Dual-Use: Weapon or Tool? The Fascinating Dual Technology That Brings Billions to Germany

### From the Gulf to the Battlefield: How VW, Conti & Co. are now conquering the arms industry ### Gold rush after the turning point: Why even printing press manufacturers are now betting on tanks ### Germany's new billionaire stars: Hardly anyone knows these defense startups ### AI for War: How German companies like Helsing are revolutionizing military technology ###

The silent boom: A German industry explodes – and changes our economy forever

The German economic landscape is undergoing a transformation. While traditional industries struggle with uncertainty, one particular sector is experiencing a veritable boom: the dual-use sector. More and more companies are discovering the lucrative business of technologies and products that can be used for both civilian and military purposes. This development has not only economic but also strategic dimensions that extend far beyond Germany.

The term "dual-use" refers to goods, including software and technology, that have a dual purpose. They can be used for both peaceful, civilian applications and military or security-related purposes. This flexibility makes them particularly valuable at a time when the boundaries between civilian innovation and military application are increasingly blurring.

Explosive market growth

The figures speak for themselves: The European market for dual-use goods has exploded in recent years. While the total value of approved exports amounted to €31 billion in 2019 and 2020, it rose to an impressive €57.3 billion by 2022. This represents an increase of more than 84 percent in just two years and now accounts for two percent of all European exports.

This dramatic development is also reflected in German export figures. Germany has established itself as the leading exporter of dual-use goods in Europe and is recording continuously increasing sales in this sector. Particularly noteworthy is the concentration on high-value technology sectors such as telecommunications, information security, and cryptanalysis, which alone account for 45 percent of the total value.

The most important export markets are the United States, with 24 percent of the total volume, and China, with 19 percent. This distribution demonstrates how German dual-use technologies influence the tensions of global power politics and thus also become an instrument of economic strategy considerations.

Venture capital discovers the defense sector

Parallel to the export boom, the financing landscape is also experiencing a revolution. The venture capital market for dual-use and defense tech startups has undergone fundamental change. Germany has recorded investments totaling one billion US dollars in this sector since 2018, making it the leading country in Europe. By comparison, the US saw investments of 130 billion US dollars during the same period, highlighting the enormous dimensions of the American market.

Particularly noteworthy is the development in 2024, when the German defense tech sector reached an investment volume of just over €800 million. These figures underscore investors' growing confidence in the future viability of this sector. In its Venture Capital Market Trends report, KfW forecasts further strong growth opportunities for cybersecurity and dual-use technologies in 2025, influenced by the current geopolitical market environment.

Investors see significant growth opportunities, particularly in the areas of artificial intelligence, cybersecurity, and dual-use technologies. More than half of the German venture capital investors surveyed expect very strong growth opportunities for cybersecurity, while enthusiasm for artificial intelligence also appears unabated.

German Dual-Use Champions: From Startups to Global Corporations

The new unicorns of defense technology

Germany has already produced two impressive success stories in the defense tech sector. The Munich-based company Helsing has developed into one of Europe's most valuable defense tech startups within just a few years. Founded in 2021 by Torsten Reil, Niklas Köhler, and Gundbert Scherf, the company focuses on AI capabilities for the security and defense sectors.

Helsing has written an impressive success story with its software-first approach. The company develops real-time data fusion systems for military applications that connect sensors from battle tanks, drones, and jets, providing soldiers with a crystal-clear situational awareness, even under the most challenging conditions, such as GPS failure or electronic warfare.

With products such as the Altra software, Cirra, and the Centaur AI pilot, Helsing has positioned itself as a key AI provider for Europe's armed forces. The company has also developed its own hardware platforms, including the HF-1 and HX-2 drone platforms and the SG-1 Fathom autonomous underwater drone.

The impressive €600 million financing round in June 2025 resulted in a company valuation of €12 billion and made Helsing a so-called decacorn. Investors such as Prima Materia, Lightspeed Ventures, Accel, and General Catalyst underscore the international confidence in the German defense tech startup.

The second German defense tech unicorn is Quantum Systems, based in Gilching, Upper Bavaria. Founded in 2015, the company has evolved from a niche provider of vertical takeoff and landing drones to a globally sought-after player. The company's unmanned systems, equipped with AI-supported image recognition and sensor fusion, are now operating in the armed forces of Germany, Great Britain, Australia, and Ukraine.

Quantum Systems achieved a unicorn valuation of over one billion US dollars in 2025 with a €310 million financing round. The company employs approximately 450 people and has offices in Los Angeles, Australia, Ukraine, Bucharest, and plans further expansion into Spain.

Quantum Systems' drones combine long flight times with vertical takeoff and landing capabilities, making them ideal for reconnaissance missions without runways. The company has formed strategic alliances with companies such as Hensoldt to develop integrated sensor solutions.

