The government’s proposal, which has gained the majority support of the main opposition parties in the Eduskunta, the parliament here, would reposition Finland’s annual spending on defense closer to 3.3% of GDP, placing it well above NATO’s 2% guideline.

Finland’s spending on defense in 2024 is expected to reach around 2.4% of the nation’s GDP.

The cooling in political relations between Helsinki and Moscow against the backdrop of the war in Ukraine continues to bolster political and public support to increase Finland’s spending on national security, said Defense Minister Antti Häkkänen.

“The security situation, in Finland and regionally, is difficult to predict. It could deteriorate quickly. Greater investment is needed in defense and national security to enhance our ability to counter broad-spectrum influencing, resist military pressure and fight potential large-scale wars that could drag on for years. As a result, we will reform national defense while also bringing the major ongoing projects in our Air Force and Navy to the finish line,” Häkkänen said.

The Finnish government presented an updated Defense Report to the Eduskunta on Dec. 19, its first since the country joined NATO in April 2023. The report underscores the elevated risks and security threats posed by Russia.

The report warns of the danger that Russia could decide to extend its war with Ukraine to neighboring NATO-aligned Baltic countries and member states of the European Union.

“Russia has moved towards a more open, unpredictable and protracted confrontation with the West that will continue to pose a long-term security threat to Europe and Finland” the defense report states.

The increase in Finland’s spending on defense represents a natural consequence of its membership of NATO, but it is also a reflection of the heightened level of threat caused by “Russian military expansionism,” said Pauli Aalto-Setälä, a member of parliament for the National Coalition Party.

“Russia is a war-addicted terrorist state that is currently waging a full-scale war on its neighbor. This is the reality we face and Finland, as part of NATO and with our European partners, must act accordingly,” said Aalto-Setälä.

Finland’s defense budget has risen markedly since 2020 when it stood at $3.5 billion. A number of big ticket procurements, including the $8.8 billion deal to purchase 64 Lockheed Martin F-35A fighters, saw the defense budget increase to $6.1 billion in 2023.

The survey found that the “NATO dividend” is working best for dual-use companies that are gaining traction from membership in the alliance to grow at a faster pace than pure defense groups.

Significantly, the survey revealed that many of the industry’s established companies, including the Finnish state controlled defense group Patria, are scaling up investments in the face of expanding their international reach to take advantage of NATO-sphere partnerships and contract opportunities.

Dual-use companies offering solutions for both civil and military use are not just experiencing rapid growth, but are also attracting indigenous and international investors, said Jakob Sandell, Tesi’s research director.

“Finland’s oldest defense companies date from the 1800s, yet as a whole the industry is still young but developing quite rapidly now. New companies are being established at a higher rate and their growth figures are impressive,” Sandell said.

The Tesi survey identified 368 companies operating in the indigenous defense sector, of which 144 were designated as “fast-growing startups and growth companies.”

Over one-third of Finnish companies offering dual-use products (DUPs) have venture capital and private equity investors as owners, the survey noted. Venture capital investors are currently the single biggest investor group in DUP companies. The growth capital needs in those firms has risen in line with investor interest and a boom in export licenses and sales.

New capital is required to ensure dual-use companies can meet increasing demand for products, orders and the wider opportunities presented by Finland’s membership of NATO, said Keith Bonnici, investment director at Tesi.

“Testimony to the country’s competitiveness in the defense industry generally is that Finnish companies include the world’s largest defense contractors amongst their customers, as well as NATO countries’ defense forces,” Bonnici said.

Some of Finland’s more established defense-only companies, the Tesi survey found, are producing moderate but positive growth albeit susceptible to weak profitability.

“It’s more difficult for companies focused entirely on defense materials and technology … to attract investments. Many investors are bound by financing agreements that may prohibit investing in technologies used for war purposes. This limitation does not apply to companies offering dual-purpose solutions since they operate with a specific commercial purpose,” said Bonnici.

Finland’s membership in NATO has opened the door to a “vast new array” of projects and commercial opportunities for startups like Varjo Oy, a company offering virtual- and mixed-reality solutions for flight training applications

“NATO membership has made a positive impact on Varjo’s operations. It has opened doors that were once largely closed to doing business with NATO countries in Europe, the United States and beyond,” said Varjo’s chief executive Timo Toikkanen.

