Industry and Technology Committee on Oct. 22nd, 2025

[Sima Acan, Liberal, Oakville West, ON]

Thank you very much.

[The Chair, Liberal, Ben Carr]

Thank you.

Colleagues, that's all the time we have for our first hour. I'd like to thank our witnesses very much for being available to the committee. We appreciate your insight and guidance on this important study.

Colleagues, we'll suspend briefly as we turn over to the next round.

[The Chair, Liberal, Ben Carr]

Colleagues, we're going to get going here in the second hour of our conversation.

We have three new witnesses with us here for the second hour of the conversation. From MDA Space, Mike Greenley, the chief executive officer, is joining us by video conference. From ONE9, we have Michael Smith, the chief operating officer, and from The Icebreaker, Matthew Lombardi, the co-founder, is also joining us via video conference.

Colleagues, it's the same process. As per usual, witnesses will be given up to five minutes to make introductory remarks, followed by a preallotted amount of time per represented political party around the table.

With that, Mr. Greenley, I turn to you for your introductory remarks. You have up to five minutes.

[Mike Greenley, Chief Executive Officer, MDA Space]

Thank you for the opportunity to make a presentation to the committee today. The study of the Canadian defence industrial strategy is important and timely.

My name is Michael Greenley. I'm the CEO of MDA Space, Canada's largest space company. We are a global leader in digital low-earth orbit satellite manufacturing; earth and space observation, with flagship programs RADARSAT and Sapphire; and space robotics and operations, with almost 45 years of Canadarm heritage. We have 3,800 employees across Canada, with a growing presence in the United Kingdom and offices in United States, Europe and Israel.

I would like to cover two related items today: first, the world-class quality and breadth of Canada's space industrial capability; and second, the enormous untapped potential of this sector in Canada's national security, its foreign and defence policy, its defence investment program and its future economic security.

For over 60 years, Canada has invested in a civil and defence space program in order to achieve its national goals to connect Canadians from coast-to-coast via satellite-based telecommunications and broadcasting, to monitor our large land mass and coastal approaches, and to explore, utilize and monitor space while burden sharing with key allies. A priority element of early national space policies in the 1960s and 1970s was to build a domestic space industry capable of building Canada's own space systems. Canada's present-day space industry is, therefore, the product of one of the county's earliest and most successful industrial strategies, with world-leading expertise representing a sovereign industrial capability that is sought out by governments and commercial customers from around the globe.

MDA Space is a result of three strategic decisions by Canada: to have space-based communications across the country, to use synthetic aperture radar to survey the maritime approaches to the country, and to contribute Canadarm to the space shuttle and the space station. As a result of those specific choices, MDA Space is now the world leader in space communications, radar-based earth observation and space-based robotics.

It's not just MDA Space. Canada's space industry includes world-renowned companies like MDA Space, Telesat, GHGSat, Calian and Kepler, along with a vibrant small and medium-sized business community, including SkyWatch, Terrestar Solutions and Mission Control. Collectively, we can develop, build and operate complex space systems, all from within our domestic borders. With commercial spaceports and rocket manufacturers—like Maritime Launch Services, Reaction Dynamics and NordSpace—quickly making progress, Canada will soon have launch capability, an important milestone that will complete our country's end-to-end space industry capability. There is little we cannot do.

In the past few years, a new and more commercially oriented space era has emerged, in which nations, along with their industry, are moving swiftly, decisively, strategically and in partnership to gain a foothold in this rapidly expanding sector. Catalyzed by the drastic reduction in the cost of launching satellites into space, the space economy is projected to grow from $600 billion in 2024 to $2 trillion by 2035, representing one of the fasting-growing and innovative industrial sectors in the world. Countries are partnering with commercial companies to quickly and efficiently bring sovereign space capability to market.

