A new Technological Forces of Ukraine (TSU) survey of 35 private defense firms indicates continued pressure to relocate production and IP abroad. Primary drivers are security risks, inability to export products/technologies, and insufficient state orders. Notably, for the first time in 18 months, the share of companies relocating or planning to relocate fell to 51% (Oct) from 85% (Feb)—a shift respondents attribute to emerging controlled-export policies.
Key Findings
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Top relocation catalysts:
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Inability to export products — 61%
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Insufficient state orders despite higher capacity — 56%
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Inability to export technologies — 56%
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Relocation scope among movers (51% of total):
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Production facilities — 78%
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Technology/IP rights — 78%
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R&D offices — 67%
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Top Destinations
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Poland
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Czechia
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United States
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Slovakia
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Estonia
These markets combine NATO proximity, export licensing clarity, access to EU/US funding lines, and insurance/risk wraps, making them attractive launchpads for dual-use and defense production.
What Could Stop Relocation
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Ability to export products — 74%
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Ability to export technologies — 69%
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Predictable state orders — 69%
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Higher procurement volumes — 57%
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Affordable credit for defense — 40%
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Joint ventures (JVs) with partners — 37%
Industry sentiment improved after a green light for munitions exports; 56% now see proactive state steps vs. 38% at the year’s start—conditional on level playing fields and EU-style export governance.
Capacity Utilization (Next 6 Months)
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Fully utilized: 14%
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>50% utilization: 21%
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Partial/low utilization: Majority
Opening exports and JV pathways are seen as the fastest route to fill order books via international contracts.
Procurement Channels (Oct 2025)
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Direct contracts with military units — 80%
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Closed procurements via AOZ — 54%
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Community procurements — 46%
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International programs — 29%
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Joint ventures — 11%
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Prozorro / Prozorro Market — 6%
Bureaucracy: 48% see only minor improvements; 34% see no change vs. 2024.
Investor Takeaways
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Relocation economics: Central-European setups offer export certainty and lower operational risk, but co-located Ukrainian capacity remains cost-competitive if export channels open and insurance is available.
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JV entry points: Partnering on licensed production, testing, QA, and NATO-grade certification can anchor firms in Ukraine while hedging with EU/US satellites.
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Financing stack: Blending war-risk insurance, export credit, and advance-purchase contracts can unlock capex for munition lines, UAV/UAS, EW, optics, and propulsion.
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Policy watch: Timelines and scope for controlled exports, tech-export permissions, and order predictability will determine whether the 51% relocation cohort stabilizes or re-accelerates.
Outlook
If controlled exports and predictable state demand materialize alongside JV frameworks and credit access, Ukraine can retain a sizable share of its fast-growing private defense base. In that scenario, investors should expect hybrid footprints—Ukrainian engineering and assembly cores paired with EU/US finishing or distribution—balancing speed to market with regulatory certainty and security.