Varjo opened a new secure manufacturing facility near Helsinki in August to bolster production and delivery of high-resolution, extended-reality (XR) solutions that are used in defense training and simulation, a niche market the company forecasts will be worth $900 million by 2027.

The U.S. Air Force and Navy currently use Varjo XR headsets in their virtual training programs, with additional prototypes slates for the air service for evaluation.

The NATO dividend is also lifting orders for Finland’s mature defense groups like Patria, which continues to deliver Patria 6×6 armored vehicles to the Finnish Defense Forces (FDF) as part of Finland’s commitment to strengthening its land forces in support of deeper collaboration with the alliance.

The FDF’s Logistics Command Unit signed an agreement to purchase 91 6×6 armored personnel carriers (APCs), with equipment, from Patria in 2023.

The 2023 deal included an option to procure an additional 70 six-wheeled vehicles. The FDF, which exercised its option to purchase 41 additional Patria APCs in January 2024, is now utilizing that right to acquire the remaining 29 vehicles. These are slated to be delivered by year-end 2025.

The Patria 6×6 APC procurement is linked to the European Common Armoured Vehicle System (CAVS) joint development program partnered by Finland, Latvia, Sweden, and Germany.

The landscape for growth and contracts among native defense companies has substantially improved due to Finland’s ambitious capital spending commitments to the NATO alliance. Finland’s defense budget will rise by 12% to a record $7.3 billion in 2025. The increase in capital spending is $550 million above Finland’s defense budget in 2024.

The acquisition of fighter jets and armored vehicles from Patria are among the priciest items in the 2025 budget, which also includes spending of $80 million towards Finland’s NATO contribution.

The increased level of funding is earmarked to help establish an alliance command structure in Finland and enable land forces to be stationed as part of the reinforcement of the NATO’s eastern flank along Finland’s 833-mile border with Russia.

The Ministry of Defense here is currently reviewing proposals and reports from the military, the Finnish Defense Forces, that outline the challenges and investments associated with NATO integration.

The MoD is expected to deliver a final report with recommendations to Finland’s conservative-right government by the end of 2024.

“There are no decisions on this as of yet,” Gen. Janne Jaakkola, the newly appointed commander of the FDF, said. “We are considering different options regarding whether new collaboration should cover extended exercises, a rotational model, or some other type of activity.”

Finland has a 830 mile (1,340km) border with Russia, the longest of any NATO member state.

The government here is examining what amendments to the constitution might be needed to allow a permanent presence by NATO allies on its territory. Given the pro-alliance nature of Finnish politics, any constitutional change needed will likely receive support from lawmakers.

In drafting its proposals, the MoD and the FDF are being mindful of plans being formalized by NATO to upgrade and reorganize its command structure. The changes will impact how allied forces may operate in Finland in the future.

For now, Helsinki appears in no hurry to request NATO troops while the country works on boosting its national defense capabilities and industries.

“The current system is optimized for national defense,” said Jaakola. “We will now take measures to coordinate it for common defense with our allies. This will take time.”

Founded by the five Nordic states in 1975, the Nordic Investment Bank was to function as a financial institution supporting the regional and international growth of nondefense industries. The Baltic states Estonia, Latvia and Lithuania joined the bank as full members in 2005.

“The NIB hasn’t in the past financed defense companies in the military-industry complex. However, the world has changed,” said André Küüsvek, the bank’s chief executive. “Such a development can have immense symbolic value. It’s a change in our business under consideration by our owner governments.”

The central discussion at the government level revolves around what type of capital investments within the defense sphere the bank might be sanctioned to finance.

Any future pan-Nordic agreement to authorize the NIB to provide development loans to the defense industry would represent a significant annex to the bank’s operations. At present, the bank is primarily focused on funding projects within the portfolios of infrastructure and green transformation, such as wind and hydropower; hydrogen-fueled transportation; environmentally friendly buildings; airports; and road networks.

Most Nordic states, led by Sweden and Norway, want to strike a balance between those activities and the additional field of national and regional security, which involves drone systems and surveillance technologies.

