An Insider’s Look at Ukraine’s DefTech Gold Rush

Ukraine is becoming a force to be reckoned with in the world of warfighting weapons production. The full-scale invasion has taught all those invovled in defense technology many lessons, and Ukraine, in order to survive, has had to learn and adapt more quickly than anyone else. Many aspects of production remain underappreciated. Make us preferred on Google Flip Share Facebook X (Twitter) LinkedIn Bluesky Email Copy Copied (Photo by General Staff of the Armed Forces of Ukraine) Content Share Facebook X (Twitter) LinkedIn Bluesky Email Copy Copied Flip Make us preferred on Google War is, above all, about spending. Massive spending. For example, one day of war costs Ukraine approximately $170-175 million – nearly Hr.7 billion. Every single day. These figures include military salaries and bonuses, ammunition, equipment, treatment for the wounded, compensation for the families of fallen soldiers, food, fuel, logistics, and keeping the army supplied 24/7 with everything required to conduct effective combat operations. Weapons procurement that consumes the lion’s share of this budget. The lengthy process of weapons development, production, frontline delivery, maintenance, and actual deployment all add up to tens of millions of dollars daily. Follow our coverage of the war on the @Kyivpost_official . The war in Ukraine has shown that “expensive” does not always mean “effective.” On the contrary, in many cases, small, simple, and affordable devices have proven far more effective than complex systems developed over decades and costing states tens of millions of dollars. Helicopters, aircraft, and armored vehicles have suddenly become vulnerable to devices that cost hundreds or even thousands of times less. For example, an FPV drone costs on average $400-1,000, while a larger strike UAV costs around $20,000. By comparison, tanks are valued at $2-10 million, armored vehicles up to $3 million, and missiles range from tens of thousands to several million dollars per unit. Looking at these numbers, the conclusion is obvious: a relatively inexpensive drone can destroy equipment worth hundreds of times more. But let’s not confuse efficiency with cheapness. Weapons have not suddenly become “affordable” – every device still carries a significant cost. What Ukraine has demonstrated is that targets can be neutralized without requiring multi-billion-dollar defense budgets. Other Topics of Interest Russian Attacks Kill 8 in Dnipropetrovsk Region Overnight Russian forces launched nearly 30 attacks across Ukraine’s Dnipropetrovsk region overnight, killing eight people and injuring 11, regional officials said. The strikes damaged homes, infrastructure and industrial facilities as Ukraine’s air defenses intercepted 111 out of 139 drones launched by Russia during the latest mass overnight attack. How weapon prices are formed Weapons manufacturers – including Ukrainian companies such as BlueBird Tech, the company I founded – do not pull prices “out of thin air.” The figures listed on an official website are only the visible tip of the iceberg. Behind every device lies an enormous amount of work, from the initial idea to the moment it reaches the frontline. In essence, pricing defense products is not fundamentally different from pricing a smartphone or microwave sold in an electronics store – but there are several critical nuances. Every product goes through five key pricing stages. A significant portion of costs comes from sourcing components. Today, Ukraine still purchases most microchips, processors, motors, and electronics from China. It is worth noting that manufacturers, including BlueBird Tech, are increasingly localizing production and transitioning toward domestic components every month. Still, working with Chinese suppliers is not as simple as selecting parts on AliExpress and picking them up at a local post office. Ordering high-quality components for thousands or tens of thousands of devices requires hard currency. This means purchasing foreign exchange worth tens of millions of hryvnias and paying Chinese suppliers 100% upfront – otherwise, no shipment. These funds are often borrowed, at substantial interest rates, creating financial pressure and risk before production even begins. Then comes the hardest part: waiting. Delivery can take weeks or even months. Most shipments travel by sea, meaning delays due to storms, blocked straits, piracy risks, or uninsured vessels, which are all real possibilities. Any geopolitical disruption – international conflict, sanctions, regional instability – immediately affects component markets and logistics. For instance, recent developments in the Middle East and concerns around the Strait of Hormuz instantly and disproportionately affected prices worldwide. Eventually, the components arrive at port – but not a Ukrainian one. Usually they land in Poland or the Baltic states before being trucked through customs into Ukraine. After that comes unloading and domestic transportation to production sites scattered across the country. In total, up to two months or more can pass between payment and the moment a component reaches a drone assembler’s workbench in Ukraine. At this stage, before receiving a single hryvnia in sales revenue, manufacturers have already spent hundreds of thousands of dollars and countless man-hours. And supply chains must remain stable. Production cannot pause for Chinese New Year or other disruptions. To avoid