Traditional arms giants as dual-use pioneers

In addition to emerging startups, established German defense companies have also become significant players in the dual-use sector. Rheinmetall leads the German defense industry with sales of approximately €7.2 billion in 2023.

The Düsseldorf-based company is no longer just a pure defense contractor. Rheinmetall also produces various automotive components and generates approximately 65 percent of its revenue in the defense segment. Its portfolio includes armored tracked vehicles, weapons and ammunition, protection systems, and air defense systems.

Rheinmetall's foray into future technologies is particularly noteworthy. The company has achieved a technological breakthrough with the KF51 Panther, which integrates advanced technologies such as a 130 mm smoothbore gun, active protection systems, and state-of-the-art command and information systems.

In the Electronic Solutions division, Rheinmetall is making significant progress in drone technology, working on tactical reconnaissance drones and drone defense systems. In cooperation with MBDA Germany, the company developed a high-energy laser weapon system that has been successfully tested and opens up new possibilities in air defense.

Hensoldt AG has established itself as a technology group in the defense and security sector, with a clear focus on state-of-the-art sensors and electronic systems for military and civil security applications. The company divides its core business into four main areas: Radar Systems and Sensors, Electronic Warfare and Avionics, Optronic Systems, and Customer Services and Support.

Hensoldt has made significant advances in radar technology. A prime example is the development of the MIMO radar system for uncontrolled airspace, which uses artificial intelligence to dynamically respond to changing environmental conditions. This technology enables the radar sensor to virtually increase its signal reception aperture without changing the physical antenna size.

The company also develops state-of-the-art night vision devices, laser rangefinders, and optronic targeting systems. These technologies have not only military applications but are also used for civilian purposes, for example, to assist visually impaired people.

Airbus Defence and Space represents the European approach to dual-use technologies. The company is involved in several major European defense projects, including the Future Combat Air System (FCAS), currently the largest defense project in its class, which aims to network combat aircraft, guided missiles, and autonomous aircraft.

As the producer of the Ariane launch vehicle and various satellite models, Airbus is a major player in the military satellite business. The company is actively working on merging its space activities with other European players such as Thales and Leonardo to form a strategic alliance in the space sector.

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Industrial groups discover the defense business

The big shift of traditional companies

The turning point in German security policy has triggered a remarkable chain reaction in the German industrial landscape. Companies that for decades produced exclusively for civilian markets are suddenly discovering the lucrative arms business as a new business area.

Volkswagen, Germany's largest automaker, officially confirmed plans to enter the defense industry. CEO Oliver Blume announced that, given the current global situation, they are discussing entering the defense industry. Rheinmetall CEO Armin Papperger described the VW plant in Osnabrück as highly suitable for converting to military production, particularly for the manufacture of infantry fighting vehicles.

The plant, which previously produced convertibles and small-series vehicles, could potentially be converted to manufacture military vehicles. Rheinmetall is also showing interest in other VW sites, such as Dresden. This development demonstrates how increased defense spending is creating new business opportunities for companies that previously had no contact with the defense sector.

Heidelberger Druckmaschinen was one of the first traditional industrial groups to venture into the defense sector. The company entered into a strategic partnership with defense company Vincorion, under which Heidelberger Druck will supply energy control and distribution systems for military applications.

For Heideldruck, this is its first project in the defense sector. CEO Jürgen Otto emphasized that the defense industry now offers great potential for companies seeking to tap into new business areas in rapidly growing markets. The company plans to ideally announce three to four more defense partnerships by the end of the year.

The Industry division, which includes the defense business, is expected to generate at least €100 million in revenue over the next three years, with a significant portion coming from the defense business. The announcement led to a dramatic increase in Heideldruck's share price of more than 36 percent.

Continental, one of Germany's largest automotive suppliers, is now collaborating with Rheinmetall and is using plants previously used for automotive technology for defense purposes. The company produces weapons components and leverages its technological expertise from the automotive sector for military applications.

ZF Friedrichshafen is offering its sites specifically for defense production and converting capacities for military drive systems. The company leverages its expertise in transmission and drive technology for military vehicles and systems.

Trumpf, the Swabian mechanical engineering company, is focusing for the first time on the development and production of laser weapons for drone defense. This entry into advanced military technology demonstrates how technology-oriented medium-sized companies are also opening up new business areas in the defense sector.

Technology companies as dual-use actors

Siemens, one of Germany's largest technology companies, has been a trusted partner in the defense sector for over 140 years. The company offers PLM systems specifically for the defense industry, monitoring systems such as Siveillance, and engineering support for embedded systems in the naval sector.

Siemens has delivered over 150 submarines to NATO countries, Germany, and other friendly nations and is collaborating with IBM on Project Hercules to modernize the Bundeswehr's IT. The company also operates a dedicated research center dedicated exclusively to dual-use enabling technologies, robotics, and artificial intelligence.

