Building Local Capabilities: SignalGeneriX's Role in Strengthening the Cypriot Defense Industry

Alexandros Rapakousios

03 Jun 2023

The Cypriot defense industry is experiencing a remarkable transformation, with the emergence of innovative companies leading the way. In an exclusive interview with Dr. Tasos Kounoudes, the founder and CEO of SignalGeneriX, we gain insights into the present state of the domestic defense industry and the pivotal role played by SignalGeneriX in its growth. The company is a receiver of various national and international Innovation awards, and included in the Deloitte list of the 50 fastest growing technology companies in the Middle East and Cyprus for 2022 and 2023. SignalGeneriX is also ranked as the top European SME (small and medium-sized enterprise) in European Defence Industrial Development Programme contracts and demonstrates a wide portfolio of innovative dual-use technologies and products.

With approximately thirty SMEs actively involved in designing and developing dual-use products, the Cypriot defense industry has showcased its potential in both civilian and defense applications. However, despite the industry's rapid growth and capacity to produce and export high-quality defense products, there are multiple challenges to be addressed. The following interview delves into the ways in which the domestic ecosystem can further expand and explores the impact of the US lifting of defense trade restrictions on Cypriot companies. In addition, Dr. Kounoudes highlights the positive developments and ongoing efforts to foster collaborations with US-based companies, leveraging the newfound opportunities for the Cypriot defense industry.

How would you describe the present state of the domestic defense industry?

The Cyprus Defence industry consists of approximately thirty SMEs which are active in the design and development of innovative dual-use products. Such products can be used both for civilian and defense applications.

Since 2019, when we formed the Cyprus Defense Cluster under the Cyprus Association of Research and Innovation Enterprises (CARIE), we have seen a tremendous growth of the domestic defense industrial capabilities. We are proud that our members are participating in 17 contracts with a total budget of approximately 172.5 million euros for the development of the next generation of European defense systems. The Cyprus defense industry is young but very innovative and rapidly growing at the level that today is able to produce and export defense products at the highest quality. Our members successfully participate as exhibitors at international Defense exhibitions, like DEFEA 2023, which was held in Athens last month, and Eurosatory 2022, which was held in Paris. In both exhibitions our association organized a National pavilion under the auspices of the Cypriot Ministry of Defense.

What are the industry’s main strengths, weaknesses and challenges?

The war in Ukraine demonstrated that affordable and innovative defense systems can outperform or neutralize the expensive and large ones. We have seen drones, portable and manpack systems produced by small companies deployed in large scale in the field. Therefore, we can notice that the defense landscape is changing and there is an opportunity for companies like ours to make an impact with innovative field proven products. Therefore, I can say that our main strength is that we design and produce innovative defense systems. In addition, the collaboration with the major European players in the fields of the design and development of the next generation systems was instrumental to develop local capabilities and transfer of knowhow which is another advantage boosting our sector.

Our main weakness and at the same time our major challenge is to convince our Ministry of Defense to trust and invest in Cyprus made products. And of course, I don’t mean arms that we do not have capabilities of producing but other systems such as drones, electronic warfare systems, surveillance and border control systems etc. I would like to remind you that in the last 35 years, the Cypriot tax payer has paid approximately 8.5 billion euros in defense taxes and is paying around 300 million euros annually for Defense in general. With that money we have not managed to produce anything in Cyprus, not even a small part of a defense system. As a result our armed forces are totally dependent on foreign suppliers.

We should enhance the self-reliance of our armed forces and ensure a reliable supply of defense resources

In your opinion, how could the domestic defense industry ecosystem further grow?

The collaboration between our organization and the Ministry of Defence has been exceptional, particularly in the area of Research and Development (R&D). This fruitful cooperation has enabled Cypriot companies to participate successfully in cooperative European defense product development programs. Now, as the Cyprus defense industry has matured, we are seeking to expand this collaboration to encompass armaments.

Our aim is to promote industrial collaboration in armaments by establishing a framework where local companies and foreign suppliers from large defense companies work together to ensure a secure supply for our armed forces. This collaborative framework, which has proven successful in numerous countries over many years, should also be implemented in Cyprus. By doing so, we can transform the substantial investments made by our country in defense systems and arms into a catalyst for economic growth.

One exemplary case is the Greek frigate program, where the winning bidder integrated Greek companies as suppliers, thereby generating significant income for the Greek economy and creating new job opportunities. We should follow this successful example to foster the continuous growth of our innovative defense ecosystem. By doing so, we can enhance the self-reliance of our armed forces and ensure a reliable supply of defense resources.

When we started, there was no entrepreneurial spirit like we see today and most graduates were interested in securing a position in the government

You founded SignalGeneriX in 2004. What has changed and what hasn’t in the Cypriot R&D field in the last 19 years?

SignalGeneriX was one of the first technology startups in Cyprus and a pioneer in the domain of R&D. Since our establishment, with a lot of passion and careful investment in our R&D and technology manufacturing infrastructure and personnel, we transformed SignalGeneriX to an internationally acknowledged company that exports its technologies and products in more than 28 countries.

When we started, there was no entrepreneurial spirit like we see today and most graduates were interested in securing a position in the government. I am very happy that today we see a completely different landscape with lots of excellent high-tech startups and matured companies. I am also proud that the Cyprus Association of Research and Innovation Enterprises (CARIE), which we formed with other Cypriot entrepreneurs back in 2010, has played a vital role in this transformation.

Did the US lifting of defense trade restrictions on Cyprus affect Cypriot companies in the industry? And if yes, how?

Certainly, the US embargo lifting was a very positive development for our country but also for our Defense industry since it opens many opportunities for us. Since this is very recent, we are currently examining ways of further cooperating with US based companies. We have excellent collaboration with the US embassy in Cyprus with which we co-organized visits of US companies to the Cypriot Pavilion at DEFEA exhibition in Athens and also visits of Cypriot companies to the US Pavilion. We are very positive of new and enhanced collaborations with US companies in the near future.