With rising geopolitical instability, global government expenditures on military space programs surpassed spending on civil space programs in 2023 for the first time, highlighting the growing importance of space to national security. Allied governments have recognized the power of partnering with their innovative space companies to jointly develop space and satellite missions, using alternative procurement processes that enable speed. In the context of a historic geopolitical shift, Canada's new government committed in June to reaching our 2% NATO target by March and to reach 5% by 2035. I commend Prime Minister Carney and his government for this significant commitment, which has the potential for far-reaching transformation of Canada's economy and national security.

To maximize this investment, Canada should focus on key areas of national strength where industry has the capacity to quickly deploy nationally significant and allied-relevant capabilities, with the potential to be a joint force multiplier. Canada's space industry meets these criteria and can enable one of the quickest paths between decisions and outcomes in areas like advanced military satellite communications; C4ISR; space domain awareness; position, navigation and timing, or PNT; and responsible counterspace operations.

By working with Canadian space industry leaders as strategic partners and leveraging dual-use commercial space technology, Canada can dramatically accelerate the design and delivery of required sovereign space capabilities to deliver advanced space missions at the speed of relevance. If new procurement approaches are empowered, this can be performed without significant demand on DND staffing capacity, as industry can design, build, operate and maintain these turnkey space systems under defence command and control or as a commercial service to DND.

Investing in space defence capabilities will not only enable Canada to protect and assert its sovereignty but will also serve to enhance Canada's economic security and high-tech sustainability with future prosperity.

Thank you for this opportunity. I look forward to your questions.

[The Chair, Liberal, Ben Carr]

Thank you very much.

I think we'll stick with the online witnesses here.

Mr. Lombardi, we'll head to you for up to five minutes for your introductory remarks.

[Matthew Lombardi, Co-Founder, The Icebreaker]

Thank you so much, Chair and members of the committee, for the invitation to appear today.

My name is Matthew Lombardi, and I am the co-founder of The Icebreaker, Canada's defence innovation network. We represent thousands of members from coast to coast with a singular goal, which is to make Canada a net exporter of defence technology.

Earlier this year, The Icebreaker conducted a first-of-its-kind national survey, mapping Canada's dual-use tech ecosystem, and I'll note here that we have provided the results to DND and to the committee clerk.

I am here today to talk about what this data tells us and how it will help point the way to a defence industrial strategy that best utilizes Canada's natural, comparative and technology advantages.

Survey questions revolved around topics such as defence capabilities, familiarity with government procurement processes, patent ownership and barriers holding Canadian firms back from achieving success at home. What we learned is that there are hundreds of Canadian SMEs, firms that have the talent, scalability and product maturity to contribute directly to national security in cutting-edge spaces where Canada can be a net contributor to NATO. In fact, many of these hundreds of companies are already selling to our NATO allies.

While almost 90% of companies said that procurement was important to their success, about half of them said that access to customers, which includes government procurement, was their biggest obstacle to scaling. Nearly 30% of these respondents said they have seriously considered leaving Canada in the past year, and roughly the same percentage said they make more than three-quarters of their revenue exporting.

As you can imagine, this negative cycle stifles company growth and capital formation, yet our entrepreneurs persist in spite of this climate.

The reality is that SMEs want to help national defence, but the system does hold them back. Canadian entrepreneurs who are developing cutting-edge technologies must often wait years before landing a trial or even a sandbox contract to support the Canadian Forces. The defence procurement system is simply not designed for SMEs. The framework, which was built during the Cold War, still revolves around acquiring large platforms like aircraft, tanks, ships and armoured vehicles that will, of course, remain in service until their expiry date.

The procurement cycle stretches over seven or eight years, between the moment the Canadian Armed Forces identifies a capability deficiency and the delivery of a solution. While this long and cumbersome process, which is full of administrative hurdles, may work for something like an F-35 fighter jet that will serve for four decades, it does not work for a piece of software that becomes obsolete within months if not constantly updated.

