The THALES Design Journey
THALES balances human-centered and tech-driven innovation through design thinking, as Didier Boulet shares key corporate innovation insights.

Production capacity outranks budgets, cheap mass beats exquisite systems, and rules bend for speed. 73 defense trends, rated by impact and time to impact. Defense R&D and strategy teams track them in ITONICS and link every trend to the programs it affects.

On the night of 9 to 10 September 2025, around 20 Russian drones crossed into Polish airspace. NATO scrambled Polish F-16s and Dutch F-35s against them, and the fighters shot down up to four. The episode captures the defense outlook for 2027 better than any budget figure: Western forces have the money and the technology, and they lack the volume, the cheap effectors and the industrial depth to keep pace. Four constraints follow from the data of 2025 and 2026.
Each constraint becomes a portfolio decision: which programs you can deliver at the rates customers now demand, which subsystems to redesign to remove ITAR-controlled or Chinese content, and where cheaper, attritable products compete with your own platforms. The defense trend radar below collects the evidence.
The interactive ITONICS defense trend radar 2027+. Trends are rated by time to impact, from 0-2 to 10+ years, and by potential impact, from low to very high. 20 of 73 rate very high.
The 2027 report tracks 73 trends, down from 156 in the previous edition. We kept 51 topics, rewrote each with a new thesis, and added 22 new trends.
The previous edition repeated each theme across land, air, naval, space and cyber. That produced six trends on directed energy, six on alliances and 25 in the ecological category, most of them restating that sustainability matters. We merged overlapping entries into sharper ones and cut consensus statements that tell a defense audience nothing new. We also removed trends whose premise no longer holds.
Five trends moved up. Electronic warfare, cost per interception, and critical minerals rose from high to very high, and their impact now falls within the next two years, driven by the drone war, the interceptor bill of the Iran war, and Chinese export controls. Collaborative combat aircraft and space-based missile interception also reached very high, after the first CCA production contracts and Golden Dome's funding.
Three moved down. Swarm robotics fell from very high to medium, because battlefield mass comes from individually piloted drones. Hypersonic weapons fell to high, as their main effect narrows to pushing carrier groups away from contested coasts. Climate change and defense infrastructure fell to medium, as rearmament pushes the adaptation of bases down the budget queue.
Read together, the changes describe an industry whose constraint has moved from budgets to factories, minerals and people.
Land warfare in Ukraine has become a contest between drones, electronic warfare and artillery, and Western armies are rewriting their force design around it. The industrial base matters as much as the battlefield. Shells, energetics and critical minerals limit what armies can field, and skilled labor limits how fast new plants run.
Three trends carry the largest consequences for land system portfolios:
Summary: Deterrence is now measured in shells, missiles and interceptors delivered per year. Production capacity, energetics and long-term framework contracts decide which states can sustain a high-intensity war beyond its first weeks.
Current situation: Rheinmetall's Unterlüß plant, Europe's largest ammunition factory, is expected to produce 140,000 155 mm shells in 2026 and reach its design capacity of 350,000 a year in 2027. In the US, Lockheed Martin is raising PAC-3 output toward 2,000 interceptors a year, and the Pentagon signed a seven-year Patriot production deal worth $58.6 billion in July 2026. CSIS estimates that rebuilding US Patriot and THAAD stocks to pre-war levels will take until at least mid-2029.
Expected development: Europe and the US move to multi-year munitions contracts with clauses that reserve capacity for surges. New plants spread across Central and Eastern Europe to reduce single points of failure. Energetics, propellants and fuzes, more than shell bodies, set the production ceiling.
Challenges: Supply of nitrocellulose, explosives and solid rocket motors remains concentrated in a few plants. Buyers must keep ordering after current crises ease, or the new capacity will close again as it did after the Cold War.
Time to impact: 0-2 years
Potential impact: Very high
STEEP segment: Economic
This year's trend development: New
Summary: Drones now cause the majority of front-line casualties in the Russia-Ukraine war. Low hit rates for cheap FPV drones keep artillery and glide bombs essential, and the winning model combines massed drones with conventional fires.
Current situation: Ukrainian officials and commanders estimate that drones cause about 70% of casualties on both sides, a widely cited figure that independent data has so far left unconfirmed. The UN human rights mission in Ukraine reported that short-range drones caused more civilian casualties than any other weapon in January 2025. A former FPV operator writing in War on the Rocks put FPV success rates at 20–30% once aborted missions are counted, with many sorties delivering a second strike on targets already hit. Both sides now fly fiber-optic FPV drones that are immune to radio jamming.
