Defense Industry Teknokent Companies Coalesce at the TSSK 4th Project Market

Accelerating Growth Rate of Turkish Defense Industry Encourages Strategic Partner Cooperation – Higher Expectations with Stringent Criteria

Date: Issue 73 - April 2017

ODTU Teknokent Defense Industry Cluster’s (TSSK) 4th Project Market took place under the auspices of the Undersecretariat for Defense Industries and by the Middle East Technical University (METU), ODTU Teknokent, Ankara Chamber of Industry (ASO) and the Defense Industry Manufacturers’ Association (SaSaD) at the beginning of 2017 at the ODTU Congress Hall.

The products developed by the companies operating under the roof of TSSK were showcased at the 4th Project Market. At the event in which large and small scale defense companies gathered, new business opportunities were discussed in detail through bilateral negotiations.

Taking the floor at the opening ceremony of the event, TSSK Chairman of the Board Mr. Fatih Ünal stated that presently, with over a hundred companies focused on innovation, ODTU Teknokent Defense Industry Cluster (TSSK) which started-up its activities in 2010, is now a prominent dynamic of the sector due to its technological solutions that contribute toward decreasing Turkey’s foreign dependency. He elaborated that TSSK formed fruitful cooperation models by attending many organizations and events on a national and international scale. Mr. Ünal continued, “We are participating in many fairs and events abroad within the year. Among these events, the most important one for us is, without a doubt, is the Project Market. For us this event is a small scale IDEF where capabilities are displayed. Over the years, the turnout has increased with each event. We are striving to expand cooperation from the top to the bottom by gathering the smaller, up and coming players along with the established great players in the industry.”

Mr. Ünal pointed out their collaboration on various cooperation models with the other defense industry clusters in the sector as well, said, “Today, here at this event, we will sign a cooperation protocol with the Defense, Aviation/Aerospace and Space Cluster SAHA İstanbul that pursues its activities in İstanbul, Ankara Aerospace Industrial (HAB) and Aviation - Space Cluster and Aerospace Cluster Association (HUKD) and we will carry this cooperation beyond expectations.”

President of the Ankara Chamber of Industry (ASO) Mr. Nurettin Özdebir expressed their sheer delight in having established such an organization under the auspices of the Undersecretariat and continued, “As a result of our position, in a challenging geographic location, we need to possess critical technologies. To this end, we regard that these types of events, gathering together the sector companies and researchers, are an essential catalyzing element in the transferring of technologies into production.” 

ASO President Mr. Nurettin Özdemir: “Ankara’s Share in Defense Industry Exports is 20%”

Stating that the Turkish Defense Industry has an accelerating growth rate, Mr. Özdebir said, “Turkey achieved exports of approximately $ 142 billion in 2016. The overall export figures of the year 2016 decreased 1.18% compared to the previous year, however, there was an increase in the exporting of Defense-Aviation/Aerospace and Space products by 1.4%. When we examine the export data according to regions and cities, Ankara has a very important place in the ranking. Since Ankara is the base for the defense industry, it alone encompasses 20% of the high-tech products manufactured in Turkey. Ankara’s technological competence is far ahead of our other cities, but it is still not enough. It must raise its targets to bring forth its true potential, reaching greater heights and stretching beyond what has already been done to achieve even higher export levels. When we analyze Turkey’s export figures, we observe that Ankara has taken a step back in the overall ranking compared to 2015. This last year 2016, Gaziantep overtook Ankara in exports for the first time.”

Deputy Undersecretary for Defense Industries Dr. Tüfekçi: “We have to increase the quality of human resources in order to achieve success in unique projects” 

Deputy Undersecretary for Defense Industries Dr. Celal Sami Tüfekçi expressed their pleasure in attending the 4th project market this year and said, “In the last era, Turkey adopted the technology developing-producing country approach instead of the technology using country approach. It focused its goals over a sustainable industry and technological competency. We have completed our strategic plans for 2017-2021 within this context and our strategic goals entered into effect as of 2017.  The 4 main strategic areas are defined in our strategic plan for the new period that focus on the main themes of technological depth and global efficiency. Speed, quality and cost-efficiency will be our priorities in modernization projects. We will be focusing on the productivity method for capability acquisition as the second area. Toward achieving speed, quality and cost-efficiency, productivity has to be supervised and monitored well. Within the scope of the third area that stands out is that we are aiming to combine the technological novelties with scientific know-how and experience. As the Undersecretariat we need to be in full harmony and synergy with the industrialists and academia. Human resources strategy and strong institutional management will be our fourth area. We have many great projects that we try to realize, and it is not possible to see them come to fruition just by imagining them on the paper. We are striving with great effort in the area of training and developing high caliber human resources. I would like to especially underline that if we fail to enhance the quality of our human resources, nothing we mentioned could pass beyond a dream.”

