Billions Are Pouring Into the Defense Industry: Could It See a Rise in Arms Export?

The government’s goal is to turn the domestic defense industry into an export-capable sector beyond supplying the Hungarian Defense Forces, relying on private capital, international partners and export-oriented production starting from 2027.

Szabolcs Szolnoki, Deputy State Secretary at the Ministry for National Economy responsible for technology, space industry and defense industry, told Economx that Hungarian defense companies are capable of competing commercially worldwide based on their abilities. The global defense market is clearly booming. The war has highlighted long-ignored security risks in Europe. For decades, the West’s peaceful coexistence, protected by NATO and EU umbrellas, diverted resources away from maintaining and developing national and joint defense capabilities. Now the rebuilding and strengthening of European countries’ own defense capabilities is driving demand – creating real market opportunities for Hungarian defense industry.

Beyond national needs, however, the strategic aim is to make the sector competitive on European and global markets. The Hungarian Defense and Space Export Agency (VEX), operating under the Ministry, helps bring Hungarian defense and space products and services to market. Major international players are present in Hungary through joint ventures:

• Rheinmetall (with N7 – National Defense Industry Innovation Holding) produces Lynx tracked armored vehicles and artillery/tank ammunition.
• The Gidrán wheeled armored vehicle is made together with Turkish Nurol Makina.
• Colt CZ also has a joint company in Hungary for small arms.

The government has launched cooperation projects and built new joint factories to revive domestic heavy defense industry. The recently publicized N7–4iG transaction follows this strategy: attractive parts of the portfolio are being reorganized into a new company to attract private defense investment. In the long term, Hungary needs a defense industry that remains self-sustaining outside crisis periods to guarantee supply security for the Armed Forces. Szabolcs Szolnoki emphasized that private capital’s profit motive can be a driving force: private owners take more risks, bring or acquire commercial expertise, and run companies in a results-oriented way.

Market-based operation, high-quality products and global sales ensure long-term self-sufficiency while still supplying the military with drones, firearms, armored vehicles and more. The state retains ownership of critical infrastructure (factories, industrial parks) through the N7 Holding. New owners can use these assets for rent. Minority state ownership guarantees continued commitment to Hungarian-made equipment and alignment with national defense strategies – combining private-sector dynamism with state responsibility and strategic planning. 

President Tamás Sulyok greeted with military honors (L2). Next to him Colonel General Gábor Böröndi, Chief of the Hungarian Defense Forces (R)

In the long run, a stronger industry could provide a broader pillar for income generation and contribute to a more resilient heavy industry. Smaller Hungarian defense companies play a role similar to automotive suppliers. If large manufacturers advance globally, the role of subcontractors grows – offering exciting opportunities for Hungarian SMEs through R&D, specialized manufacturing and services in global supply chains. Many high value-added jobs can be created this way. Some Hungarian firms already supply quantum computers or develop virtual training systems for aircraft maintenance – less visible but important contributions.

Szabolcs Szolnoki’s message to ambitious SMEs: dare to seize their opportunities and join at their own level – they can play an equally valuable role in the sector’s development.

Currently the most accessible entry points are Tier 1–2 supplier roles (sub-assemblies and components). Hungarian electronics designers/manufacturers, simulation/virtual environment developers and cybersecurity companies are performing particularly well. However, customer requirements vary greatly, and certification processes are demanding and time-consuming. The Ministry supports supplier development, primarily helping companies join existing defense firms in Hungary to build a domestic base and open further international doors. In the space sector, synergies between traditional industries and space are key.

Main cooperation areas: hardware (sensors, electrical machines), software (data transmission, encryption), ground infrastructure (antennas, networks), and data/AI-based services – where most value is created today. Companies with precision metalworking, electronics, telecom, dual-use technologies, automotive suppliers, satellite tech or electro-optics experience have an advantage. Hungary’s defense and space industry is clearly rising. The coming years will bring massive NATO and EU funding for development and capacity expansion. Success requires new companies, expertise, entrepreneurial courage, persistence and internationally competitive performance. Interested businesses should contact VEX for guidance on requirements, supplier paths and market entry.

Gidrán wheeled armored vehicle. Photo: MTI/Bodnár Boglárka

Additional opportunities include ESA’s RPA programme (2 million euros in 2026, open to Hungarian entities only) and the ESA BIC Hungary incubation programme (up to 60,000 euros non-dilutive funding). Hungary has been a full ESA member since 2015, contributes over €10 million annually and is represented by 11 delegates and 37 experts. In the international space business, even SMEs can secure significant deals – potentially reaching players like Elon Musk – with the right information and knowledge. The Space Insider portal (by HypeX Consulting, in cooperation with the Ministry) gathers relevant domestic and international space news and tenders. On March 26, 2026 the Ministry will organize the Space and Defense Summit in Budapest, focusing mainly on V4 countries, offering B2B networking and project-partner opportunities.