The bank, which traditionally prioritizes high-impact projects, completed $1.1 billion in new lending during the first three months of 2024. In 2023, it paid out $3.7 billion in loans to Nordic companies. A significant and increasing proportion of the lending is extended for research and development.

The final decision as to whether the NIB is cleared to provide financing to the Nordic defense sector is “in the hands of the bank’s government owners,” Küüsvek said.

Sweden is the largest owner in the NIB, as it holds 34.6% of the bank’s shares, followed by Norway with 21.5%, Denmark with 21.1%, Finland with 17.7%, Iceland with 0.9%, Lithuania with 2%, Latvia with 1.3% and Estonia with 0.9%.

Nordic government interest in using the bank to support the growth potential of defense companies has followed quickly on the heels of formerly nonaligned states Sweden and Finland joining NATO, a development that removed many obstacles to closer cross-Nordic defense collaboration. Nordic governments have made no secret of their desire to exercise what they consider a so-called NATO dividend to deepen cooperation in key areas, including joint weapons development and production.

One joint Nordic cooperation project that got underway in the first quarter of 2024 saw the Finnish Defence Forces transfer military equipment to stores in neighboring Norway. Finland’s military plans to commence a similar operation to move equipment to stores in Sweden in the fall.

The Labor-led government’s broad-ranging LTDP, announced at a news conference in Oslo on April 5, proposes a record-breaking increase in capital investments for national defense that project $60 billion in spending in the 12 year period up to 2036.

A critical feature in the LTDP raises spending and financial benefits across all branches of the Norwegian Defense Forces. The plan will strengthen the NDF’s manpower while significantly enhancing its air-defenses and capabilities to better defend its High North borders with Russia in collaboration with NATO forces, including Nordic neighbors, and new Alliance members, Sweden and Finland.

Higher levels of funding in the LTDP are directed at improving the NDF’s situational awareness capabilities by building its surveillance, presence, and control assets across the High North and in strategic neighborhood areas in the Nordic region. The NDF aims to achieve superior situational awareness through an integrated plan comprising the use of new specialist surveillance vessels and the expansion of satellite and drone capabilities.

“The most fundamental task this government has is to provide security for the people of Norway. We need a defense that is fit for purpose in the emerging security environment. This plan represents a historic boost in defense spending and it will entail a major strengthening of all branches of the Armed Forces,” said Støre.

If achieved, and the LTDP meets all set targets, the expectation is that Norway’s annual defense budget, measured in real terms, will double from its 2024 level of $8.75 billion to over $17 billion by 2036.

The key funding proposals in the LTDP also cover the replenishment of military stocks shipped to help Ukraine’s war efforts against Russia. Since Russia’s invasion in February 2022, Norway has provided Ukraine with over $2 billion in military hardware and humanitarian aid. In 2023 alone, Norway provided $1 billion in military support under the Nansen Support Program, including NASAMS air defence systems.

The procurement elements in the LTDP are pivotal to Norway’s national defense strengthening goals. As a result, the acquisition of new frigates, submarines and surface vessels for the Navy is being prioritized.

Air defense

The procurement plan comprises an advanced air-defense solution to include the country’s first long-range air defense system. The NDF’s Army branch will be expanded from one to three brigades. The Home Guard, the NDF’s rapid mobilization force, will be increased from around 40,000 personnel at present to 45,000 combat-ready soldiers.

Norway aims to reconstruct its military to give it a sharper focus on dealing with active conflict prevention, said Bjørn Arild Gram, Norway’s defense minister.

“Our better resourced military must be able to deal with active conflict prevention every day and stand ready to handle conflict. Increased activity requires more personnel. In total our Armed Forces will be strengthened with over 20,000 conscripted soldiers, civilian employees and reservists,” Gram said.

For the LTDP to succeed, said Gram, the key proposals in the plan will need to be implemented simultaneously to address critical deficiencies in present day national defense structures and capabilities.

“Norway must invest in infrastructure, not just for today’s defense but also for a defense that is set for growth. We need to bolster educational capacity to meet the need for more personnel. We must also allocate sufficient funds to replenish our emergency stockpiles. This is essential to avoid ending up with an imbalanced force structure, where vessels are docked, and aircraft are parked,” Gram said.