Expected development: Armies reorganize around drone units and reconnaissance-strike loops, with fiber-optic links and AI-assisted terminal guidance. Artillery keeps its role for volume fires, and NATO armies buy drones in the hundreds of thousands and train every unit in drone and counter-drone tactics.
Challenges: Analog radio links, electronic warfare and dependence on Chinese components limit effectiveness. Supplying, storing and replacing millions of short-lived drones creates a logistics burden Western armies are only starting to plan for.
Time to impact: 0-2 years
Potential impact: Very high
STEEP segment: Technological
This year's trend development: New
Summary: China's export controls on rare earths, magnets and strategic metals make critical minerals the tightest constraint on Western munitions, missiles and aircraft. From 2027, suppliers to US programs must prove magnet supply chains free of Chinese content.
Current situation: China placed seven medium and heavy rare earth elements under export licensing in April 2025 and suspended a broader October 2025 package only until 10 November 2026; the April controls stay in force. Controls on tungsten, tellurium, bismuth, molybdenum and indium also remain. China dominates rare earth separation and magnet production, and industry analysts warn that many US suppliers are unprepared for the Pentagon's 2027 deadline.
Expected development: From 1 January 2027, DFARS 252.225-7052 bars the Pentagon from buying magnets mined, refined or produced in China, Russia, Iran or North Korea, across the whole supply chain. Western mining, separation and magnet capacity grows with government offtake guarantees and equity stakes, yet demand outpaces new supply and keeps prices and lead times high through the decade.
Challenges: Separation and magnet-making know-how sits largely in China, and new Western plants need permits, financing and years of ramp-up before they reach defense-grade quality. Pressure to delay the US deadline grows as suppliers struggle to qualify alternatives.
Time to impact: 0-2 years
Potential impact: Very high
STEEP segment: Economic
This year's trend development: Upgraded
Air and missile defense is where the cost of modern war shows first. The war against Iran drained US interceptor stocks, Russian drones over Poland exposed thin low-level coverage in Europe, and drone incursions closed airports in Copenhagen, Oslo, and Munich in autumn 2025. On the offensive side, uncrewed fighters have entered production.
For air and missile defense programs, three trends matter most:
Summary: The 2026 war against Iran consumed US interceptors faster than industry can replace them. Magazine depth now limits air and missile defense for the US and its allies more than radar or missile performance.
Current situation: CSIS estimates, based on budget documents and public information, that US Patriot interceptor stocks fell from about 2,330 before the war to 1,030 at the April ceasefire and to 759–827 by late July 2026. THAAD stocks fell from 452 to 234–278. The Pentagon has asked Congress for $67 billion to replenish munitions after the war and signed a seven-year Patriot production deal worth $58.6 billion. Secretary of War Pete Hegseth publicly rejected a CNN report on interceptor use in August 2026.
Expected development: Allies compete for limited production slots, and US replenishment takes priority over exports. Europe accelerates licensed and domestic interceptor production, and stockpile targets and surge clauses become standard contract terms.
Challenges: Seekers, rocket motors and energetics constrain output. Every interceptor fired at a cheap drone is one less available against ballistic missiles, which forces commanders to ration and changes how layered defenses are designed.
Time to impact: 0-2 years
Potential impact: Very high
STEEP segment: Economic
This year's trend development: New
Summary: The US Air Force moved collaborative combat aircraft into production in June 2026, making uncrewed fighters part of its force structure. Air forces shift from buying ever fewer exquisite jets to pairing crewed fighters with cheaper autonomous wingmen.
Current situation: The Air Force selected General Atomics and Anduril to build its first production collaborative combat aircraft. It intends to procure more than 150 combat-capable aircraft by the end of the decade and has set a long-term goal of about 1,000. General Atomics' YFQ-42A first flew in August 2025 and Anduril's YFQ-44A in October 2025, and a venture-backed company now holds a production contract in a major US fighter program.
Expected development: Allies launch their own loyal-wingman programs or buy into US designs, and government-owned autonomy software lets airframes and software evolve separately. Training, basing and maintenance concepts adapt to mixed crewed and uncrewed fleets.
Challenges: Assuring autonomous behavior in combat, protecting data links under jamming and holding the unit cost down at scale remain open risks.
Time to impact: 2-4 years
Potential impact: Very high
STEEP segment: Technological
This year's trend development: Upgraded
Summary: Counter-drone defense has grown from a niche into a mass market that spans armies, critical infrastructure and airports. Interceptor drones, guns, lasers and electronic warfare are bought in volume to protect everything from brigades to power plants.
