TKMS: Masters of the Deep — The Story of Germany's Submarine Empire

I. Introduction & Episode Roadmap

On the morning of October 20, 2025, something remarkable happened on the trading floor of the Frankfurt Stock Exchange. A company born from the wreckage of Germany's post-war industrial reconstruction—one with roots stretching back 185 years to a modest steel foundry in Essen—began trading as an independent publicly listed entity. TKMS AG & Co. KGaA made its debut on the stock market, with shares trading on the Frankfurt Stock Exchange for the first time.

The stock opened at €60 per share—already dramatically exceeding analyst expectations of roughly €36—then surged during the trading session to nearly €100, before closing its first day at €81.10, up more than 35% from the opening price. At its intraday peak, TKMS was valued at over €6 billion, a market capitalization that briefly exceeded that of its former parent company, thyssenkrupp AG.

But why did investors chase this particular stock with such enthusiasm? The answer lies in a single, staggering fact: TKMS has supplied some 70 percent of NATO's conventional submarine fleet. In an era of mounting geopolitical tensions, with defense budgets across Europe swelling in response to Russia's invasion of Ukraine and American pressure for NATO burden-sharing, TKMS has found itself at the center of an unprecedented wave of orders.

Over the past five years, TKMS's order backlog has tripled and currently stands at a record level of €18.6 billion (as of June 30, 2025). The company stated it therefore expects capacity utilization to continue until the 2040s. This is not merely a healthy backlog—it is the kind of visibility that most industrial companies can only dream of, providing near-certainty of revenue for the next two decades.

"We need more flexibility...in light of rising geopolitical tensions," TKMS CEO Oliver Burkhard said just before shares began trading. "With our own shares we now have our own currency, something that we can use to operate. Before we were part of a conglomerate, now we can really focus on defense."

The spin-off from thyssenkrupp wasn't merely a corporate restructuring—it was a strategic imperative for both entities. ThyssenKrupp retained 51% ownership of the new company, with the remaining 49% distributed proportionally to existing shareholders. The arrangement allows TKMS to access capital markets directly while maintaining the governmental oversight structures that Germany deems essential for such a strategically important defense asset.

A security agreement with the German government gives the federal government a pre-emptive right if thyssenkrupp were to sell a stake of 5% or more to a third party, and the government would have a right of approval if a stake of 25% or more were to be sold.

The story that follows—of cannons and submarines, of war and rebuilding, of technological innovation and corporate transformation—is not merely the tale of a company. It is the story of German industrial might, refracted through the lens of naval defense. It is the story of how a shipyard that built the first German submarine in 1850 evolved into a global leader in underwater warfare technology. And it is the story of what happens when ancient industrial heritage meets twenty-first-century geopolitical realities.

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II. The Deep Roots: Krupp, Thyssen, and German Industrial Heritage

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A. The Founding of an Empire (1811–1900)

Picture the Ruhr Valley in 1811—coal smoke hanging heavy in the air, the clang of hammers on steel echoing through the streets of Essen. In this industrial crucible, a man named Friedrich Krupp opened a small steel foundry, embarking on what would become one of the most consequential business dynasties in European history. Friedrich Krupp (1787–1826) launched the family's metal-based activities, building a pioneering steel foundry in Essen in 1811.

Friedrich's early death in 1826 left the company in precarious financial condition. On his deathbed, the elder Krupp reportedly confided to his son Alfred, who was then just 14 years old, the secret of steel casting. In 1848, Alfred became the sole owner of the foundry.

What happened next transformed not only the Krupp business but the nature of modern warfare itself. Alfred Krupp (1812–87), known as "the Cannon King" or as "Alfred the Great," invested heavily in new technology to become a significant manufacturer. His transformation of a struggling foundry into an arms-manufacturing empire is one of the remarkable business stories of the nineteenth century.

To prove the quality of his steel, Alfred Krupp turned to making cannons. Initially he could not sell his guns in Prussia, and the first orders came from Egypt (1856), Belgium (1861), and Russia (1863). This early experience in export sales would prove prophetic—TKMS today derives the vast majority of its revenue from international customers.

The breakthrough came with the Franco-Prussian War of 1870–71. As a result of the performance of Krupp guns in the Franco-German War, the firm came to be called "the Arsenal of the Reich." The unexpected victory of Prussia over France demonstrated the superiority of breech-loaded steel cannon over muzzle-loaded brass. Krupp artillery was a significant factor at the battles of Wissembourg and Gravelotte, and was used during the siege of Paris.

Alfred Krupp was in many ways the founder of modern warfare. At the time of his death he had armed 46 nations. The scope of this expansion was breathtaking. When Alfred Krupp started with the firm, it had five employees. At his death twenty thousand people worked for Krupp—making it the world's largest industrial company and the largest private company in the German empire.