The LTDP requires a rapid elevation in force strength across all branches of the NDF. To the end, the plan aims to increase the number of conscripts and reservists by 4,600 and 13,700 respectively. The number of support civilian personnel is projected to grow by 4,600 with a special focus on hiring talent with specialized technology skills.

The prioritized Naval strengthening program aims to deliver five to six new frigates, with onboard anti-submarine helicopters, in addition to a minimum of five new submarines. Norway is acquiring the Type 212CD submarine, which is being built under a German-Norwegian strategic partnership that will deliver the T212CDs to both navies.

Along with the procurement of surface ships, the frigate and submarine elements of the LTDP represents the largest capital investment by any Norwegian government in to the strengthening of the Royal Norwegian Navy’s ability to protect the country’s extensive territorial Arctic and sub-arctic waters against prevailing threats.

The scope in ambition of the LTDP is evidenced in Norway’s decision to procure a long-range air defense system to upgrade the NDF’s ability to defend against short-range ballistic missile threats. Moreover, Norway plans to double the quantity of the existing NASAMS air defense which is set to be updated to deliver a higher level of protection against drones and missiles.

The LTDP recognizes the importance of Nato and neighboring Nordic Alliance states Denmark, Sweden and Finland to the long-term security of Norway. Nato’s continuing presence, said Gram, is fundamental to supporting “stability and guaranteeing peace” in the Nordic and Baltic regions.

“Finland’s and Sweden’s recent membership of Nato strengthens security in our region. It also presents Norway with new obligations. We must rapidly transform from not just a receiving country of Allied reinforcements but also a transit and contributing ally to the defense and security of the entire Nordic and Baltic regions,” Gram said.

The move comes as Finland also seeks to ramp up its defense strategy and capacity to deal with escalating cyberthreats.

The NATO research centers, which are to focus on new technologies, will be based in the Finnish town of Espoo, while the accelerator unit will be run from a new facility in Oulu, Finland’s leading cyber technology hub.

The Espoo site will collaborate with VTT, Finland’s largest technical research center and the axis for quantum computer development in Finland. The location will also test cyber-secure communications in addition to quantum and space technologies.

The test facility in Oulu, which will operate in cooperation with the University of Oulu, will test 6G network technologies.

Finnish Defence Minister Antti Häkkänen said the accelerator and test centers will create business opportunities for domestic technology companies as well as help lift Finland’s profile among the 32 other fellow NATO member states. Finland joined NATO in April 2023.

“Finland’s leading position, especially in the development of new-generation communication technologies and quantum technologies, is likely to attract operators and experts to Finland. Our status as a global frontrunner of dual-use communication technologies will render Finland more attractive to international financiers and strengthen our technological input as a NATO member,” Häkkänen said in a statement.

NATO launched the DIANA program — or Defence Innovation Accelerator for the North Atlantic — in 2021 with the mission of identifying challenges for the defense sector. A core part of the program’s mission is to find technologically innovative solutions through partnerships with tech firms inside and outside of the defense industry.

Cyberspace switch

Meanwhile, under a new joint initiative, the Defence Ministry and the Ministry of Transport and Communications are tasked with revamping Finland’s national cybersecurity strategy. The initiative aims to provide the government with an operating model better suited to protect critical military and civilian assets and infrastructure.

Bolstering cyber resilience and improving defensive capabilities were among the chief national security priorities of Prime Minister Petteri Orpo’s coalition government that took power after parliamentary elections in June 2023.

The urgency behind updating the national cybersecurity strategy became evident during the third quarter of 2023 when Finnish security and intelligence service SUPO warned of a sharp rise in cyberattacks emanating from Russia. Those attacks reportedly targeted state agencies, the Finnish Defence Forces, and their critical IT networks and infrastructure.

In February, SUPO issued an alert that Russia was trying to recruit and train migrants seeking political and economic asylum in Finland as spies. The agency also warned that “hostile forces” in Russia were behind an increase in cyberespionage activities against Finland.

As a result of the heightened security threat — and with Russia allegedly bussing thousands of migrants to Finnish crossing points — Finland closed its 832-mile border with Russia on Feb. 20. The government plans to keep the border closed until April 14 at the earliest.