Current situation: When around 20 Russian drones entered Polish airspace on 9–10 September 2025, NATO answered with fighter jets that shot down up to four, and launched Operation Eastern Sentry two days later. Unidentified drones closed Copenhagen and Oslo airports on 22 September 2025, and Munich airport suspended flights in early October. In Ukraine, interceptor drones have become a standard answer to Shahed-type attacks.
Expected development: EU and national programs fund layered counter-drone networks along borders and around critical sites, and police forces, energy operators and airports become customers alongside armies. Interceptor drones become the high-volume effector, backed by guns, lasers and electronic warfare.
Challenges: Legal authority to engage drones over civilian areas, detection of small, low-flying targets and coordination between civil and military agencies slow deployment. Low-cost effectors must keep pace with drone designs that change every few weeks.
Time to impact: 0-2 years
Potential impact: Very high
STEEP segment: Technological
This year's trend development: New
Naval power is being redefined at both ends of the cost scale. Ukraine pushed Russia's Black Sea Fleet out of the western Black Sea with drone boats, while China's shipyards out-build every rival. The Hormuz crisis of 2026 put chokepoints, mines and convoy escort back at the center of naval planning.
Three trends reshape fleet and shipyard planning:
Summary: Iran's threats against shipping in the Strait of Hormuz during the 2026 war showed that a mid-sized power can hold global energy flows hostage. Control of chokepoints returns as a central instrument of coercion.
Current situation: After US and Israeli strikes on Iran began on 28 February 2026, traffic through the strait was disrupted and energy prices rose sharply. Washington proposed naval escorts for merchant ships, Lloyd's backed a new war-risk insurance consortium for Hormuz transits, and talks between Iran and Oman over the strait ran alongside the fighting. In the Red Sea, Houthi attacks since late 2023 had already diverted much of the shipping between Asia and Europe around the Cape of Good Hope.
Expected development: Navies plan for contested passage through Hormuz, Bab el-Mandeb, the Taiwan Strait and the Baltic approaches. Mine countermeasures and escort capacity gain funding, and states expand strategic stockpiles and pipelines that bypass chokepoints.
Challenges: Escort missions tie down scarce frigates and destroyers for months. Coalition partners disagree on rules of engagement, and every interceptor fired at a cheap drone over a shipping lane drains magazines needed elsewhere.
Time to impact: 0-2 years
Potential impact: Very high
STEEP segment: Political
This year's trend development: Upgraded
Summary: China's shipbuilding capacity dwarfs that of the US and Europe, making yards, workforce and supply chains the binding constraint on naval power. In a long war, fleet size depends on the ability to build and repair ships.
Current situation: An Office of Naval Intelligence briefing slide put China's shipbuilding capacity at more than 232 times that of the US, measured in gross tonnage and including commercial yards. The US Navy Secretary said in January 2026 that American shipbuilders must hire about 250,000 workers over the next decade, and several US programs run years behind schedule. South Korean groups position themselves for US Navy work, with Hanwha operating Philly Shipyard in Pennsylvania since its acquisition in December 2024.
Expected development: The US and its allies use Korean and Japanese yards for maintenance and possibly construction, and Europe consolidates its naval yards. Modular designs and commercial-standard hulls gain ground, and repair capacity close to likely theaters becomes a planning priority.
Challenges: US law restricts the construction of Navy ships in foreign yards. Workforce shortages, long lead times for components and limited dry dock capacity slow every expansion plan.
Time to impact: 6-8 years
Potential impact: Very high
STEEP segment: Economic
This year's trend development: New
Summary: Ukraine used low-cost uncrewed surface vessels to push Russia's Black Sea Fleet out of the western Black Sea with a minimal conventional fleet. Drone boats give smaller states sea-denial capability at a fraction of the cost of warships.
Current situation: Ukrainian Magura and Sea Baby drones sank or damaged multiple Russian warships and forced the Black Sea Fleet to shift much of its activity from Sevastopol to Novorossiysk. In 2025, Ukraine reported that missile-armed sea drones had shot down Russian aircraft. Navies from the US to Taiwan now buy and develop uncrewed surface vessels for patrol, strike and swarm attacks.
Expected development: Uncrewed surface vessels operate in packs alongside crewed ships, harbor defense against drone boats becomes standard, and mid-sized navies adopt them as a core capability. Shipyards outside the traditional naval primes win a growing share of orders.
Challenges: Range, sea state and countermeasures such as guns, helicopters and electronic warfare reduce effectiveness against prepared defenders. The Houthis have used drone boats against merchant shipping in the Red Sea, which shows how quickly the concept spreads to non-state actors.