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B. The Shipyard Origins: Schweffel & Howaldt (1838–1900)

While the Krupp empire was being forged in Essen's steel mills, another critical thread in TKMS's genealogy was being woven along Germany's Baltic coast. In 1838, the company "Maschinenbau & Eisengießerei Schweffel & Howaldt" was founded by Johann Schweffel and August Ferdinand Howaldt in Kiel. The company initially focused on steam engines and railroad cars—the bleeding-edge technologies of the early industrial age.

The pivotal moment came in 1850, when the first German submarine, the "Brandtaucher" (Fire Diver), was built at Schweffel & Howaldt as a means to counter the Danish fleet. This crude vessel—essentially an iron barrel with a hand-cranked propeller—represented the first tentative step in what would become TKMS's core competency.

The dawn of the twentieth century brought consolidation to Germany's fragmented shipbuilding industry. Krupp, by then a vast industrial empire, acquired the Germania shipbuilding yards at Kiel in 1902—the first step in connecting the steel-making dynasty to naval manufacturing. This acquisition would prove prescient in ways that could not have been imagined at the time.

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C. War, Destruction, and Rebuilding (1914–1950s)

The two World Wars transformed both the Krupp and Thyssen enterprises in ways that still echo through TKMS's corporate structure today. During the war, the Krupp combine manufactured submarines, trucks, locomotives, and warships, in addition to artillery and munitions.

More crucial to the operations of the German military was Krupp's development of the famed 88 mm anti-aircraft cannon which found use as a notoriously effective anti-tank gun. The company's centrality to Germany's war effort would have devastating consequences after the conflict ended.

After World War II, Alfried Krupp was convicted of war crimes at Nürnberg, specifically for employment of slave labour, but the company had also been guilty of plundering property and plants in all the occupied countries. It sentenced him to 12 years in prison and ordered him to sell 75% of his holdings.

The Cold War, however, created new imperatives. In 1951, as the Cold War developed and no buyer came forward, the U.S. occupation authorities released him, and in 1953 he resumed control of the firm. West Germany's strategic importance to NATO overcame moral objections to Krupp's rehabilitation.

The Allied restrictions on German defense manufacturing created a paradox: they prevented Germany from rebuilding its own military capabilities while inadvertently creating the conditions for Germany to become a dominant force in submarine exports. Forbidden from building submarines for the German navy, German shipbuilders turned their engineering expertise toward export markets—a strategic pivot that would define TKMS's business model for the next seventy years.

For investors, this history is not mere background—it is the foundation upon which TKMS's competitive advantages rest. The company's technological leadership, its global customer relationships, and its reputation for engineering excellence all trace directly to this turbulent century of war, destruction, and reinvention.

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III. The Birth of HDW and the Export Model (1960s–1990s)

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A. Creating the Submarine Export Empire: Type 209

The 1960s found Germany in a peculiar strategic position. The Federal Republic had been integrated into NATO, but decades of restrictions had created a German defense industry with more expertise than domestic demand. The solution, pioneered by Howaldtswerke-Deutsche Werft (HDW), would reshape the global submarine market.

The Type 209 is a range of diesel-electric attack submarines developed exclusively for export by Howaldtswerke-Deutsche Werft of Germany. Five class variants, including modifications thereof, have been successfully exported to 15 countries, with 68 submarines being built and commissioned to five different variants between 1971 and 2021.

The German Type 209 diesel-electric submarine was the most popular export-sales submarine in the world from the late 1960s into the first years of the 21st century. In 1967, the Kieler Howaldtswerke shipyard signed a contract for the delivery of four submarines of approximately 1000 tons displacement to the Royal Hellenic Navy.

The original variant, the Type 209/1100, was designed in the late 1960s with Greece becoming its first adopter. What made the Type 209 so successful was not merely its technical capabilities but its fundamental design philosophy—a philosophy that TKMS continues to employ today.

In the early 1970s, many navies began to need replacements for World War II-era submarines, aging United States GUPPY conversions, and British units transferred postwar. During this time, few western submarine designs were available for export as most were large, expensive, sophisticated and difficult to operate. The design, designated by the German Ministry of Defense as the "Type 209" provided a solution combining size, performance, relative ease of operation for small or inexperienced navies, reasonable price and economy of operation.

The Type 209's global reach was remarkable. Turkey is the largest adopter, having purchased 14 submarines consisting of eight Type 209/1400 and six Type 209/1200 submarines. Countries operating the Type 209 included Argentina, Brazil, Chile, Colombia, Ecuador, Egypt, Greece, India, Indonesia, Israel, Peru, South Africa, South Korea, Turkey and Venezuela.

This export-first model created a virtuous cycle: international sales provided the revenue and production volume to fund continued R&D, while the resulting technological advances made German submarines even more attractive to foreign buyers. The strategic insight that would guide TKMS for decades was simple: Germany's naval ambitions might be constrained, but the world's appetite for German-engineered submarines was essentially limitless.