downtime and ensure military units receive devices daily in sufficient quantities, companies maintain reserve inventories for delays, force majeure events, or defective shipments. That means even more capital tied up in warehouses – and an even more expensive financial model. Assembling a basic FPV drone is not especially difficult. A skilled individual can do it in a kitchen workshop. But producing hundreds of units per day with consistently high quality is an entirely different challenge. It requires dozens of production sites across different cities, often in classified locations. Large centralized factories are impossible – they would become immediate targets for Russian missiles and drones. Secrecy and decentralization are expensive. Another major cost category is quality control. A single defective unit can lead to an entire batch of thousands being rejected during Ministry of Defense acceptance procedures. Facilities with shelters must be renovated, equipped with furniture, machinery, and tools – and made safe for work. Employees must not only be recruited but trained, equipped, officially employed, and provided with social benefits. Naturally, competitive wages account for a substantial portion of expenses. Then come taxes. Large technology companies such as BlueBird Tech operate fully transparently, meaning every tender and every financial transaction carries additional costs reflected in the final product price. Finally, the finished devices are ready. But expenses do not stop there. Products must be carefully packaged, instructions printed, delivered to clients, serviced afterward, and covered under warranty and replacement procedures. Communication with government agencies, military units, volunteers, and prospective buyers requires dedicated teams working around the clock to answer inquiries and solve problems. That is another ongoing cost. In reality, a defense product is not simply sold – it is supported throughout its operational lifecycle. And there is another critical factor: external communications. It is not enough to build an effective device. Different audiences must know it exists, understand how it works, and want to use it. This requires spending on PR, marketing, and participation in international defense exhibitions. Perhaps the least visible but most critical part of the price is R&D (research and development. Every device operating on the front line today partially finances what will appear tomorrow. Development often takes months or years of work, testing under various weather conditions, failed prototypes, destroyed airframes, classified field trials near active combat zones, extended deployments, mistakes, and experimentation. Most of these prototypes will never see deployment. But without them, there is no breakthrough. BlueBird Tech invests in future innovative systems that the battlefield may not yet require – but which engineers are already discussing today. In effect, the buyer pays not only for the current product, but for the company’s ability to develop future solutions. Given the enormous needs of the military, Ukrainian developers operate in constant emergency mode. Often overtime. Frequently under severe time pressure. This automatically increases costs. Employees may work with only one day off per week. Contractors raise prices for urgent work. The labor market suffers from acute shortages. Ukraine simply does not have time for traditional long development cycles. Solutions must be implemented immediately. Faster procurement costs more. Faster production rollout costs more. Faster delivery creates additional logistics costs and risks. And this applies not only to creating new products, but to continuously upgrading existing ones. No frontline device is ever truly “finished.” It is constantly modified and adapted to changing battlefield requirements, which can shift several times within a single month. Every such modernization incurs additional costs. For perspective: The Patriot air defense system was developed over more than a decade. Initial prototypes appeared in 1969, and the system entered service in 1981. Its total development, modernization, production, and lifecycle support costs amount to hundreds of billions of dollars. The F-16 fighter jet was developed from the early 1970s and entered serial production only toward the end of that decade. Its overall program costs also amount to hundreds of billions over its lifetime. The Tomahawk cruise missile has undergone continuous development since the 1970s, costing billions in creation and modernization. Each upgrade still requires separate large-scale Pentagon funding programs. Traditional military systems are multi-decade, multi-billion-dollar programs. Ukraine’s reality is entirely different.Solutions must be created much faster and under battlefield conditions – which automatically increases the cost of each development cycle. A common question is: Can production be fully localized? Formally – yes. Practically – it is a long and complex process. Ukraine’s strategic goal is full localization. But building semiconductor production is not something that can happen in a month. Global giants such as Taiwan invested decades and billions into building such capabilities. That said, Ukraine has enormous potential to manufacture everything from components to complex systems. Even accounting for Soviet-era industrial heritage, this requires time, investment, and a full production ecosystem. Many Ukrainian