Finish government websites experienced a distributed denial-of-service attack in April 2022 amid an address to Parliament by Ukrainian President Volodymyr Zelenskyy. Russia launched a full-scale invasion of Ukraine in February 2022.

The Finnish government’s drive to strengthen national security is backed by an increase in the cyber defense budget. Finland will spend $350 million on cybersecurity in 2024, corresponding to a 35% increase over 2023. A large part of the additional funding will be used to drive projects and programs that counter artificial intelligence-based cyberthreats.

The budget will support new cybersecurity measures slated for implementation by the military and SUPO in 2024. The increase in the cyber budget is partly influenced by findings and recommendations in a report on AI-enabled cyberattacks, which was delivered to the government in 2022.

The report was created by a group that included the national communications agency Traficom, the National Emergency Supply Agency, and the Helsinki-based cybersecurity firm WithSecure.

The national cybersecurity strategy, once finalized and implemented, will conform with the European Union’s updated directive on measures meant to achieve a high common level of cybersecurity across the bloc, said Rauli Paananen, director Finland’s National Cyber Security Unit.

“Under its plan, the government wants to revamp Finland’s cybersecurity strategy in a way that makes it more able to respond to the changed operating environment and the increasing risk to national security that is posed by threats from the cyber domain,” Paananen said.

The unit ran a major national cybersecurity exercise over five days in mid-February. The KYHA drill included cybersecurity experts in Finnish municipalities as well as state and private sector operators of critical infrastructure.

“Organizations need to develop cyber defense capabilities and resilience, just as Finland needs to develop cyber resilience as a country. Exercises like KYHA strengthen Finland’s cyber resilience, which is also what the cyber security strategy update aims for. The goal of the strategy is to be well prepared as a society,” Paananen said.

The project is linked to the $9.6 billion jet procurement contract reached between Finland’s MOD and the American company Lockheed Martin in February 2022. The deal covers the delivery of 64 F-35s to the Finnish Air Force.

The building of the aircraft assembly facility forms part of the contract’s so-called stage one industrial component. The umbrella project required the signing of a lease for a suitable assembly plant development site. This was found near the town of Nokia. The site lease was signed in January between the Finnish Defence Forces and Defence Properties Finland, the state organization tasked with managing properties and assets owned by Finland’s defense administration.

Construction work on the engine assembly building is slated to commence during the second half of 2024. Under the terms of the industrial deal struck between Finland and Lockheed Martin, engine maintenance at the facility in Nokia will continue throughout the entire life cycle of the Air Force’s F-35 fleet.

“Industrial cooperation tied to the F-35 agreement will generate critical maintenance and repair expertise for Finland’s indigenous defense industry. This includes performance areas like reliability of maintenance. The agreement will also create significant know-how in Finland for F-35 engine assembly and testing,” Defence Minister Antti Häkkänen said.

The assembly plant will operate in close collaboration with the regional aircraft hub in Tampere run by Patria’s aviation division. An estimated 100 personnel will work in various assembly roles at the facility.

The government owns 50.1% of Patria, and the Norwegian company Kongsberg controls the remainder. Patria itself owns half of the Norwegian defense contractor Nammo.

The F-35s are set to replace the Air Force’s ageing McDonnell Douglas F/A-18 Hornet jets. These planes are scheduled to retire by 2030. The first batch of the F-35s on order are due for delivery and then deployment to Arctic air bases in Finland’s Lapland region by 2026.

The industrial cooperation component of the F-35 acquisition deal is expected to be scaled up in stages by 2030. The broadening of the industrial agreement may include the production or assembly in Finland of certain parts and systems used in the aircraft.

The Air Force has already tested the F-35′s suitability and adaptability to operate in extreme weather conditions, especially in Arctic areas of Finland during the country’s long winters that feature limited daylight.

In recent exercises, the service routinely used stretches of “closed highway” in Arctic and sub-Arctic regions as temporary airstrips. The Air Force is currently running such maneuvers as part of the weeklong Hanki drills in the north of the country, which are to continue until March 2.

The budget, which is on course to be ratified by the end of October, puts defense spending at about €6.2 billion (U.S. $6.6 billion) — a nearly 5% rise from 2023. The Defence Ministry approved the draft budget with amendments in September.

