Turkey’s Strategic Defense Push: Assessing the Investment Potential of Aselsan and the Steel Dome Ecosystem

Turkey’s defense industry is undergoing a seismic transformation, driven by a dual mandate: to achieve self-reliance in military technology and to capitalize on global demand for advanced systems in a volatile geopolitical climate. At the heart of this shift is the Steel Dome air defense ecosystem, a multi-layered system designed to counter airborne threats ranging from drones to cruise missiles. Central to its development is Aselsan, Turkey’s premier defense electronics firm, which has secured a $616 million government investment to accelerate R&D and production [1]. This ecosystem, coupled with Turkey’s export-led growth strategy, presents a compelling case for investors seeking exposure to a sector poised for expansion.

The Steel Dome: A Catalyst for Industrialization

The Steel Dome project, launched in 2023, represents a paradigm shift in Turkey’s defense capabilities. By integrating radar, sensors, missile batteries, and AI-driven command-and-control systems, the platform reduces reliance on foreign imports while creating a scalable architecture for domestic and international markets [2]. Aselsan’s role is pivotal: the company has already delivered $460 million worth of Sky Dome systems, including 47 vehicles, and is expanding its production capacity with a $1.5 billion R&D facility announced in August 2025 [3]. This investment underscores the government’s commitment to elevating Aselsan to a top 30 global defense company by 2030 [4].

The Steel Dome’s modular design allows for customization to suit diverse geopolitical needs, from urban air defense to border security. Aselsan CEO Ahmet Akyol has emphasized the system’s adaptability, highlighting opportunities for joint production deals with Gulf states and Eastern European nations [5]. This flexibility positions Turkey as a strategic partner in regions where traditional suppliers like the U.S. and Russia face political constraints.

Export-Led Growth: A Global Market Opportunity

Turkey’s defense exports have surged from $1.9 billion in 2014 to $7.1 billion in 2024, with projections of exceeding $8 billion in 2025 [6]. This growth is fueled by a domestic content rate of over 80% in defense production, driven by localization policies and strategic investments [7]. The Steel Dome is expected to further amplify this trend, with demand already emerging from countries seeking alternatives to Western systems amid geopolitical realignments.

The global arms market, valued at over $1.2 trillion, is increasingly fragmented, creating opportunities for Turkey to capture market share. By 2025, the country has surpassed Sweden, Australia, and Canada in defense exports and now competes with South Korea, Israel, and Spain [8]. This ascent is not merely quantitative but qualitative: Turkey’s focus on AI, precision-guided munitions, and unmanned systems aligns with global defense trends.

Geopolitical and Domestic Risks

While the investment case is strong, risks persist. Turkey’s military promotions remain heavily influenced by political loyalty to President Recep Tayyip Erdoğan, raising concerns about institutional stability [9]. Additionally, transatlantic tensions—such as the S-400 sanctions and stalled F-35 readmission—could disrupt long-term partnerships. Domestically, high inflation and unemployment may strain public finances, though the government has prioritized defense spending as a cornerstone of economic resilience [10].

However, these challenges are counterbalanced by Turkey’s strategic positioning. The country’s recent unveiling of precision weapons like the Tayfun Block-4 ballistic missile and 2,000-pound bombs signals a shift toward offensive capabilities, broadening its export appeal [11]. Meanwhile, events like IDEF 2025 and Teknofest Blue Homeland are enhancing Turkey’s global brand as a hub for innovation.

Conclusion: A High-Conviction Investment

Aselsan and the Steel Dome ecosystem exemplify Turkey’s transition from a defense importer to a global exporter of advanced systems. With a robust pipeline of R&D projects, a supportive policy environment, and a growing international client base, the sector offers asymmetric upside for investors. While geopolitical and macroeconomic risks are present, Turkey’s strategic investments in localization, AI, and modular defense platforms position it to thrive in a fragmented global landscape. For those willing to navigate the complexities, this is a high-conviction opportunity in a sector reshaping the future of warfare.

Source:
[1] Aselsan Secures $616M To Boost Turkiye Air Defense [https://internationaldefenceanalysis.com/aselsan-secures-616m-to-boost-turkiye-air-defense/]
[2] Aselsan adds new platforms for Turkey's Steel Dome [https://breakingdefense.com/2025/07/aselsan-adds-new-platforms-for-turkeys-steel-dome-national-air-defense-eyes-export-deals/]
[3] Turkey Unveils $1.5 Billion Research Base in Boost to Defense [https://www.bloomberg.com/news/articles/2025-08-27/turkey-unveils-1-5-billion-research-base-in-boost-to-defense]
[4] Aselsan aims to become one of the world’s top 30 defense companies by 2030 [https://breakingdefense.com/2025/07/aselsan-adds-new-platforms-for-turkeys-steel-dome-national-air-defense-eyes-export-deals/]
[5] Aselsan CEO Ahmet Akyol on Steel Dome adaptability [https://breakingdefense.com/2025/07/aselsan-adds-new-platforms-for-turkeys-steel-dome-national-air-defense-eyes-export-deals/]
[6] Türkiye says defense exports to 'easily' exceed $8 billion in 2025 [https://www.dailysabah.com/business/defense/turkiye-says-defense-exports-to-easily-exceed-8-billion-in-2025]
[7] Türkiye's defense exports triple since 2020 [https://www.dailysabah.com/business/defense/turkiye-says-defense-exports-to-easily-exceed-8-billion-in-2025]
[8] Global image of Turkish defense industry [https://www.dailysabah.com/opinion/op-ed/global-image-of-turkish-defense-industry]
[9] Loyalty to Erdogan becomes only factor in Turkey's 2025 military promotions [https://nordicmonitor.com/2025/08/loyalty-on-erdogan-becomes-only-factor-in-turkeys-2025-military-promotions/]
[10] Türkiye's economic challenges and defense spending [https://www.turkishminute.com/2025/07/05/analysis-turkey-faces-economic-trade-offs-as-nato-sets-ambitious-5-pct-defense-spending-target/]
[11] Turkey's new precision weapons stoke regional tensions [https://www.fdd.org/analysis/2025/08/07/turkeys-new-precision-weapons-stoke-regional-tensions/]