activities and the serial production activities are ongoing.
Defence Turkey: Dear Dr. Eken, as part of your growth strategy, will you take initiatives in 2017 and afterwards such as the acquisition of medium or small scale foreign companies or mergers with other companies that are active particularly in niche areas and producing advanced technologies with high added value?
Aselsan main growth strategy is to achieve organic growth. Our acquisition strategy is to seek after medium to small foreign companies in order to supplement or strengthen our technological capability in order to support Aselsan’s main activities.
Defence Turkey: Recently, Aselsan accomplished the sale of a highly critical technology, the ASELPOD targeting pod, to an unidentified country in the Middle East. Through this deal valued at 25 million USD, an indigenous product with advanced technology and high added value was exported to a foreign country for the first time. What are your comments on this significant achievement and what are your opinions on the new doors which would be opened following this achievement?
The sale of one of the most complex systems developed by Aselsan to a foreign country is really a great success. This sale is quite important in demonstrating our capability to develop high technology and of integration. The targeting pod is a system developed by merely 3-4 countries in the world and Turkey not only developed this system to meet the need of its own army but also achieved to export it to another country.
Currently, we are in touch with several other countries for this product. This contract will be an important reference paving the way for other opportunities in the future.
Defence Turkey: Considering the foreign sale of the ASELPOD, how much demand do you expect, especially from the North African, East European and Middle Eastern countries? That being said, how do you evaluate the competitiveness of the ASELPOD in the market as an important brand-product as compared to its rivals, firstly specific to those regions and then including other regions of the world?
When the ASELPOD’s technical features, display quality, operational utilization, etc. are taken into consideration, we evaluate that the ASELPOD has equivalent and superior qualities compared to the other targeting pods in the market. Therefore, we are in an advantageous position in terms of international competition. Besides, we are one step ahead of our rivals with respect to price. As you have also mentioned, we expect significant demand for the ASELPOD from the North African, East European and Middle Eastern countries and the developing countries of Asia and South America. We are conducting our marketing and business development activities intensively to this end.
Defence Turkey: System qualification activities were completed recently within the scope of the EO/IR Targeting System development project initiated as part of the demands of the Turkish Air Force and currently the project is ready for the serial production stage. With the serial production stage comprising the second phase of the targeting pod system, the integration of this system to the F-16 PO-III aircrafts in the inventory of the Turkish Air Force is being planned. What is the scope of the project in this context? Parallel to this, could you please inform us about the development activities regarding the targeting pod?
All the qualification test activities of the ASELPOD system were completed. In the first phase, four (4) ASELPOD systems are being delivered to the Turkish Armed Forces (TAF).
Aselsan has also received serial production order from Turkish Air Force for for the ASELPOD system to be integrated to the F-16 PO-III aircrafts.
Defence Turkey: Could you briefly summarize the latest status of the development and test processes of the HİSAR-A and HİSAR-O programs?
The Low and Medium Altitude Air Defense Missile Systems, that we named HİSAR-A and HİSAR-O, are the indigenous solutions that we refer to as the ‘system of systems’, that contain many critical technologies, and that are highly complex.
The prototype systems were developed within the scope of this project, for which we are currently executing the Sub-System Development and Test Phases. We accomplished the sub-system level design verification activities to a great extent and the system level test process is ongoing. At this stage, the field tests of the prototype systems have started and the firing tests and regular (non-firing) tests planned for the development activities of the missiles and the missile sub-components are being conducted. Meanwhile we continue performance assessment activities by using the models of the system components at the system integration laboratory established at Aselsan. We plan to launch the qualification tests of the HİSAR projects in 2018.
Defence Turkey: How are the activities, conducted as part of the Long-Range Air and Missile Defense System which has been determined to be developed with national resources, proceeding? Which responsibilities will Aselsan have in this project?
As Aselsan, we are developing the required technologies such as command control systems, fire control systems, communication systems, search and tracking radar systems and missile sub-components (seeker, data link, etc.).
As part of the Long-Range Air and Missile Defense Project, activities are being held with foreign companies under the coordination of the Undersecretariat for Defense Industries.
Defence Turkey: Considering the acquired infrastructure and experiences, could we claim that Turkey has a bright future in the indigenous development of surveillance and fire control radars, that constitute the most important part of Long-Range Air Defense systems?
Yes exactly. Since our radars, being developed within the framework of the Multi-Functional Phased Array Radar System (ÇAFRAD) to be used by the Turkish Naval Forces and the Early Warning Radar System (EWRS) to be used by the Turkish Air Force projects, are the systems that have the equal capability scale with the surveillance and fire control radars required by the long-range air defense systems with their improved AESA (Active Electronically Scanned Array) antenna technologies and indigenous radar algorithms.
Defence Turkey: Dear Dr. Eken, do you have a project initiated towards the development of a ‘Very Long-Range Ballistic Missile Defense Radar’ against ballistic missiles, that would upgrade our country?
Yes. The conceptual design activities are being conducted for the development of a ‘Very Long-Range Ballistic Missile Defense Radar’ as part of the conceptual studies of the National Air Defense Systems launched by our Undersecretariat for Defense Industries.
Defence Turkey: When do you plan to launch the system development and production stage of the ÇAFRAD Phase-1 Project? What is the program schedule for the system tests and for rendering the system operational following the delivery of the first prototype?
Within the scope of the ÇAFRAD Phase-1 Project, initiated for the Multi-Functional Phased Array Radar (ÇAFRAD) Systems which will be the radar sensor suite of the air defense frigate of the Turkish Naval Forces; a scaled model of the ÇAFRAD are being developed.