The elevated level of spending is directly linked to Finland’s accession to NATO as well as heightened tension in the region following Russia’s full-scale invasion of Ukraine in February 2022.

The expected budget increases Finland’s defense spending to 2.3% of its gross domestic product, lifting it above NATO’s 2% goal for member states.

A border-reinforcement plan embedded in the 2024 budget includes the construction of 125 miles of so-called smart fencing supported by advanced sensors and drones operated by the Finnish Border Guard. The smart fence, erected at strategic points along the Finnish-Russian border, costs between $400 million and $500 million.

The budget also includes a $272 million reimbursement to the ministry to cover the cost of replacing military equipment and weapons donated to Ukraine. The formalized budget will provide the Finnish military with $1.6 billion to spend on materiel procurement in 2024.

Finnish Defence Minister Antti Häkkänen described the budget increase as “fundamental to national security and enhancing defense capability.”

“We cannot ignore how the war instigated by Russia has changed the security landscape in our Nordic region and in the wider neighborhood. The world around Finland is becoming an increasingly dangerous place. Despite Finland’s economic challenges, we are now part of NATO and with membership comes added costs and responsibilities,” Häkkänen said.

Although Russia’s defense-industrial base is in overdrive and the country is expanding its military bases along Finland’s border, Häkkänen said the government does not feel under threat.

Russia’s Alakurtti base, which is east of the Finnish border region of Lapland, houses the Russian Army’s arctic motor rifle brigade. And construction efforts at the Petrozavodsk base, south of Alakurtti, include work on a large military storage site and new buildings to house tanks, armored transport vehicles and mobile artillery pieces.

Based on Finnish Army intelligence, movements to and from Petrozavodsk suggest the base is being used as a regional depot to deliver equipment to Russian front-line motorized brigade forces attacking Ukraine.

“Russia repeatedly warned us that it would strengthen its near-border bases if Finland joined NATO. We are not surprised by these activities. Our intelligence is that these new structural works at military bases are part of normal Russian operations. We do not believe they pose a threat,” Häkkänen said.

Finland spent about $3.87 billion on defense in 2020, according to the Stockholm International Peace Research Institute, which cites the figures in current prices, converted at the exchange rate for the given year.

The next year, Finland spent about $3.8 billion on defense, followed by $4.8 in 2022, the Swedish think tank reported. Its 2023 defense budget was about $6.3 billion.

Under the purview of the Chalmers University of Technology, or CUT, Sweden wants to use quantum technology to improve the performance of radar systems. In Finland, the state-funded organization VTT Research wants to bolster the processing capability of an existing quantum computer

“There are many reasons why the defense industry might want to monitor, if not engage with, the quantum computer projects running in Sweden and Finland. It is generally recognized in defense quarters — and increasingly by governments, too — that while quantum science is a positive, its disruptive nature will bring challenges and a certain degree of threat,” Lars Sundström, an independent computer industry analyst based in Stockholm, told Defense News.

The challenge for cybersecurity specialists, Sundström said, is to build solutions based on quantum technology that offer a superior level of protection to critical IT networks and infrastructure. “The big defense and cybersecurity players in the Nordic region are already connected in some way, and indirectly to the quantum projects in Finland and Sweden. Saab is probably the most well-known name in the mix,” Sundström added.

Saab is an “industrial partner” to the Wallenberg Centre for Quantum Technology, a co-partner with CUT in the quantum computer project. Saab is currently running several PhD-level projects at the center aimed at developing new applications for the defense industry, the most high-profile of which is for a quantum-enhanced noise radar. Researchers are investigating whether entanglement between generated photons can improve the performance of radar systems.

In a significant move, CUT has decided to produce a copy of its quantum computer — the school currently has a 25-quantum bit system — that would be available to companies operating in the country’s IT, defense and engineering industries within eight to 12 months.

For its part, Finland currently has a 5-qubit computer, but VTT Research plans to have a 20-qubit version operational by year’s end. It’s slated for an upgrade to 50 qubits in 2024 — a level that can more capably demonstrate the quantum advantage to solving individual problems.