SAP, the German software company, develops IT solutions specifically tailored to the needs of the military. Its portfolio includes management software for cost, material, and situational awareness, as well as specialized solutions for the defense and security sector.

BASF, the world's largest chemical company, supplies dual-use coatings and plastics with explicit reference to their benefits for various military applications. The company leverages its expertise in materials science for both civilian and military purposes.

The innovation driver biotechnology

Biotechnology has developed into one of the most important dual-use areas. Germany implements EU dual-use controls through the Foreign Trade and Payments Act and the Foreign Trade and Payments Ordinance, with the Federal Office for Economic Affairs and Export Control responsible for licensing and enforcement.

The new German coalition government views biotechnology as one of the key industries that will contribute to the German economy in the coming years and has committed to extensive investment in this sector. Many biotechnological advances, such as genetic engineering or pathogen research, are inherently dual-use.

Controlled goods include certain pathogens, toxins, genetic sequences for the production of dangerous active substances, gene editing techniques such as CRISPR-Cas, and equipment such as fermenters or freeze dryers that can be converted for the illegal production of biological agents.

The risks are further exacerbated by the increasing accessibility of advanced biotechnologies, the global dissemination of knowledge, and the digitalization of research processes. These developments pose new challenges to export controls traditionally intended for physical goods.

Artificial intelligence as a key dual-use technology

Artificial intelligence has become one of the most important dual-use technologies. German companies are investing heavily in AI-based solutions that have both civilian and military applications. For example, the Bundeswehr operates an innovative AI laboratory in Electronic Warfare Battalion 912 that specializes in the integration of artificial intelligence in a military context.

Embedded AI, which is directly integrated into hardware or software systems, enables autonomous operation and real-time decision-making without an internet connection. These systems are increasingly being used in civil security and military defense for threat detection, tracking, and identification.

In the defense sector, AI is increasingly being used in fighter jets, drones, helicopters, and naval vessels. Through fine-grained pixel analysis, AI enables precise image interpretation and supports decision-making under challenging conditions such as adverse weather or long distances.

Systems like Guardion collect and analyze data from various sensors in real time to detect threats such as drone attacks and automatically initiate countermeasures. Palantir is used by various militaries around the world and analyzes vast amounts of data from various sources to support decision-making.

Regulation and challenges

The explosive development of the dual-use sector presents significant regulatory challenges. The European Union has created a new legal framework with Regulation 2021/821, which is regularly updated. The most recent update of Annex I entered into force on November 8, 2024.

Germany has significantly expanded the list of nationally registered dual-use goods as part of the 21st Regulation amending the Foreign Trade and Payments Regulation. Numerous emerging technology goods have been added to Section B of the export list and are now subject to licensing.

This development highlights the tension between promoting innovation and security interests. Companies must immediately check whether their exported goods are now subject to licensing requirements. The EU Commission had already expressed concerns in 2021 that national controls could lead to a patchwork of different export control regimes.

International dimensions and geopolitical significance

The German dual-use sector operates in an increasingly complex geopolitical environment. The main destinations for German dual-use goods are the United States and China, which exposes German exporters to increased risks.

The new Trump administration could impose tariffs on imports from the EU or tighten US re-export controls, which could severely impact EU exporters. At the same time, European regulatory authorities could also adopt more restrictive approval practices for exports to China.

NATO has initiated a one-billion-euro venture capital fund to finance related technologies, underscoring the sector's strategic importance. This development demonstrates how dual-use technologies are becoming a tool of geopolitics.

Future prospects and growth potential

The future prospects for the German dual-use sector are extremely positive. German venture capital investors expect particularly strong growth opportunities in the areas of cybersecurity and dual-use technologies in 2025. Over half of the investors surveyed expect very high growth opportunities for cybersecurity.

The European Commission has presented a quantum strategy to make Europe a world leader in quantum technology by 2030. By 2040, the sector is expected to create thousands of highly skilled jobs and exceed a total value of €155 billion.

The photonics industry, in particular, is showing impressive growth figures. The more than 1,000 German photonics companies, with their 190,000 employees, increased their revenue to approximately €54 billion in 2023. The export rate of 73 percent demonstrates the international competitiveness of German photonics companies.

The German government is supporting this development through the Deep Tech & Climate Fund, with a total volume of up to one billion euros and a term of 25 years. Startups can receive between one million and 30 million euros in financing.

The German dual-use sector faces a golden future. The combination of technological excellence, strategic partnerships, and growing political support creates ideal conditions for further growth. At the same time, this development requires a responsible approach to the associated ethical and security challenges. Germany has the opportunity to establish itself as a leading dual-use nation, pursuing both economic and strategic interests.

Markus Becker

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Head of Business Development

Chairman SME Connect Defense Working Group

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Konrad Wolfenstein

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contact me under Wolfenstein ∂ Xpert.digital

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