The Government of Canada has promised to prioritize buying Canadian, focusing on the country’s existing strengths, and picking domestic champions in its new Defence Industrial Strategy (DIS).
The feds aim to hand 70 percent of defence contracts to domestic businesses and create 125,000 new jobs.
The federal government intends to pour nearly $82 billion CAD into defence over the next five years, and the DIS offers a roadmap for ensuring that Canada’s defence industry reaps the rewards of that spending. The DIS was supposed to be released last week but was delayed due to the mass shooting in Tumbler Ridge, BC. The announcement was rescheduled for this week, but media outlets have now published the details.
As Canada ramps up its defence spending in a big way after decades of neglect, the DIS is a $6.6-billion plan of attack to ensure that domestic companies play a “a central role” in the country’s push to rebuild its armed forces and bolster its sovereign defence capabilities.
This plan could have big benefits for Canadian tech, which spent 2025 embracing defence and angling for a cut of the billions that the feds plan to pour into the sector over the coming years, and is well-positioned to provide some of the tech the Canadian Armed Forces requires.
The DIS indicates that the feds intend to prioritize developing and purchasing Canadian defence products and services, focus on areas where Canada already possesses deep strength (like AI and quantum), and help scale some of the country’s promising defence small and medium-sized businesses (SMBs) into “national champions.”
With the DIS, the feds hope to not only ensure that Canada possesses the capacity to defend itself amid increasing geopolitical tensions, but position the country’s defence sector “as a powerful engine of growth, innovation, and long-term national resilience.”
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The DIS lays out a number of clear targets for Canada over the next decade, including: building “world-leading” Canadian defence firms in key verticals; increasing the share of defence contracts awarded to domestic businesses to 70 percent; and boosting federal investment in defence research and development (R&D) by 85 percent. The federal government hopes to more than triple total defence industry revenues, grow exports by 50 percent, and create 125,000 new quality defence jobs.
The DIS will be supported by Canada’s recently-launched Defence Investment Agency (DIA), which has been tasked with overhauling the country’s approach to military procurement.
Initially housed within Public Services and Procurement Canada, the feds now plan to establish the DIA as a standalone entity, after realizing that putting defence procurement under the purview of multiple departments has made it too slow to respond to urgent needs. Once fully operational, the DIA will coordinate across the government.
Canada’s defence ambitions take shape
Since 2000, Canada’s annual defence spending has hovered between one and 1.4 percent of its GDP, lagging behind its international peers. But last year, in response to economic threats and challenges to Canadian sovereignty, the feds set the country on pace to spend two percent of its GDP on defence this fiscal year as it targets five percent by 2035.
Prime Minister Mark Carney’s first budget earmarked nearly $82 billion over five years to “rebuild, rearm, and reinvest” in the CAF, including through investments in not just tools for kinetic warfare, but also sensors, AI, cybersecurity, quantum computing, space tech, and other forms of both dual-use and military-focused digital infrastructure.
This DIS will help shape some of that spending. It outlines a to-do list for the federal government that includes: renewing its relationship with domestic defence players; taking a strategic, “build-partner-buy” approach to defence procurement; securing the country’s most sensitive tech; and reinforcing its critical mineral supply chains.
“Buy Canadian” will be Canada’s “guiding North Star” when it comes to defence, according to the strategy. The “build-partner-buy” framework indicates that Canada will focus first on domestic production and procurement. When that is not feasible, the feds intend to explore co-development partnerships with trusted allies. The DIS indicates that Canada will buy solutions from foreign defence contractors only where necessary, “under conditions that flow back into domestic industry and ensure Canadian sovereign control.”
“The emphasis on ‘build’ as the first priority before ‘partner’ and ‘buy’ is a huge shift and shows the government is listening to Canadian defence companies about building sovereign capability,” Matt Lombardi, co-founder of Canadian defence innovation network The Icebreaker, told BetaKit.
Dominion Dynamics founder and CEO Eliot Pence echoed that reaction, calling the DIS as “an overdue and meaningful shift that rightly prioritizes build–partner–buy, faster procurement at the speed of the threat, and the deliberate cultivation of Canadian defence champions.”
The feds define key sovereign capabilities as “those without which Canada cannot defend its sovereignty or meet its allied commitments,” and lay out an initial list of 10 priority areas that includes: aerospace, ammunition, digital systems (such as secure cloud, AI, and quantum), in-service support, personnel protection like medical countermeasures, sensors, space, specialized manufacturing, training and simulation, and autonomous systems.
Canada’s key sovereign capabilities
- Aerospace platforms, avionics, and aircraft communications
- Ammunition: common ammunition, battle-decisive munitions; small arms, missiles, and bombs
- Digital systems: secure cloud, AI, quantum computing and communications, integrated command, control and communications, and high-assurance communications equipment
- In-service support: naval, land, and air
- Personnel protection, including medical countermeasures
- Sensors: marine sensors, quantum sensors; electronic warfare
- Space: space-based intelligence, surveillance and reconnaissance, space domain awareness, satellite communications; space launch
- Specialized manufacturing: land vehicles and surface ships, including icebreakers and marine systems
- Training and simulation: naval, land, and air
- Uncrewed and autonomous systems: uncrewed and autonomous land, aerial, underwater and surface systems (including uncrewed collaborative platforms)
Canada plans to enter “formal strategic partnerships” with industry partners, with a view to building global champions in those priority areas. The feds intend to share a framework for the identification and onboarding of select Canadian defence firms this summer.
Lombardi described the DIS’ focus on growing Canadian SMBs into anchor companies as “a welcome shift and important recognition that so many Canadian SMBs are already selling to our NATO allies first while searching for a domestic customer.”
Among other things, Canada has also set its sights on building new defence-industrial relationships with the European Union, United Kingdom, Australia, New Zealand, Japan, and the Republic of Korea, ensuring the Industrial and Technological Benefits Policy aligns with this plan, establishing a permanent Defence Advisory Forum to improve industry engagement, and providing concierge support for SMBs working with the government.
Lombardi noted the DIS is currently “very light on enforceable mechanics that would actually make it fast and SMB-friendly,” such as fast lanes or hard caps on decision timelines, but said he is confident that some of this will come from the DIA.
“The [DIS] targets are daunting—but doable, which is exactly where a serious nation-building strategy should sit,” Pence told BetaKit.
The real challenge going forward, Pence continued, will be ensuring that Canada’s defence procurement system can keep pace. “It will require the same sustained, focused political attention that this year’s push to reach two percent received… except now that push will be a decade long.”
Feature image courtesy Mark Carney via LinkedIn.