But to solve industrially relevant computational problems, the computing power must rise to 100 to 300 qubits, said Pekka Pursula, a research manager at VTT.

“When the number of qubits increases from 50 to 100, the computing power of a quantum computer does not double — it grows exponentially. This will enable companies to use quantum computing for industrial applications and achieve the quantum advantage,” Pursula told Defense News.

Quantum technology is developing rapidly and will become key in the areas of energy, defense and finance, according to Per Delsing, a professor of experimental physics at Chalmers who leads the quantum computer project at WACQT.

“We are now starting to get the tools to be able to control quantum systems and thereby exploit inherent quantum physical phenomena,” Delsing said. “The time is ripe to start using these commercially and in society. A national strategy and funding plan is needed in Sweden to coordinate all aspects of the development.”

Broadening investor interest in quantum computer technology was among the primary reasons management at CUT decided to produce a copy for selective release. The university-run project requires a deep funding pool, Delsing noted, and the school is seeking capital investments for related education and innovation specifically to build a 25-qubit computer. The organization hopes to finish building the system by the end of the year. The goal is to scale it up to 40 qubits, and then 100 qubits.

“In order to be able to do things that a classical computer cannot, such as super-fast optimization of complicated logistics problems, you need to reach more than 50 to 60 quantum bits,” Delsing said.

The CUT and WACQT quantum computer effort is currently working off a $132 million grant that covers a project development period of 2018-2029. The grant includes contributions from Swedish industry, universities and the private Knut and Alice Wallenberg Foundation.

A proposed route

Five organizations released a report in March, titled “A Swedish Quantum Agenda,” calling for a Swedish national strategy for quantum technology.

The document maps out how to deliver long-term financial support for related research, said Darja Isaksson, director general at the innovation funding agency Vinnova, one of the organizations that authored the report. The others are RISE, a research and innovation institute; Swelife, a life science-focused funding agency; the Swedish Research Council, the country’s largest governmental research funding body; and WACQT.

“Quantum technology has enormous potential in areas such as energy efficiency, defense and security, and health. Sweden is at an advanced stage in research. In order for Sweden to maintain its long-term competitiveness in quantum technology, we need to build a national ecosystem for innovation and commercialization of the technology,” Isaksson said.

The report identifies logistics planning, organizational realignment, product development and the creation of solutions for airspace security issues as ideal problem-solving areas for quantum computing to tackle.

The report concludes that Sweden’s defense and national security sectors could harvest real value from four subfields — quantum computers, quantum simulators, quantum communication and quantum sensors — by using spinoff disruptive technologies to both create new and improve existing applications.

On cybersecurity, the report notes that encryption algorithms currently “rely on the inefficiency of classical computers to solve the functions required to decrypt the secure data. While they are astronomically hard to solve in classical implementations, a quantum computer equipped with the right algorithm can break the encryption with relative ease.”

The advance of quantum computers, the report states, has motivated multiple European initiatives to quickly assemble quantum cryptographic communication channels where fiber-optic networks can be used to securely communicate sensitive information between and inside of national borders.

“Additionally, satellite networks can be put in place to connect local fiber networks to the global web — something that requires considerable national effort to initiate,” the report notes.

“Sweden should actively develop international collaboration in the quantum technology field while also developing cooperation with ambitions on Nordic, European, as well as global levels. The Nordic countries, in particular Denmark, Finland, and Sweden have a strong research tradition in quantum technology,” the report recommends in its conclusion. “Together the Nordic countries become a strong international player.”

The mergers and acquisitions are taking place as Sweden seeks NATO membership, and neighboring Finland this year joined the alliance.

Combined, according to defense spending plans, the Nordic states of Denmark, Finland, Iceland, Norway and Sweden are to invest more than $2 billion to upgrade their respective military and national security cyber defenses over the next three years.

Meanwhile, cybersecurity companies are also forming strategic partnerships with the regional armed forces. For example, the Norwegian firm Atea won a two-year information technology and cybersecurity services contract worth $45 million from the Norwegian Defence Research Establishment (FFI) and the Norwegian National Security Authority (NSM).

The former is responsible for Norway’s defense research and development efforts, and the latter serves as the country’s national intelligence agency. FFI also operates as a procurement agency for the property-focused Norwegian Defence Estates Agency, the Norwegian Armed Forces and the NSM.