companies already manufacture controllers, drone motors, cameras, microchips, and other products. Frankly, many of them not only match Chinese equivalents – they outperform them. The advantages are obvious: lower logistics costs, better quality, and pricing in hryvnias. However, these facilities are not yet sufficient to fully satisfy national demand. And another challenge remains acute: a shortage of qualified specialists due to war, migration, and labor market distortions. At first glance, large-scale manufacturing should reduce prices. And it does – under certain conditions. Industrial-scale production lowers unit costs through economies of scale. When producing tens of thousands rather than dozens of units, procurement becomes more efficient, logistics become optimized, and automation becomes viable. But most Ukrainian manufacturers operate in very different circumstances. Often they produce dozens or hundreds of units per month, with small regional teams working under near-field conditions. A true serial manufacturer must account for official payroll, management structures, cybersecurity, certifications, logistics, service support, and uninterrupted output. The Ministry of Defense cannot rely on unstable suppliers. It needs guaranteed monthly deliveries of tens of thousands of systems with predictable quality. In theory, large manufacturers could temporarily dump prices. But that would eliminate smaller innovators and slow the development of new products. There is a widespread myth that high prices mean massive profits for manufacturers. Many assume defense tech companies are “making money hand over fist” during wartime. That is simply false. High prices reflect technological complexity and the real costs of producing systems that must work quickly, accurately, safely, and reliably. Moreover, profitability in many defense sectors is tightly regulated by the state. In Ukraine, the maximum markup is capped at 25%. That margin is not excess profit. It is what allows companies to survive, expand production, train specialists, and invest in new R&D. These funds are constantly reinvested into the production cycle. A company that fails to reinvest quickly loses its ability to provide effective solutions to the military. When comparing Ukrainian and Western defense systems, especially drones, the price gap can appear shocking. For example, UAVs from major European defense groups such as Rheinmetall often start at €20,000-30,000 ($23,500-35,000) per unit – and that is before discussing missiles costing millions. Why? First, Western defense industries operate under entirely different economic and regulatory systems. Unlike Ukraine, profit margins are not tightly capped. In the US and Europe, markups can reach several hundred percent. This is part of their business model. Such systems evolved over decades around massive budgets, complex procurement frameworks, and geopolitical lobbying. A significant portion of spending goes not only toward production, but also toward: Only then comes the product itself. Second, labor costs are significantly higher. Engineers’ salaries, benefits, taxes, rent, and overall living costs increase final prices. Third is bureaucracy. Large defense corporations are massive, slow-moving organizations with substantial internal overhead. Their advantage lies in deep state integration and long-term contracts. For a long time, major Western defense players viewed Ukrainian solutions with skepticism. Ukraine was not considered a serious defense innovator. That has changed. Ukrainian manufacturers have fundamentally shifted defense thinking. Large corporations are naturally resistant to fast, inexpensive, highly effective solutions that threaten established systems. But reality is forcing adaptation. Ukraine’s wartime experience proves that: Western companies are beginning to invest in smaller firms, including Ukrainian ones, or launch dedicated agile divisions. But their scale and inertia make rapid adaptation difficult. That is why the world is increasingly turning to Ukraine as a major defense technology player. Ukraine’s drone revolution is only the first stage of a much deeper transformation. Any technological breakthrough in one area reduces costs across the broader defense ecosystem. Faster, simpler, cheaper drone manufacturing drives down costs for electronics, sensors, communications systems, and eventually more complex systems such as armored vehicles, artillery, missiles, and air defense. Over the coming years, defense will undergo a multi-level transformation – including financial transformation. Air defense systems will become more automated and affordable through AI. Missiles will become more standardized and cheaper to produce. Armored vehicles will become easier to manufacture through modular designs and advanced materials. And Ukraine is becoming one of the primary drivers of this global transformation. The views expressed in this opinion article are the author’s and not necessarily those of Kyiv Post.   Valerii Zarubin is a co-founder of the technology company BlueBird Tech. An expert in military engineering technologies, security solutions, and defense AI innovations. He specializes in unmanned systems, electronic warfare, drone detection, battlefield communications, and the impact of technology on modern warfare. BlueBird Tech (blue-bird.tech) is a leading Ukrainian technology company specializing in the design and production of electronic warfare (EW) systems