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B. The Technology Breakthrough: Fuel Cell AIP

If the Type 209 established HDW's market position, the development of Air-Independent Propulsion (AIP) technology would cement it. The problem with conventional diesel-electric submarines is fundamental: they must periodically surface or raise a snorkel to run their diesel engines and recharge batteries. This "snorting" process makes them vulnerable to detection—a potentially fatal weakness in modern warfare.

Nine fuel cell units are incorporated into Howaldtswerke Deutsche Werft AG's 1,830 t submarine U-31, lead ship for the Type 212A of the German Navy. The other boats of this class and HDW's AIP equipped export submarines, Dolphin class, Type 209 mod and Type 214, use two 120 kW modules, also from Siemens.

The application of hydrogen technology in ships dates back to the 1980s when the German Navy began equipping its submarines with proton exchange membrane fuel cells (PEMFCs) provided by Siemens. In 1990, the HDW company retrofitted the Type 209/1200 submarine and successfully developed the world's first hydrogen-oxygen fuel cell-powered submarine—the 212A model with air-independent propulsion (AIP).

The Type 212A is a class of diesel-electric attack submarine developed by Howaldtswerke-Deutsche Werft AG (HDW). It features diesel propulsion and an additional air-independent propulsion (AIP) system using Siemens proton-exchange membrane (PEM) compressed hydrogen fuel cells. The submarines can operate at high speed on diesel power or switch to the AIP system for silent slow cruising, staying submerged for up to three weeks with little exhaust heat.

The Type 212 is the first fuel cell propulsion system equipped submarine series. This first-mover advantage in operational AIP technology represents one of TKMS's most durable competitive moats. The Type 212 can remain submerged for 21 days; one such submarine conducted a 1600 nautical mile journey solely on AIP in 2016.

The technical elegance of the system lies in its use of hydrogen stored in metal hydride cylinders and liquid oxygen in cryogenic tanks—both stored outside the pressure hull for safety. In the Type 212 this has been countered by storing the fuel and oxidizer in tanks outside the crew space, between the pressure hull and outer light hull. The gases are piped through the pressure hull to the fuel cells as needed to generate electricity, but at any given time there is only a very small amount of gas present in the crew space.

In addition to the well-known advantages of fuel cells, like efficient and quiet operation, no further type of signature (thermal energy, electrical stray field) can be detected. The world leader in conventional submarine design and construction with AIP-systems based on PEMFC is ThyssenKrupp Marine Systems. HDW classes 212A and 214 have set new standards especially in the areas of signatures and range.

For investors, the AIP system represents not just a product feature but a fundamental technological moat. No competitor has yet matched the combination of stealth, endurance, and operational reliability that TKMS's fuel cell systems provide. This technological leadership translates directly into pricing power and customer loyalty—navies that have trained their crews on German submarines and built their doctrine around German capabilities are unlikely to switch to competitors.

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IV. The Mega-Merger: ThyssenKrupp and HDW Acquisition (1997–2005)

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A. The 1999 Thyssen-Krupp Merger

The late 1990s brought consolidation fever to German industry. Two of the nation's most storied industrial names—Thyssen and Krupp—had circled each other for years, their futures increasingly intertwined by competitive pressures and the logic of scale.

Thyssen agreed to merge the two firms' flat steel operations, and Thyssen Krupp Stahl AG was created in 1997 as a jointly owned subsidiary (60% by Thyssen and 40% by Krupp). About 6,300 workers were laid off.

But the 1997 joint venture was merely the opening act. Later that year, Krupp and Thyssen announced a full merger, which was completed in 1999 with the formation of ThyssenKrupp AG. In 1999, it merged with Thyssen AG to form the industrial conglomerate ThyssenKrupp AG.

The merger created an industrial giant but did not immediately address the naval shipbuilding question. ThyssenKrupp had inherited shipbuilding operations from both lineages, but the crown jewel of German submarine construction—HDW—remained independent.

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B. The Strategic HDW Acquisition (2005)

TKMS was founded when large industrial conglomerate ThyssenKrupp acquired Howaldtswerke-Deutsche Werft on January 5, 2005. The acquisition transformed ThyssenKrupp's marine division from a regional player into a global submarine powerhouse.

The timing was fortuitous. The post-9/11 security environment had increased defense spending worldwide, while the proliferation of diesel-electric submarines by potential adversaries was driving demand from NATO allies and partners. HDW's technological lead in AIP systems made it an increasingly valuable asset.

Later that same year, ThyssenKrupp expanded its naval electronics capabilities with a strategic acquisition: the company purchased 60% of Atlas Elektronik from BAE Systems, with EADS acquiring the remaining 40%. Atlas Elektronik brought critical competencies in sonar, combat systems, and naval electronics—capabilities that would prove essential as modern submarines became increasingly defined by their electronic systems rather than their steel hulls.

The consolidation was not merely about size but about integration. By combining submarine design and construction (HDW), naval electronics (Atlas Elektronik), and surface ship capabilities inherited from both Thyssen and Krupp lineages, ThyssenKrupp created what it now describes as "Europe's only fully integrated system provider for maritime defense."