At the same time, the threat environment has, of course, changed. Electronic warfare, drone detection and AI-powered threat responses are all here. Hybrid warfare is no longer theoretical. We see this every day when we see headlines about the EU president's flight being jammed, when we see unidentified drones appearing over Poland, Denmark and German infrastructure, and when we see attacks on critical infrastructure here in Canada, which are in the headlines almost daily in the form of cyberwarfare.

The old approach to procurement does not work at the speed of modern threats. In fact, many traditional defence companies are not structured to answer fast enough. We see this play out in Ukraine every day, where billion-dollar fighter jets are stuck several kilometres behind the front lines, stymied by disposable thousand-dollar drones. The same has occurred on the ground with tanks and in the Black Sea with billion-dollar warships.

The single worst thing that Canada can do today with our defence industrial strategy is to engage in a box-checking activity that hits our NATO spending obligation by procuring a backlogged laundry list of obsolete equipment, mostly foreign, at a cost of hundreds of billions—equipment that would be functionally useless in a modern conflict like Ukraine.

The answer is instead to find a way to connect our smaller domestic producers—the entrepreneurs we have found who are already selling Canadian technology to our NATO allies—to our own procurement system. The way we do this is by focusing on what we call “attritable mass”. This means moving away from the overfocus on exquisite billion-dollar weapons systems and instead looking at smaller systems that are cheap enough to risk, vast enough to replace and smart enough to bring new capabilities such as drone swarming to the Canadian Armed Forces.

Attritable mass systems are how Ukraine has held the line against a better-armed aggressor by using technology that is 90% as capable at 10% of the cost. This trade-off has delivered the Ukrainians operational freedom. It's allowed their military to operate and iterate faster than a larger adversary that was initially trapped in the crossfire of high-end hardware.

An attritable drone may cost as little as $50,000, rather than several million. An attritable submarine might cost $10 million, not $2 billion. If Canada wanted to, let's say, patrol the Arctic, it might be nice to have a network of hundreds of attritable unmanned submersibles, which we can build in Canada and build quickly, as opposed to receiving just a handful of billion-dollar submarines many years from now.

Many people will appear before this committee and they will ask you to set percentage targets, things like a percentage of new procurement spending that must go to Canadian firms. The Icebreaker is asking for nothing less than a rewiring of how our country thinks about a defence industrial strategy.

In order to take advantage of Canada's existing strengths and our domestic entrepreneurs, and at the same time respond to the modern threat environment, we must rewrite defence production and procurement for the era of attritable mass production. Buying large quantities of attritable systems requires a fundamentally different kind of defence industrial strategy, one where bespoke performance goals take a distant back seat to speedy production schedules and lower costs.

Thank you very much.

[The Chair, Liberal, Ben Carr]

Thank you.

Good. I was just going to stop you there. I appreciate it. We went a little bit over, but that's okay. It was useful information.

Mr. Smith, the floor is yours for five minutes.

[Michael Smith, Chief Operating Officer, ONE9]

Thank you.

Good evening.

The world is in a state of persistent competition, often devolving into conflict, enabled in large part by emerging and disruptive dual-use technologies. As Canada contemplates its way forward in this period of heightened geopolitical—

[Gabriel Ste-Marie, Bloc, Joliette—Manawan, QC]

I have a point of order, Mr. Chair.

The wrong microphone was turned on.

[The Chair, Liberal, Ben Carr]

Mr. Smith, perhaps you could start from the top, please.

[Michael Smith]

It would be my pleasure.

The world is in a state of persistent competition, often devolving into conflict, enabled in large part by emerging and disruptive dual-use technologies. As Canada contemplates its way forward in this period of heightened geopolitical risk, we must begin by asking what it means to win in the 21st century.

I argue that winning today is less about tanks, drones and artillery shells, and more about building a dynamic and agile economy, one that leverages Canada's comparative advantages to generate prosperity while ensuring our security. Achieving this outcome will be possible only through the deliberate alignment of public and private capital to accelerate the dual-use technologies essential to Canada's productivity as well as our national security.

