Canadian space companies received a definitive demand signal today: if you can build something outlined as a key sovereign capability, the military will buy.
Under Ottawa’s new Defence Industrial Strategy (DIA), the space sector has been elevated to the exclusive status of a “Sovereign Capability,” granting domestic firms a priority position in a new procurement framework that aims to direct billions in spending toward homegrown technologies.
Space was designated one of 10 key sovereign capabilities in today’s much-anticipated release of Canada’s Defence Industrial Strategy.
For space, the government is looking at the following prioritized sub-sectors: Space-Based Intelligence; Surveillance and Reconnaissance; Space Domain Awareness; Satellite Communications; and Space Launch.
The other key defence sovereign capabilities include: Aerospace; Ammunition, Digital Systems including Quantum Computing and Communications; In-Service Support; Personnel Protection; Sensors including Quantum Sensors; Specialized Manufacturing; Training and Simulation; and Uncrewed and Autonomous Systems.
The DIA includes a “Build-Partner-Buy” framework.
Build: The government will prioritize Canadian space products to strengthen strategic autonomy and reduce reliance on foreign suppliers.
Partner: In areas where domestic capacity is limited, Canada will seek to co-develop space systems with trusted allies (Five Eyes, EU, UK, and Indo-Pacific partners) while prioritizing the retention of Canadian intellectual property (IP).
Buy: If off-the-shelf space equipment must be purchased abroad, it will be done under strict conditions to ensure Canadian sovereign control over operations and sustainment.
On this topic and in making the announcement this morning Prime Minister said “Its framework is simple. Build, partner, buy. First, we will build in Canada and prioritize Canadian companies. As a matter of policy, military procurement in areas where we have sovereign capabilities will be directed to Canadian firms first.”
Where we can’t build alone, we will partner with like-minded allies… helping to attract investment, transfer intellectual property, and integrate supply chains… And only after exhausting those first two options will we buy from abroad.”
R&D and innovation support
BOREALIS, the new research bureau (Bureau of Research, Engineering and Advanced Leadership in Innovation and Science) will focus on accelerating defence research in frontier technologies, which includes space-related capabilities.
There are several funding pathways part of the DIA including the Defence Innovation Program (IDEaS), Innovative Solutions Canada, the Strategic Response Fund, the NRC‑IRAP, and the Canadian Space Agency’s Space Technology Development Program, and NRC‑IRAP.
BOREALIS held its first Defence Innovation Secure Hubs (DISH) industry day last month where quantum and drone tech dominated.
Of note, the Industrial and Technological Benefits (ITB) policy is being modernized. The 17 existing Key Industrial Capabilities (KICs) will be replaced by a streamlined list of 10 Sovereign Capabilities.
Canada’s current position
It’s no secret that Canada has lagged in defence spending and procurement. Neither the Liberal or Conservative governments over the last several decades have fully followed through on promises.
In his speech Prime Minister Carney acknowledged this saying, “Defending Canada means more than just increasing the size of our military. It also means the strength of our industries, the resilience of our economy, and our capacity to act independently when it matters the most. Our national security and our economic security go hand in hand.”
The truth is, over the last few decades, Canada has neither spent enough on our defence nor invested enough in our defence industries. We’ve relied too heavily on our geography and others to protect us. This has created vulnerabilities that we can no longer afford and dependencies that we can no longer sustain.”
Mike Mueller, President and CEO, Aerospace Industries Association of Canada (AIAC) said in a statement on today’s announcement;
Today’s release of Security, Sovereignty and Prosperity — Canada’s Defence Industrial Strategy is an important milestone for Canada’s aerospace and defence sector.
For years, industry has called for greater clarity, a stronger demand signal and a more strategic approach to procurement. The Strategy provides that direction and recognizes industry as a partner in building and sustaining Canada’s defence capabilities and strengthening our sovereign industrial base.
The focus now must be on disciplined and timely implementation. With accelerated procurement, predictable R&D pathways, resilient supply chains and a modernized export framework, Canada has an opportunity to rebuild industrial capacity, enhance economic security and deliver real capability outcomes for the Canadian Armed Forces.
The numbers
Top-Line Investments
- $81.8 Billion: Total funding pledged in Budget 2025 to increase defence investments.
- $6.6 Billion: Specific allocation from the 2025 budget dedicated to implementing the Defence Industrial Strategy.
- $180 Billion: Projected total direct investment in defence procurement by 2035.
- $290 Billion: Projected total investment in defence-related infrastructure by 2035.
Innovation & R&D Support
- $460 Million: Investment over five years for a new R&D platform.
- $244 Million: Funding for the new “Defence Industry Assist” stream under the NRC’s Industrial Research Assistance Program (IRAP) to help SMBs with defence technologies.
- $105 Million: Investment over three years to establish a Drone Innovation Hub at the National Research Council (NRC).
- $68.2 Million: Initial three-year investment to stand up BOREALIS, the new defence research bureau.
Supporting Canadian Businesses (SMBs)
- $4 Billion: Value of the new Defence Platform at the Business Development Bank of Canada (BDC) to provide loans and venture capital to defence firms.
- $357.7 Million: Funding for the new Regional Defence Investment Initiative to integrate SMBs into supply chains.
- $5.1 Billion: Targeted annual revenue growth for Canadian defence SMBs.
Infrastructure & Supply Chain Security
- $5 Billion: Allocated to the Strategic Response Fund to help industries (like steel and aluminum) adapt to tariffs and pivot to defence production.+1
- $2.67 Billion: Investment for the Northern Operational Support Hubs (NOSH) network to build infrastructure in the Arctic.
Workforce & Skills
- $450 Million: Funding for workers affected by global market shifts and tariffs, with defence identified as a priority sector.
- $383 Million: Investment over five years to create new sectoral alliances for skills development.
Updated: This story was updated with a quote from Mike Mueller, President and CEO, Aerospace Industries Association of Canada (AIAC).