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V. INFLECTION POINT #1: The 2008 Financial Crisis & Strategic Pivot

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A. The Civil Shipbuilding Exit

When Lehman Brothers collapsed in September 2008, the shockwaves rippled through every corner of the global economy. For ThyssenKrupp Marine Systems, the crisis forced a reckoning that would ultimately prove transformative.

The shipbuilding industry—particularly civil shipbuilding—was devastated. Overcapacity that had built up during the boom years suddenly became untenable as orders evaporated and financing dried up. ThyssenKrupp faced a stark choice: attempt to weather the storm across all its marine businesses, or focus on the segments where it possessed genuine competitive advantages.

The decision was made: civil shipbuilding was no longer viable. To save the company, the shipyards Blohm+Voss, Nordseewerke and Nobiskrug were sold. The strategic pivot to pure-play defense contractor had begun.

This was not merely a cost-cutting exercise—it was a fundamental transformation of corporate identity. By exiting civil shipbuilding, ThyssenKrupp Marine Systems shed the cyclicality and commodity-like economics of commercial vessel construction. What remained was a focused defense contractor with long-cycle contracts, government customers, and deep technological moats.

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B. Rebuilding and the Road Back

Five years after the crisis, the corporate pieces were reassembled in a more coherent form. Howaldtswerke-Deutsche Werft GmbH and Blohm+Voss Naval GmbH merged again, forming Thyssenkrupp Marine Systems GmbH.

In 2015, ThyssenKrupp became thyssenkrupp (lowercase intentionally) and brought to life a new slogan along with its rebranding: "engineering. tomorrow. together." The motto fit the company's innovative history, but the lowercase letters were perhaps symbolic of the humbler posture required after the crisis years.

For the marine systems division, the post-crisis period was one of steady rebuilding. Order intake recovered, the submarine pipeline remained strong, and the technological lead in AIP systems continued to attract customers. The strategic focus on defense had proven its wisdom: while commercial shipbuilders struggled with overcapacity and razor-thin margins, TKMS benefited from the steady, if not spectacular, growth of global defense spending.

The crisis had taught a painful but valuable lesson: in a cyclical industry, specialization in high-value, defensible niches trumps diversification into competitive commodity markets. This lesson would guide TKMS's strategy in the years ahead.

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VI. INFLECTION POINT #2: The Type 212CD Mega-Deal & Norway Partnership (2017–2021)

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A. The German-Norwegian Strategic Alliance

In the annals of European defense cooperation, few programs have proceeded as smoothly as the German-Norwegian submarine partnership. The collaboration began in 2017 when Norway selected Germany as its strategic partner for submarine procurement—a decision that went far beyond any single contract.

On the 2nd of February 2017, the Norwegian Government decided on Germany as a strategic partner for new submarines. Since then, the partnership has been expanded to encompass additional areas.

A €5.5 billion contract for development and procurement of the six submarines was placed with TKMS on 8 July 2021 after the German and Norwegian governments reached an agreement in principle in March. This followed an extensive period of negotiation between industry and the two governments which took place after Norway had, in 2017, decided on an extensive naval partnership with Germany and TKMS for their Ula-class replacement project.

In 2021, TKMS received the biggest order in its history, worth €5.5 billion for six identical Type 212CD submarines (in partnership with Kongsberg Gruppen) for the German and Norwegian navies.

The structure of the partnership was notable for its depth of integration. Norway and Germany intend to establish a joint life-cycle management office, staffed by personnel from both countries, to plan and conduct maintenance and upgrades of all six submarines. A dedicated maintenance shipyard for the Norwegian and German 212CDs is under construction at the Haakonsvern Naval Base outside Bergen in Norway which is expected to be ready by the time the first submarine enters service in 2029. The maintenance yard will also host the joint life cycle management office.

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B. The 212CD Technology

The Type 212CD represents the next evolution of TKMS's submarine technology—bigger, stealthier, and more capable than its predecessors.

Developed jointly by Germany and Norway, the HDW Class 212CD (Common Design) submarine is a milestone in non-nuclear submarine technology. Based on the proven 212A platform, the 212CD class features a larger hull that is characteristically diamond-shaped to reduce its signature. The propulsion system combines diesel engines and hydrogen fuel cell-based air-independent technology as power supplies, ensuring the longest dives without surfacing.

The submarines will be based on, but nearly twice the size of the current Type 212A class and features a new stealth design—the hull will be diamond-shaped to deflect emissions by the active sonars common on modern anti-submarine warfare (ASW) ships.

Just like the Type 212A, the submarines will be fitted with a hydrogen fuel cell-based air-independent propulsion system, although they will receive two (MTU 4000 series) diesel engines instead of one. The overall endurance is to be increased as well.

A key feature of the Type 212CD is its increased size and enhanced stealth capabilities compared to its predecessor, the Type 212A. The new design boasts a 65% increase in surface displacement, now reaching around 2,500 tons, and a length extended to 73 meters.