At this stage, the system integration and test activities are being carried out intensively and the accomplishment of the system’s factory acceptance tests are being planned for the end of 2017. After that, fire tests with actual guided missiles are planned. The preparations for the second phase of the project are being carried out and the delivery of the systems is planned in line with the TF2000 procurement program.
Defence Turkey: How are the activities conducted for the integration, tests and qualification of the CATS HD EO/ IR Reconnaissance, Surveillance and Targeting System developed indigenously by Aselsan proceeding? The safety-of-flight tests were expected to be completed this October. Could you inform us on the relevant developments?
The CATS System is a high performance electro-optical reconnaissance-surveillance and targeting system developed for the Unmanned Aerial Vehicles (UAV), Helicopters and Aircrafts. CATS has a multi-functional electro-optical system containing an infrared camera, day vision camera and low light camera and including a Laser Target Marker, Laser Range Finder, Laser Illuminator and Laser Fixer.
The CATS system, that is the abbreviation of “Common Aperture Targeting System”, in addition to its high range performance capability with the help of its common aperture high performance optics and developed image improvement algorithms, features the capacities of identifying precise geographic position of the target and directing the laser guided ammunition to the target through the laser marker.
The CATS System launched its flights on-board a helicopter in early 2016. Moreover, flight activities were accomplished over a Cessna Grand Caravan aircraft. The activities are carried out for the system to operate on-board various airborne platforms. Within the scope of a current ANKA contract, we accomplished the initial deliveries in 2016.
Defence Turkey: Could you please comment on the preparations being conducted for the material procurement and purchasing orders within the scope of the requirements of both the Armed Forces and other security institutions regarding the CATS HD EO/IR reconnaissance, surveillance and targeting system’s serial production phase? It was anticipated that the speed of the serial production line would triple in 2017. Could you inform us on the activities conducted to this end and on the latest status?
We are aware of the requirements in this subject. Therefore, we planned the serial production by projecting the demands of the potential customers, allocating an additional budget and initiating material procurement activities in 2016. We aim to increase the production capacity gradually starting from the first months of 2017.
Defence Turkey: The very first KORKUT Self-Propelled Air Defense Systems, developed for the armored and mechanized units’ air defense needs, were delivered to the Turkish Land Forces. Could you enlighten our readers on the delivery of the other systems and the serial production process following the delivery of two KORKUT Weapon System Vehicles (WSV) and a single Command Control Vehicle (CCV) to the Land Forces?
Our projects for the development of the air defense artillery systems, and the development of the smart ammunitions utilized by these systems, are quite significant both for our country and for Aselsan. In addition to the KORKUT systems, the Fire Control Device (FCD) developed with these systems; and 35 mm Modernized Towed Air Defense Artillery (MTADA) modernized in order to be controlled by the FCD and 35 mm smart ammunition were delivered to the Turkish Land Forces in 2016.
These systems, developed as part of the KORKUT Project, will provide a great contribution to the air defense capabilities of the fixed and mobile units of the Turkish Armed Forces. The indigenous development of smart ammunition along with the KORKUT systems has been a great achievement for our country. With the utilization of the smart ammunition, the effect of both the KORKUT Weapon System Vehicles and the modernized 35 mm Towed Air Defense Artillery against the current airborne threats has been increased significantly.
Upon the successful completion of the development program, we also signed the serial production contract with the Undersecretariat for Defense Industries for the KORKUT systems in 2016.
Defence Turkey: You established the AB MikroNano Company with Bilkent University at the end of 2014, which will be producing nano transistors and electronic integrated circuits commercially for the first time in Turkey. When will this facility start its activities and in which areas will Turkey gain advancement with the launch of the facility? What advantages and capabilities will it contribute to the Turkish economy, as well as to Aselsan, in the long run?
The construction of the AB MikroNano Company’s building and the installation of its laboratories at Bilkent Cyberpark have been completed in 2016. The production of the semiconductor devices started according to the delivery schedules of Aselsan’s radar and electronic warfare programs, primarily the ÇAFRAD and EWRS radars. We expect the first deliveries in 2017.
As you may know, with Galium Nitrate (GaN) Semi Conductor Technology, it is possible to reach output powers 4-6 times higher than GaAs and LDMOS technologies per unit area in frequencies and frequency bands quite higher compared to other technologies. This technology will help Turkey to upgrade itself in many areas such as the AESA required by the Long-Range Air Defense Systems, reconnaissance and fire control radars requiring high output power, missile seeker radars, broad band electronic warfare jamming systems, power electronics applications in which efficiency is crucial and in the areas of satellite intelligence and satellite communication systems where the high power and radiation resistance requirements are important.
By enabling the serial production of GaN products, the ABMikroNano Company will eliminate foreign dependency in radar, electronic warfare and satellite projects and therefore it will both create an alternative to foreign suppliers requiring export permits and also reduce project expenses. Moreover, the foreign sales of these products will contribute significantly to our country’s high technology product exports.
Defence Turkey: Will you be announcing new products that will create an impact before IDEF 2017?
Of course, our preparations for IDEF are continuing. IDEF is a prominent event for launching new products. We continue our activities intensively in order to make the most of this opportunity.
In order to create the desired level of impact during the launch of new products, the products have to be introduced to users during the fair. Therefore, the answer to your question is ‘yes’, you will be able to see some of our new products at IDEF for the first time.
Defence Turkey: Lastly, is there any message you would like to convey to the readers of Defence Turkey magazine?
Ever since its establishment 41 years ago, Aselsan has been striving to achieve the unattainable in Turkey. Reducing our country’s foreign dependency in technology is our main reason for existence.
For this purpose we are allocating great resources to R&D. We are carrying out 150 different indigenous projects in which we are collaborating with the universities, TUBITAK and over 2000 domestic manufacturing and supplier-industry companies across the country.