My name is Michael Smith. I'm the chief operating officer of ONE9, Canada's first and only defence and dual-use focused venture capture fund. Before joining ONE9 in 2022, I spent 13 years in the regular force with the office of the judge advocate general, specializing in operational and international law. I completed a master of laws in 2019, focusing my research on lethal autonomous weapon systems. This combined experience now shapes how I see Canada's position in a rapidly evolving global landscape.

Canada finds itself at an inflection point. Public and private sectors alike have a rare opportunity to collectively shape the development of our defence and dual-use ecosystems. Taking full advantage of this opportunity demands that we focus on the three core components of any ecosystem: competency, capital and customers. Other witnesses have already spoken to elements one and three, highlighting Canada's need to safeguard our talent, as well as our abysmal history in procurement. I will focus on element two, capital.

Returning to the idea of winning in the 21st century, I begin by cautioning that a defence industrial strategy, in the absence of a broader industrial strategy, risks learning the wrong lesson. Indeed, Canada and our allies didn't win World War II because of our defence industrial base. We won because we were able to weaponize our existing industrial base, demonstrating the enduring truth that security is achieved, not by building more weapons but by investing to build the economic and technological strength that make weapons possible in the first place.

China, soberingly, illustrates this point by controlling the supply chains and technologies that underpin present and future productivity—rare earth elements, batteries, microelectronics, robotics and advanced manufacturing. It now possesses the ability to weaponize its manufacturing might without significantly impacting its industrial output. It is estimated that China could weaponize one billion drones by using less than 1% of its assembly capacity, less than 5% of its battery output and only a fraction of its printed circuit-board production. That capacity is not the result of a Chinese defence industrial strategy. It is the by-product of industrial strategy executed at scale and built upon a foundation of investment into emerging and disruptive dual-use technologies.

Canada will never match such industrial scale. We must, therefore, focus our resources on where we could lead. In a world of constrained capital and finite industrial capacity, we must be deliberate about where we invest to build sovereign capability and where we collaborate with trusted allies, striving to become a net technology maker rather than taker. Yes, we must maintain a baseline capacity of classically understood defence capabilities, such as shipbuilding and munitions production, but this alone will not guarantee our success in today's world. Canada's recognized strengths—artificial intelligence, quantum, advanced materials, energy and the critical minerals that underpin them—must form the backbone of a national strategy that builds economic power, strategic autonomy and deterrence in equal measures.

In the end, only capital will convert this ambition into capability—aligned, coordinated, patient capital—yet, among our allies, Canada stands out for what we don't yet have, which are instruments to align public and private capital towards strategic technologies, like the U.S. office of strategic capital or the U.K.'s national security strategic investment fund. Thus, after setting a national strategy that plays to Canada's strengths, I believe that the single most impactful thing the Crown can do is seed the venture capital ecosystem to ensure that critical early-stage technologies make the leap from concept to commercialization.

However, we do not expect the government to do this alone. Like the OSC and NSSIF, the Crown's role is not to pick winners but to shape behaviours and catalyze change across private capital markets. By aligning public purpose with private capital, Canada can show that “defence” is not a dirty word but a cornerstone of national resilience, unlocking billions in investment and making capital itself a strategic instrument of national power. The task before us is not to build a war economy but a winning one. Government must set clear priorities, provide predictable demand and align policy so that private capital can flow towards technologies that advance both our prosperity and security.

When public purpose and private capital move in the same direction, we build more than technologies: We build the enduring industrial and economic strength that winning in this century demands.

Thank you. I look forward to your questions.

[The Chair, Liberal, Ben Carr]

Thank you very much, Mr. Smith.

We're going to begin our line of questioning.

Mr. Guglielmin, the floor is yours for six minutes, sir.