SSM, Aselsan, Roketsan and TÜBİTAK are Preparing for the Establishment of a Semi–Conductor Company in Microelectronics 

Noting the crucial importance of the development of domestic industry facilities and capabilities in projects within the scope of the activities for the development of SMEs and sub-industry, Dr. Tüfekçi conveyed a striking message to the sector in this context: “We attach great importance to industry participation activities directed toward having domestic system components. We demand the transfer of a minimum of 30% of the industrial participation off-set liabilities of our Main Contractor companies to the sub-industry and SMEs as business share and at least 15% to SMEs as business share. We aspire that the participation of our small companies in programs to not merely be that of supplying the labor but also to be involved in technology generation. We are constantly consulting the SaSaD and other defense industry clusters on how to expand on this and reach new levels. We have an initiative with Aselsan, Roketsan, TÜBİTAK and the Undersecretariat for Defense Industries for the unique design and domestic production of microelectronics. This is key as microelectronics are one of the critical components of the systems that we procure; the domestic development of the detectors over the cameras which are amongst the most important implementation areas of these microelectronics. With the establishment of such a company, we aim to conduct serial production of the microelectronics that we have supported through years of R&D, thus gaining leverage as we achieve yet another level of technological independence.He noted a current challenge that must be addressed “In subsystems, especially when we add intelligence to systems, unfortunately, we cannot integrate them into our systems and mass-produce them. We have to change this and we have to create production-oriented output.”

Dr. Tüfekçi underlined the necessity of supporting the design and production process of systems with the high added value provided by required testing and infrastructure. “To this end, we decided on the establishment of the TrTest or Türktest Corporation which will, in particular, establish and operate the system platform level identification and assessment infrastructures.” said Dr. Tüfekçi.

Dr. Tüfekçi: “We excluded the requirement of needing to be a staff member of a company in order to benefit from the SAYP Program”

Noting that they made severe changes in the Defense Industry Researcher Training (SAYP) program in 2016, Dr. Celal Sami Tüfekçi said, “The personnel, who would be conducting the research as part of the initial implementations of the SAYP program, were obliged to be both the staff of a defense industry company and registered in the graduate or post- graduate programs of the university. In 2016, we made the process more dynamic by abolishing the obligation of being a staff member of a company in order to benefit from SAYP.

“We implemented incentives and support for the sector which will provide support and relief to companies as they endeavor to increase industrial participation in projects. We used to grant credits to our companies within the scope of supporting qualified products and infrastructure through our Defense Industry Support fund. We decreased the interest rate of this credit on a USD basis from 2.1% to 1%.” said Dr. Tüfekçi. 

Supportive financial investment models were established to promote the realization of new projects in critical technology areas, fostering a more fertile environment that would create a sustainable and competitive technology base in the defense industry.  Dr. Tüfekçi said, “We established our Defense Industry Technologies Inc. Company. With this company, we will be launching the model of becoming partners with our existing technology manufacturing companies We are striving to build companies focusing on know-how and designs that will generate organic growth, and as the Undersecretariat, form a structure supporting these companies. I would like to state that we are open to the partnership models with our main contractor defense industry companies and other SME companies.”

SSM Deputy Undersecretary: “120 companies made applications for the Ankara Aerospace Industrial Zone” 

Dr. Tüfekçi underlined the importance of the cooperation protocol to be signed with the ODTU Teknokent and Istanbul SAHA clusters and added that the union of the prominent features of the eco-system is of great significance. When compared to the examples in the world, typically a cluster’s ability to reach the desired level requires 10 years. However, the clusters in Turkey achieved fruitful results with their limited budgets in less than 10 years. In order to raise these achievements to higher levels, we are working on the establishment of the Ankara Aerospace Industrial Zone with an area of over 730 hectares located next to the TAI facilities. We intend to establish a zone that would create synergy between the universities, R&D centers and clusters by gathering the domestic and foreign companies in the area and enable integration. We are conducting joint activities with our Ministry of Science, Industry and Technology for the establishment of a techno-polis within this zone. 120 companies have applied for the zone so far. The preliminary appropriation was made nearly to 70 of these companies. We project that approximately a hundred companies within the zone will be constructed during the first stage.”