Atea signed the first segment of the two-part deal, with a two-year option, in June 2022. The second part of the deal was inked in April 2023. The contract covers the delivery of hardware, software, IT and network cyber defense solutions, and consultancy services.

“The deal reflects the greater emphasis on IT network and infrastructure security in national defense areas. The contract reinforces our positive and developing relationship with the defense sector,” said Steinar Sønsteby, CEO of Atea.

The appetite for strategic corporate partners in the Nordic cybersecurity domain gained momentum in 2022 following a far-reaching nonequity collaborative agreement between Finnish software specialist Digia and Danish cybersecurity technologies provider Arbit Cyber Defence Systems.

The collaboration was instrumental in securing a $6 million contract to build a protected information-exchange gateway for the Finnish Defence Forces, said Jussi Tammelin, the director of Digia’s defense unit.

The contract includes the supply of a secure information-exchange gateway communication solution, as well as software and equipment. The technology is based on Digia’s Linja software and Arbit’s data diode.

“Our collaboration with Arbit reinforces the capabilities of our defense and security sector services in the Nordic countries. International cooperation improves the competitiveness of both companies when it comes to defense sector tenders and increases defense sector exports,” Tammelin told Defense News.

In 2022, Digia accelerated its plan to establish a dedicated defense unit, after it became clear Sweden and Finland intended to apply for NATO membership.

Nordic countries must do more to strengthen their cybersecurity against increasing threats, said Natasha Friis Saxberg, the CEO of Danish ICT Industry Association, a trade organization representing information and communication technology firms.

According to Saxberg, the pooling of Nordic skill sets in this area, driven by the wave of cybersecurity mergers and acquisitions, is beneficial to developing a deeper pan-Nordic expertise to counter cyberthreats.

“A significant number of the cyberattacks emanating from Russia and linked to the invasion of Ukraine are directed at Denmark and the other Nordic countries. Today, cyberthreats play a significant role in every war and conflict, and therefore it is necessary to invest in cybersecurity and make it a central element of our defense,” Saxberg told Defense News

Growth trends

Acquisitions — such as Swedish firm Lyvia’s takeover of Polish company IT Systems and Solution — underline a trend where major players in the Nordic cybersecurity space with the financial means are looking to use such purchases to consolidate the market and accelerate regional growth. That acquisition by Lyvia is expected to help the company gain greater access to even larger contracts in the defense and national security sphere.

The purchase also improves Lyvia’s reach in to the Baltic region as well as Central and Eastern Europe, according to Oleksandr Fomenko, who leads the business’s Central and Eastern European division.

“We want to expand in this high-growth sector. ITSS is a large player in a fast-growing industry with top-drawer, end-to-end cybersecurity services and impressive IT infrastructure modernization resources,” Fomenko told Defense News.

Similarly, Norwegian cybersecurity company DNV’s $107 million purchase of Finnish firm Nixu was motivated by a desire to win more contracts, while taking advantage of increasing investments by Nordic governments to upgrade and maintain next-generation cyber defenses and more reliable IT infrastructure.

DNV’s cybersecurity expertise has historically focused on high-security areas in energy, maritime, telecommunications and financial services. “By joining forces with Nixu, we will make cyberspace a more secure place with greater impact than either company could achieve alone,” said Remi Eriksen, DNV’s chief executive.

Other industrial acquisitions in the region included Sweden’s Truesec buying Danish firm Venzo Cyber Security. And Ireland-based Integrity360 acquired Sweden’s Netsecure. In Denmark, Columbus purchased ICY Security, while in neighboring Norway, Netsecurity acquired Data Equipment to create a new cybersecurity group with revenues of $74 million.

The acquisition of Venzo will allow Truesec to strengthen its cybersecurity offerings to both the corporate and national defense sectors in Denmark and the wider Nordic region, said Anna Averud, Truesec’s chief executive.

“The acquisition significantly enhances our cyber defense capabilities. It expands our capability to better defend cyberattacks. The pooling of our cyberspecialists with Venzo will make a significant difference in creating a safer society for all organizations in Denmark and Northern Europe,” Averud told Defense News.