[Michael Guglielmin, Conservative, Vaughan—Woodbridge, ON]

Thank you to all the witnesses for your opening statements and for appearing at the industry committee.

Mr. Smith, I'm going to start with you.

As a chief operating officer for a defence investment firm, you're familiar with the industrial and technological benefits policy. Conservatives definitely support benefits of defence contracts flowing to Canadian industry, but increasingly I've become concerned with some of the issues that have been raised with the policy.

I'm wondering if you feel that a comprehensive audit of the ITB might be beneficial to identify opportunities to maximize impacts on domestic industry.

[Michael Smith]

At the risk of sounding glib, I don't think it can get much worse. It would be a worthwhile effort to reimagine how we can use a policy that truly runs the gamut in terms of the size of companies to unlock this capital.

[Michael Guglielmin, Conservative, Vaughan—Woodbridge, ON]

When it comes to the ITB policy as it stands, would you say that it fully maximizes benefits for Canadian defence and dual-use technology firms?

[Michael Smith]

Anecdotally it does not, but at the risk of getting outside my lane, I'll speak to it from the venture perspective.

There are policy instruments within it that ostensibly allow the use of ITB dollars for venture investment, but they are so constrained and hamstrung that they are essentially worthless. I don't have the policy directly in front of me, but essentially what it amounts to is that no more than 5% of an obligor's total obligations can be committed, after a five-times multiple, towards venture.

Again, it's money that's being left on the sidelines that could be funnelled into the private sector, into SMEs, but in a different way, rather than directly from the company.

Why force them to pick the exact company they can invest in, when going through experts such as ourselves, who understand the broad market, would allow them to hedge bets across the ecosystem to find the technologies that look promising?

[Michael Guglielmin, Conservative, Vaughan—Woodbridge, ON]

Then to put it simply, could a review benefit Canadian SMEs?

[Michael Smith]

Yes.

[Michael Guglielmin, Conservative, Vaughan—Woodbridge, ON]

Mr. Lombardi, I move to you.

Data shows that investment in industrial machinery and equipment in Canada is at all-time lows, while the Americans seem to surge along. In your view, have excessive regulatory issues contributed to this decline?

[Matthew Lombardi]

May I just clarify the question? Do you mean investment in defence R and D in particular?

[Michael Guglielmin, Conservative, Vaughan—Woodbridge, ON]

Yes...particularly in defence.

[Matthew Lombardi]

I would actually defer to Mr. Greenley on this question, because I think it's often with the larger player that there's a larger issue.

When it comes to companies that are start-ups, scale-ups, SMEs and SMBs, I'll give you an example of some regulatory red tape, Mr. Guglielmin.

The average SME has told us that there is an 18-month wait to get a security clearance to be able to bid on a defence contract in Canada. When you double-click on that and you ask them why they are able to bid on security contracts in the United Kingdom or in Australia or in any of the NATO-allied countries, they will tell you that there's the same rigorousness of vetting, but it just happens much more quickly.

SMEs, start-ups and scale-ups will simply decide to opt out of bidding in Canada because of a simple bureaucratic backlog of this nature.

[Michael Guglielmin, Conservative, Vaughan—Woodbridge, ON]

Would you say, then, that our tax environment or tax regime, combined with these regulatory or procurements issues, which seem less competitive than those in other jurisdictions, affect the defence industry's ability to grow and innovate?

[Matthew Lombardi]

We certainly have domestic entrepreneurs that are ready to deliver on innovation if they're given the opportunity to compete. I think what we're looking for is the opportunity for faster and smaller contracting vehicles. In the absence of those, it's not that there's red tape; it's just that there's currently not a playing field for them.

[Michael Guglielmin, Conservative, Vaughan—Woodbridge, ON]

Mr. Greenley, you've indicated in the past that Canada is falling behind in military space capabilities due to ineffective engagements with the industrial base. What specific barriers prevent your company and others from contributing more effectively to national defence-based priorities?