The combat systems represent equally significant advances. A new combat system ("ORCCA") to be developed by kta naval systems, a joint venture between TKMS' naval electronics division Atlas Elektronik and Norwegian manufacturer Kongsberg will be installed on the boats and is claimed to allow the analysis of larger amounts of sensor data as well as to improve interoperability with allied forces.

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C. Investment and Capacity Expansion

Winning orders is one thing; delivering them is another. TKMS has committed significant capital to ensure it can fulfill its growing backlog.

In preparation for the Type 212CD order, thyssenkrupp initiated investments of around €250 million in 2019. The aim was to further develop thyssenkrupp Marine Systems at the Kiel location into an international center of competence for the construction of conventional submarines. Construction of a new shipbuilding hall began, with progress clearly visible at the shipyard site.

Oliver Burkhard noted: "We have invested around 250 million euros in our Kiel site in recent years and will invest another triple-digit million amount in our Wismar site to offer our customers some of the most modern production conditions in the world."

TKMS has doubled its capacity in recent years and now has two shipyards where it can build state-of-the-art submarines. TKMS says by 2027-2028, it should be able to produce at least three submarines a year. So far, Germany has put in an order for six vessels and Norway, four.

The program has since expanded. On 19 December 2024 it was reported that the German government had signed a contract with TKMS for the construction of four more Type 212CD submarines. In December 2024, the German parliament approved the purchase for 4 additional submarines of this type. In December, the Haushaltsausschuss des Bundestags approved the construction of four further U-boats of the modern 212CD class for the German Navy. The order volume for the German units alone amounts to €4.7 billion.

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VII. INFLECTION POINT #3: Global Expansion & Major Contracts (2021–2025)

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A. Brazil: First Latin American Footprint

In January 2021, ThyssenKrupp confirmed the acquisition of the Oceana shipyard in Itajaí, Brazil, becoming the company's first shipyard in Latin America, with the objective of building the new Brazilian Tamandaré-class frigates.

German shipbuilder ThyssenKrupp Marine Systems bought the Oceana shipyard in the southern Brazilian state of Santa Catarina to manufacture Tamandaré-class frigates for Brazil's Navy. The German vendor heads the Águas Azuis consortium, which is building an initial set of four ships based on its MEKO vessel design.

The construction of the lead ship, Tamandaré, started in September 2022 and the launch ceremony of the boat took place in August 2024. As of November 2023, each ship of the first batch cost around $555 million, with total program cost reported at $2.2 billion.

The Brazilian Navy's first Tamandaré-class frigate, Tamandaré, has completed sea trials off the coast of Brazil, marking a decisive step toward the delivery of the vessel. The program calls for four frigates to be delivered between 2025 and 2028.

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B. India Partnership: The €7 Billion P75(I) Program

India represents perhaps TKMS's most significant growth opportunity outside Europe. The country's aging submarine fleet, combined with its ambitious naval modernization plans and the "Make in India" initiative, creates a perfect alignment of interests.

Mumbai, September 11, 2025 – The Indian submarine program is entering its next phase with TKMS and Mazagon Dock Shipbuilders (MDL) beginning their official contract negotiations with the Indian procurement authority for Project 75(I). This marks a critical milestone in India's pursuit of domestic naval capability and international technology transfer. As part of Project 75(I), six submarines developed in Germany are planned to be built in cooperation with Mazagon Dock Shipbuilders Limited (MDL). This initiative is expected to deepen strategic and industrial ties between India and Germany.

The future deal is expected to cost ₹70,000 crore (US$8.3 billion), against the originally estimated ₹43,000 crore.

Oliver Burkhard, CEO of TKMS, emphasizes: "I am convinced that India will develop into a global center for submarine technology and manufacturing."

Important milestones have already been reached in Project 75(I): MDL and TKMS completed all services for the Concept Design Agreement (CDA) by August 31, 2025. In addition, TKMS submitted binding offers for engineering services, advanced TKMS submarine components – including AIP systems – and flexible combat system solutions.

The first submarine is likely to be delivered seven years after the contract is signed, around 2032.

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C. Singapore: The Type 218SG Success

Singapore has emerged as one of TKMS's most important customers in the Asia-Pacific region, with a relationship that spans multiple submarine generations.

In September 2024, the Republic of Singapore Navy commissioned the first two units of the project — RSS Invincible and RSS Impeccable — both built by TKMS and delivered via cargo ships in July and August of that year.

In May 2025, Singapore confirmed the purchase of two additional Type 218SG submarines, expanding its planned fleet to six Invincible-class units. The new acquisitions aim to complete the full renewal of the submarine force and strengthen the country's maritime defense capabilities.

"The submarines built in this project are the most modern conventional submarines the world has ever seen. They belong to a new, state-of-the-art generation and are also the largest submarines built in Germany to date," said Oliver Burkhard, CEO of TKMS.

With a length of about 70 meters and a displacement of around 2,000 tonnes, they are currently the largest submarines ever built at TKMS.