Time to impact: 0-2 years
Potential impact: Very high
STEEP segment: Technological
This year's trend development: Upgraded
Space has become an operational warfighting domain, and budgets now treat it as one. In September 2025, Germany announced €35 billion for military space by 2030, citing two Russian Luch-Olymp satellites that tracked Intelsat satellites used by the Bundeswehr, and said it must consider offensive space capabilities. In the US, Golden Dome puts missile defense into orbit, while commercial providers set the pace and the price of military space.
Three trends decide where space budgets go next:
Summary: Golden Dome turns space-based missile interceptors from concept into a funded program, yet their cost at scale remains open. The program will shape US space and missile defense spending for a decade.
Current situation: The Space Force awarded 20 agreements worth up to $3.2 billion combined to 12 companies, including Anduril, Lockheed Martin, Northrop Grumman, Raytheon and SpaceX, to develop space-based interceptor prototypes for demonstration by 2028. The official cost estimate rose from $175 billion to $185 billion through delivery in 2035. Of the $17.5 billion requested for FY2027, only $398 million sits in the base budget; the rest depends on a reconciliation bill. Program director Gen. Michael Guetlein told Congress that boost-phase intercept from space will be dropped if it proves unaffordable at scale.
Expected development: Demonstrations through 2028 decide whether space-based interceptors enter production. The sensor, tracking and command layers proceed in any case and build on the Space Development Agency's proliferated constellations. Allies weigh participation against the consequences for strategic stability.
Challenges: The Congressional Budget Office put possible costs between $161 billion and $542 billion in 2025, depending on assumptions. Launch volume, vulnerability to counterspace attack and the risk of an arms race in orbit remain unresolved.
Time to impact: 4-6 years
Potential impact: Very high
STEEP segment: Technological
This year's trend development: Upgraded
Summary: Ukraine's reliance on Starlink showed that one commercial constellation, controlled by one company, can shape a war. Governments now treat dependence on a single provider as a sovereignty risk.
Current situation: Ukraine's armed forces rely heavily on Starlink for front-line communications and drone operations, and public disputes over access in 2025 showed how much leverage a single operator holds. SpaceX also won the largest share of the Space Force's Phase 3 national security launch contracts and holds one of the Golden Dome interceptor agreements. The EU's IRIS² constellation adds 66 early-delivery satellites for launch in 2029 to bridge delays to the full network, and Germany's space plan calls for redundancy through several networked constellations.
Expected development: Militaries contract multi-orbit, multi-provider services and pay for guaranteed access in a crisis. European and national constellations gain funding, and commercial operators accept government controls in exchange for contracts.
Challenges: Alternatives to Starlink lag in capacity, terminal cost and coverage, and building sovereign constellations takes most of the decade. Europe's own launch bottleneck slows every plan to deploy them.
Time to impact: 0-2 years
Potential impact: Very high
STEEP segment: Economic
This year's trend development: Reframed
Summary: Russia, China and the US field counterspace weapons, from jammers and lasers to co-orbital interceptors. Space is now an operational warfighting domain in which satellites face threats in peacetime as well as in war.
Current situation: The US Space Force said in 2025 that Chinese satellites had practiced coordinated "dogfighting" maneuvers in orbit, and the Pentagon assessed in 2024 that a Russian satellite placed near a US government satellite was likely a counterspace weapon. Germany reported in 2025 that two Russian Luch-Olymp satellites had tracked Intelsat satellites used by the Bundeswehr. Russia vetoed a UN Security Council resolution against nuclear weapons in orbit in April 2024.
Expected development: Military satellites gain maneuverability, defensive payloads and hardened links, and allies develop counterspace capabilities of their own, with Germany saying it must consider offensive options. Space forces define rules for self-defense in orbit.
Challenges: Escalation risk, debris from destructive attacks and slow attribution of interference remain unresolved, and the commercial satellites militaries rely on are largely unprotected.
Time to impact: 0-2 years
Potential impact: Very high
STEEP segment: Political
This year's trend development: Reframed
Cyber operations now run ahead of any shooting war. US agencies warned in 2024 that the Chinese group Volt Typhoon had gained access to US critical infrastructure networks to prepare disruptive attacks, and Salt Typhoon penetrated major telecom providers. At the same time, AI agents have taken over much of the tactical work of hacking, and US acquisition policy now trades certified supplier security for speed.