ODTU President Prof. Mustafa Verşan Kök touched upon the important contributions of the TSSK companies that are conducting actives at the ODTU campus within the eco-system and added, “We initiated the SAYP program in 2011 with the Undersecretariat for Defense Industries and ODTU and with our major industry companies such as Aselsan, Roketsan, TAI, FNSS, MilSOFT and Havelsan. The number of projects conducted within the scope of these programs reached 25 in 2016 and its economic growth exceeded 7 million TL ( approx. $ 2 million).” Mentioning that ODTU  constantly invests in informatics and innovation, Kök added, “In 2017, we aim to complete the informatics and innovation center, in which we invested 80 million TL ( approx. $ 23 million)”

Following the speeches, an agreement was signed between STM and TSSK for STM academy to provide training for ODTU Teknokent companies. A cooperation protocol was signed between TSSK and the Aerospace Cluster Association, Ankara Space and the Aviation Specialized Organized Industrial Zone and SAHA Istanbul.

Following the opening speeches, a discussion panel was held regarding the procurement selection, procurement procedures and expectations from the suppliers, moderated by the Department Head of the Industrialization Department of the Undersecretariat for Defense Industries, Mr. Bilal Aktaş. As the initial speaker of the panel, Aselsan Procurement Manager Mr. Ali Rıza Kılıç stated that Aselsan achieved cooperation with 37 universities reaching $ 137.5 million, based on 2015 figures and added that, in 2016 considering the production and R&D budget, the number of companies that Aselsan procured from was 707, of which 597 of them were SMEs. Mr. Kılıç also mentioned that as of 2016, Aselsan had an open order of 3.3 billion TL (est. $ 900 million) to these companies and that they made a payment of 900 million TL (est. $ 250 million) to domestic companies again in 2016. Mr. Kılıç remarked that where the orders made to teknopark companies remained at the level of $ 5-6 million in 2015, as of 2016 this figure increased to $ 24 million and added that this increase will be continuing in 2017 and 2018 as well. Mr. Kılıç specifically highlighted that the design activities to be outsourced will become an increasing trend as of 2018. 

On behalf of FNSS, Quality and Business Excellence Manager Mr. İhsan Kahraman made a presentation on the systems, production and their expectations from subcontractors and stated that they plan to focus novel products in 2017. Mr. Kahraman mentioned the difficulties that they were facing in acquiring the required level of quality due to the rare nature of products of the subcontractors and technical systems in the sector. “We are having difficulties due to the scarcity of the subcontractors capable of creating solutions to bring novelty and innovation to products, reverse engineering and design simultaneously. During special processes in the course of certification we confront a problem”, said Mr. Kahraman. 

Also sharing their expectations from the subcontractors in his presentation, Mr. Kahraman underlined that they will surely be coinciding with the companies that are particularly investing in electronic systems, protection systems, improved power train and C4ISR areas.

Havelsan R&D and Technology Director Mr. Cenk Özen stated that they evaluated many criteria when selecting their suppliers and added, “We analyze important parameters such as the quality system, management system, product costs and financial structure of the companies wishing to incorporate into our eco-system. During the first stage, we made a scoring system with a preliminary assessment form. A company achieving 30 points over 100 is able to pass to the next stage. In the following stage, we conduct a visit and an evaluation of activity. We have consultancy companies working for us here and a technical staff executing the technical assessment. We evaluate the companies regarding administrative, quality and technical aspects. Companies scoring 90-100 are defined as priority companies in procurement and as a competent business partner. Our suppliers having 70-89 are defined in the category of a sufficient business partner.  In 2016, 251 companies applied to be included in our eco-system. 72 of these companies passed several stages and as of today, they are included in the category I just mentioned.”

Otokar Procurement Director Mr. Metin Karadaş made a presentation on Otokar’s procurement revenue distribution and supplier selection process. Mr. Karadaş stated that their export figure of $ 40 million in 2010 increased to $ 150 million in 2015 and 2016, noting the importance of cooperation to be created with the suppliers. Mr. Karadaş stressed that they can collaborate with suppliers active in micromachining, electronic boxes, radars, turrets, camera systems and insulation materials in the defense industry. 

Roketsan Procurement Director Mr. Ali Şarlak stated that they achieved procurement of 1 billion 533 thousand TL (est. $ 430 million) between 2011 - 2016 from suppliers and added, “Our Procurement Directorate analyzes the machinery proficiency, apparatus-set, labor, production reference list, financial structure, reliability aspects of the companies in supplier selection. We select suppliers through audits that are supervised by independent institutions that we outsource. We collaborate with the companies that scored over 75 as a result of the audits.”

Procurement and Industrialization Director Mr. İlhami Tanyolu shared that TAI works for over 100 programs with 97 companies in 11 cities. Noting that TAI’s strategic subcontract concept is of great importance to them, he said that they do not pursue tenders in their projects with their strategic partners, they make contracts over a unit price instead. Mr. Tanyolu added that they expect the subcontractors to have an engineering infrastructure, production infrastructure, quality, facility security and to be capable of performing risk management; companies of this caliber meeting the designated criteria are able collaborate with TAI as strategic partners.