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D. Turkey: Technology Transfer Model

On November 27, 2025, German shipbuilder TKMS announced the delivery of the second Reis-class (Type-214TN) air independent propulsion (AIP) capable submarine to the Turkish Navy.

TKMS handed over the second of a total of six contractually agreed HDW Class NTSP boats in a festive ceremony. The TCG Hızırreis was handed over by the GNSY (Gölcük Naval Shipyard) to the procurement authority SSB and simultaneously from there to the Turkish Navy. The first boat was handed over in October 2024.

The Reis-class will benefit not only the Turkish Navy but also Turkey's defense technological and industrial base. The know-how and experience gained from the project will be a strong reference for indigenous submarines intended to be built under the National Submarine (MİLDEN) project.

Ankara's Reis submarine program includes the construction of six vessels based on the German Type 214 diesel-electric export submarine. Beginning this year, Turkey is scheduled to induct one Reis-class vessel annually until 2028.

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E. The Competition for Canada

Perhaps no current opportunity illustrates TKMS's market position—and the competitive dynamics it faces—better than Canada's patrol submarine program.

Prime Minister Carney announced that TKMS is now in the final round of bidding for the Canadian Royal Navy modernisation programme, which involves eight to twelve submarines. During the visit, he highlighted the importance of German-Canadian cooperation in the defence sector.

It was announced that Canada had narrowed the list of contenders to build the navy's new submarines to two bidders — TKMS and South Korea's Hanwha Ocean Ltd.

Hanwha and German firm ThyssenKrupp Marine Systems are the two contenders for the Canadian submarine contract that could be worth up to $24 billion.

The 212CD class is a German-Norwegian project currently on schedule and on budget. TKMS underlined that these highly advanced conventional submarines are specially designed for Arctic and under-ice operations, meeting all Canadian operational requirements.

Burkhard said if Canada were to join the program it's possible the first Canadian boat could arrive in the 2032-33 timeframe. Slipping into the production line at this point would likely involve redesignating one of the submarines already earmarked for either Germany or Norway.

The Canadian competition illustrates both TKMS's strengths—technological leadership, interoperability with NATO allies, proven track record—and its challenges. TKMS says it can beat Canada's tight 2035 deadline for its first sub delivery, but its delivery schedule cannot meet the aggressive pace Hanwha is offering.

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VIII. The Israel Relationship: Controversy & Complexity

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A. The Dolphin-Class Strategic Partnership

No discussion of TKMS's history would be complete without examining its relationship with Israel—a relationship that has been both commercially significant and politically fraught.

Between 1999 and 2000, Israel commissioned three Dolphin class submarines from German company Howaldtswerke-Deutsche Werft (HDW). Germany donated two of these vessels but split the cost of the third with Israel. The submarines are widely believed to provide Israel with a second-strike nuclear capability, though neither government confirms this.

The German government is subsidising the deal, covering approximately one-third of the initial $2 billion (€1.8 billion) contract, with Israel covering $1.4 billion (€1.2 billion), reflecting Germany's sense of responsibility for Israel's security.

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B. Case 3000: The "Submarine Affair"

The Israel relationship has also been TKMS's most significant source of controversy. The high-profile Case 3000 investigation has ensnared several close associates of Netanyahu, but not the premier himself, on suspicion that they received illicit funds as part of a massive graft scheme in the multi-billion-shekel state purchase of naval vessels and submarines from German shipbuilder ThyssenKrupp. Some have called it the largest suspected graft scandal in the country's history.

Michael Ganor: Israeli businessman; main agent for ThyssenKrupp in Israel since October 2009; allegedly received at least $11.4 million in commissions from ThyssenKrupp; indicted in the latest case. Avriel Bar-Yosef: Former Deputy head of National Security Council; accused of promoting Ganor's appointment as ThyssenKrupp agent in Israel while anticipating financial reward; indicted in the latest case.

The package for three new Dolphin 2-class, air-independent propulsion submarines was approved by the Israeli Cabinet after an extraordinarily fast-tracked process that circumvented normal oversight and approval procedures within the Navy, the Israel Defense Forces' General Staff and the Defense Ministry. It was negotiated directly between Netanyahu and German Chancellor Angela Merkel and their direct representatives.

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C. Recent Deliveries Despite Controversy

Despite the legal cloud hanging over the program, deliveries have continued. The deal will see Israel buy the advanced vessels from German shipbuilder Thyssenkrupp for €3 billion. The first of the vessels, which will form a new class called Dakar, is to be delivered within nine years. Part of the cost will be financed by the German government via a grant in accordance with an agreement signed between the two countries in 2017.

The sixth Dolphin-class submarine, named INS Drakon, was apparently spotted during sea trial off the Baltic Sea island of Rügen. For investors, the Israel situation represents both an ongoing business relationship and a legal/reputational risk that bears watching.