Three trends change what defense suppliers must deliver in cyber:
Summary: The US Department of War suspended CMMC Phase II in July 2026 to cut compliance costs for small and non-traditional suppliers. Speed of delivery and supplier access now outrank third-party-certified cyber hygiene in US defense acquisition.
Current situation: Phase II would have required third-party certification for most contracts involving controlled unclassified information from 10 November 2026. The Department suspended it on 13 July 2026 as part of its Acquisition Transformation System and set up a CMMC Reform Task Force with a 60-day review. Officials declined to rule out cancelling the program, and the Small Business Administration cited costs of up to $600,000 per company for Level 2 certification. Phase I self-assessments, NIST SP 800-171 and DFARS 252.204-7012 remain in force.
Expected development: CMMC returns in reworked form, built on self-assessment, continuous monitoring and targeted government checks, or a different verification model replaces it. Primes keep their own supplier requirements, and enforcement shifts toward the False Claims Act.
Challenges: Lower assurance across the supplier base raises exposure to state hackers who target subcontractors to reach primes. Suppliers that already paid for certification face uncertainty about what their investment is worth. The task force's recommendations were due in mid-September 2026, and the successor regime remains open.
Time to impact: 0-2 years
Potential impact: High
STEEP segment: Political
This year's trend development: Reframed
Summary: AI agents now execute most of the tactical work in sophisticated cyber operations. Attack and defense both move to machine speed, and defenders must automate to keep pace.
Current situation: In November 2025, Anthropic disclosed that a group it assessed as Chinese state-sponsored had used Claude Code in an espionage campaign against about 30 organizations, including technology companies, financial institutions, chemical manufacturers and government agencies. According to the report, AI performed 80–90% of the tactical work, and the campaign succeeded in a small number of cases. The model also produced false findings, which still required human checks.
Expected development: Security operations centers deploy AI agents for detection, triage and response, and defense ministries procure AI-enabled cyber capabilities for offense and defense. AI providers and regulators build monitoring for misuse of agentic systems.
Challenges: AI agents can be manipulated through their inputs, generate false positives and widen the attack surface of the tools themselves. Attribution of AI-run operations becomes harder as human fingerprints disappear.
Time to impact: 0-2 years
Potential impact: Very high
STEEP segment: Technological
This year's trend development: Upgraded
Summary: State hackers pre-position access in power, water, telecom and transport networks to disrupt them in a crisis. Critical infrastructure becomes a target long before any shot is fired.
Current situation: In February 2024, US agencies warned that the Chinese group Volt Typhoon had gained access to US critical infrastructure networks, including communications, energy, transportation and water systems, to prepare disruptive attacks in a crisis. Salt Typhoon penetrated major US telecom providers in 2024. Mobilization in any major war would run over exactly these networks.
Expected development: Governments mandate threat hunting and network segmentation for critical operators, and defense planning includes cyber disruption of mobilization, ports and logistics. Offensive cyber capabilities serve deterrence signaling.
Challenges: Private operators bear the costs, legacy operational technology is hard to secure, and attribution stays slow, which complicates any proportional response.
Time to impact: 0-2 years
Potential impact: Very high
STEEP segment: Political
This year's trend development: Reframed
Download the full list of all 73 defense trends (each with its current situation, expected development, challenges, and ratings) for sharing with your colleagues, your next strategy review, or portfolio workshop.
Download all 73 defense trends 2027+
In ITONICS, defense R&D and strategy teams link every trend to the programs and roadmaps it affects, so companies like Rheinmetall, Northrop Grumman and Hensoldt can see which programs gain or lose relevance as conditions change.
Twenty trends reach very high potential impact in this report. Leading them are depleted interceptor stockpiles after the Iran war, munitions production capacity, critical minerals, the cost per interception, electronic warfare in the drone war, collaborative combat aircraft and NATO's 3.5% spending target.
World military expenditure reached $2,887 billion in 2025, 2.5% of global GDP and the highest share since 2009, according to SIPRI. NATO allies committed to 3.5% of GDP for core defense plus up to 1.5% for resilience and the industrial base by 2035. The US spent $954 billion in 2025, and the administration's FY2027 request totals $1.5 trillion.
The main risks are Chinese export controls on rare earths and strategic metals, the US ban on Chinese-sourced magnets from January 2027, and concentrated supply of energetics, seekers and solid rocket motors. Skilled labor and shipyard capacity limit how fast any of these bottlenecks can be cleared.
Buyers now score systems on cost per engagement and production rate alongside performance. Budgets shift toward attritable drones, counter-drone layers, and electronic warfare, and uncrewed aircraft such as collaborative combat aircraft enter production alongside crewed fighters.
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