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IX. INFLECTION POINT #4: The Spin-Off & IPO (2023–2025)

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A. Parent Company Pressures

The path to TKMS's independence was anything but straightforward. ThyssenKrupp AG—burdened by a struggling steel business, a failed elevator divestiture that underperformed expectations, and persistent losses across multiple segments—needed options.

In 2023, the German government signalled that it was prepared to back a sale of TKMS by taking a supporting minority stake.

Since 2024, ThyssenKrupp has been running a dual-track process for TKMS, which could result in either a sale or spin-off of the division. In June 2024, private equity firm Carlyle and German development bank KfW entered into negotiations to jointly acquire a majority stake in TKMS.

The dual-track process gave ThyssenKrupp optionality—it could either sell to private equity or spin the division off to public shareholders, depending on which path yielded better economics and strategic outcomes.

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B. Government Strategic Protections

Given TKMS's role as a cornerstone of German and NATO defense capabilities, the German government's involvement in the spin-off process was inevitable and substantial.

In July 2025, the German government reached a preliminary agreement with ThyssenKrupp on getting a right of approval if a stake of 25% or more were to be sold in TKMS following a spin-off; in addition, the government would have a pre-emptive right if ThyssenKrupp were to sell a stake of 5% or more to a third party.

The government would have a member on the ten-person supervisory board of the marine technology company.

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C. The Successful IPO

The thyssenkrupp subsidiary thyssenkrupp Marine Systems AG, TKMS, successfully completed its IPO on October 20, 2025.

TKMS CEO Oliver Burkhard said, "This not only marks a corporate milestone but is also a strong signal for maritime safety and stability. This is also important for the future of Europe," adding that the region wanted to defend its "free, democratic" way of life.

As a fully integrated systems provider for maritime defense, TKMS combines submarines, surface vessels, unmanned platforms, electronics, sensors, software solutions, and maritime command and control systems under a single roof. With a record order backlog of €18.6 billion, TKMS targets annual revenue growth of 10% and an EBIT margin increase to over 7% in the medium-term.

TKMS expects the market potential for maritime security to double by the mid-2030s and targets average annual revenue growth of approximately 10% in the medium term. Thanks to process optimizations in new projects, TKMS has also significantly improved its EBIT margin over the last three years.

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X. Financial Analysis & Competitive Position

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A. Financial Performance

TKMS's financial trajectory reflects its transformation from a turnaround story to a growth company.

thyssenkrupp Marine Systems (tkMS) announced robust growth for the 2023/2024 financial year, with significant increases in sales, adjusted EBIT, and order intake. Sales reached €2.1 billion, a substantial rise from €1.8 billion the previous year, primarily driven by the final invoice for a submarine delivery to a customer in Asia. Order intake also grew, reaching €1.5 billion compared to €1.0 billion in the prior year.

Sales increased to €1,587 million for the nine months ended June 30, 2025, up from €1,414 million year-over-year, with net income rising to €75 million from €62 million.

Gross margin improved to €274 million from €238 million year-over-year. Adjusted EBIT rose to €98 million from €63 million, reflecting operational improvements and special items.

Cash and cash equivalents surged to €1,010 million, mainly due to advance payments for new contracts and capital contributions. Contract liabilities increased to €2,143 million, driven by new orders and project advances.

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B. Competitive Position Analysis

Porter's Five Forces:

Threat of New Entrants: LOW. Submarine construction requires decades of accumulated know-how, massive capital investment, and government relationships that take generations to build. TKMS's 185 years of experience and its role as supplier to 70% of NATO's conventional submarine fleet create nearly insurmountable barriers.

Supplier Power: MODERATE. While TKMS depends on specialized suppliers for components like fuel cells (Siemens) and electronics, its scale and long-term relationships provide negotiating leverage. The company's acquisition of Atlas Elektronik reduced supplier dependence in critical areas.

Buyer Power: MODERATE. Sovereign governments are powerful buyers, but switching costs are enormous—a navy cannot easily replace its submarine fleet with a different manufacturer. The specialized training, support infrastructure, and interoperability requirements create significant lock-in.

Threat of Substitutes: LOW. For conventional submarines, there is no substitute. Nuclear submarines serve different missions and remain politically impossible for most nations. Surface ships cannot replicate submarine stealth.

Competitive Rivalry: MODERATE. The global conventional submarine market includes capable competitors like Naval Group (France), Saab Kockums (Sweden), and increasingly Hanwha Ocean (South Korea). However, TKMS's technological leadership in AIP systems and its NATO relationships provide significant competitive advantages.

Hamilton Helmer's 7 Powers Analysis:

Scale Economies: TKMS benefits from scale in R&D amortization—the enormous costs of developing new submarine designs are spread across a large order book.

Network Effects: Limited direct network effects, but NATO interoperability creates something similar—navies that operate TKMS submarines benefit when allied navies do the same.

Counter-Positioning: TKMS's focus on conventional AIP submarines counter-positions it against nuclear submarine builders, who cannot easily enter the conventional market.

Switching Costs: Extremely high. Training, maintenance infrastructure, spare parts, and operational doctrine all create significant switching costs.

Branding: The HDW and TKMS brands carry significant weight with naval procurement officers worldwide.

Cornered Resource: TKMS's fuel cell AIP technology, developed over decades, represents a cornered resource that competitors cannot easily replicate.

Process Power: Decades of submarine construction have created process advantages that enable reliable delivery of extraordinarily complex products.

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C. Key Performance Indicators

For long-term investors tracking TKMS, two metrics deserve particular attention:

1. Order Backlog to Revenue Ratio: Currently approximately 9x annual revenue, this metric indicates visibility into future business. A declining ratio might signal competitive pressures or market softening; an increasing ratio signals continued demand strength.

2. Book-to-Bill Ratio: The ratio of new orders to revenues in any given period indicates whether backlog is growing or shrinking. TKMS has maintained a book-to-bill above 1.0 in recent years, indicating continued demand momentum.

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XI. Investment Considerations

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Bull Case

The bull case for TKMS rests on several compelling factors:

Structural Tailwinds: European defense spending is in the midst of a structural increase. NATO's 2% of GDP spending target—once aspirational—is now a floor rather than a ceiling for many members. Germany's €100 billion special defense fund, announced after Russia's invasion of Ukraine, has already translated into orders for TKMS.

Market Leadership: TKMS has supplied some 70 percent of NATO's conventional submarine fleet. This installed base creates ongoing demand for maintenance, upgrades, and eventual replacement.

Backlog Visibility: As of 30 June 2025, TKMS's order backlog stood at a record level of €18.5 billion. The company stated it therefore expects capacity utilisation to continue until the 2040s. Few industrial companies enjoy such visibility.

Technology Moat: TKMS's fuel cell AIP technology remains unmatched. The fourth-generation HDW fuel cell plant has no moving parts, making detection of such submarines virtually impossible.

Capacity Expansion: With investments in Kiel and Wismar, TKMS is positioned to increase production rates just as demand is surging.

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Bear Case

The bear case acknowledges several risks:

Execution Risk: Project- and execution risks: Shipbuilding projects tend to time- and cost-overruns. Large, complex defense programs frequently run over budget and behind schedule, potentially eroding margins and customer relationships.

Political Risk: Political risk and approval dependence: Defense orders are politically sensitive. Export restrictions or cancellations are real. German export policy could constrain sales to certain countries, and international relationships can shift unexpectedly.

Competition: While TKMS currently leads in AIP technology, competitors are investing heavily. South Korea's Hanwha Ocean is offering aggressive pricing and delivery schedules that could erode TKMS's market share.

Customer Concentration: Government customers, while providing revenue stability, can also create concentration risk. Budget cuts, political changes, or strategic pivots by major customers could materially impact order intake.

Valuation: After the IPO surge, TKMS trades at a premium to many defense peers. If the defense spending cycle turns or competition intensifies, the valuation could compress.

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XII. Conclusion: Masters of the Deep

Stand on the quay at TKMS's Kiel shipyard today and you witness a company at an inflection point. Behind you, 185 years of German industrial history—the Krupp steel mills, the first German submarine in 1850, the destruction and rebuilding of two world wars, the steady accumulation of technological expertise. Before you, the sleek dark shapes of submarines under construction, destined for navies across the globe.

TKMS emerges as a publicly traded company at a moment of rare alignment: geopolitical tensions are driving unprecedented demand for the products it makes better than anyone else. Its order backlog provides visibility that most companies can only dream of. Its technological moat in AIP systems remains formidable. Its customer relationships span decades and continents.

But this moment also brings new scrutiny, new obligations, and new competition. As a public company, TKMS must deliver not just submarines but returns—quarter after quarter, year after year. The private equity buyers who circled the company will be watching, ready to pounce if the valuation cracks. South Korean competitors are making bold promises to potential customers. And the political complexities that have always surrounded the defense industry—exemplified by the Israel controversy—will continue to create headline risk.

TKMS CEO Oliver Burkhard commented: "Today, we are opening a new chapter in the history of TKMS and at the same time sending a strong signal for maritime security. As Europe's only fully integrated system provider for maritime defense, TKMS combines submarine and surface platform expertise with a strong market position in maritime electronics, sensor technology, effectors, unmanned systems, maritime command and control systems, and software."

For investors willing to navigate the complexities of defense investing—the long cycles, the political sensitivities, the execution risks—TKMS offers exposure to a company with genuine competitive advantages operating in a market experiencing structural growth. The masters of the deep have surfaced on public markets; what they do with this new independence will be worth watching.

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Key Risks to Monitor: - Progress on Type 212CD program (on schedule and budget as of November 2025) - Canada submarine decision (expected 2026) - India P75(I) contract finalization (negotiations ongoing) - German government defense spending trajectory - Competitor actions, particularly from Hanwha Ocean - Any developments in Case 3000 or related legal matters