The international demand for weapons and military materiel has ramped up globally in 2022, but production still lags behind. This was mainly due to disruptions in global supply chains as a lasting consequence of the Covid-19 pandemic, proving especially problematic in the Western hemisphere. As a consequence, the surge in new contracts in the final part of the year was not reflected in companies’ 2022 revenues. However, outstanding orders suggest that global arms revenues could rise significantly in the next few years.
According to new data released on December 4 by the Stockholm International Peace Research Institute (SIPRI), revenues from sales of arms as well as military services and materials secured by the 100 largest companies in the industry went down by 3.5% compared to 2021 in real terms, totalling $597 billion. Russia’s full-scale invasion of Ukraine and other major geopolitical tensions around the world have caused the global demand for arms and ammunition to rise sharply last year. Still, this increase in demand was not fully met by the pace of production – or at least not universally so worldwide.
The overall decrease registered by SIPRI was mainly the result of falling arms revenues for the biggest companies in the US, where revenues for 32 out of the 42 national producers in the global top 100 plummeted by 7 percentage points year-on-year. However, the US arms industry is still worth around 51% of the global arms production in 2022. Similarly, production in the EU could not be drastically ramped up owing to supply chain disruptions, soaring costs and labour shortages, which were all exacerbated by the war in Ukraine.
However, not all European countries suffered the same. The overall increase in arms sales for the 26 companies in the global top 100 amounted to 0.9% (some €112 billion), reflecting some countries doing much better than others. For instance, Poland’s PGZ earned an additional 14% in nominal terms, benefitting from the country’s accelerated modernisation of the military pursued by Warsaw after the Russian aggression on Kyiv. Norway’s Kongsberg Gruppen scored +12%, and the UK’s 7 biggest companies grew by an aggregate 2.6% in real terms (with Babcock International Group’s revenues up around 21%). In real terms, the country which suffered the highest losses was Italy, whose 2 main companies, Leonardo and Fincantieri, scored an overall -5.6%. Spain was second-worst, with -5.3%, and France stood to lose 3.9% compared to the previous year (with Dassault Aviation Group losing some 14% of revenues).
‘The war in Ukraine created a demand for materiel suited to a war of attrition, like ammunition and armoured vehicles. Many European producers of these items saw their revenues grow,’ said Lorenzo Scarazzato, a researcher with the SIPRI Military Expenditure and Arms Production Programme. Moreover, trans-European companies like Airbus and KNDS were among the main sources of arms revenue growth in Europe (+17% and +11%, respectively), largely due to deliveries against long-standing orders.
On the contrary, arms revenues increased substantially in the Asian-Pacific region and the Middle East, with the highest growth registered in Taiwan (+36%) and Türkiye (+21.7%). This trend was especially evident in countries where companies maintain responsive ‘ever-warm’ manufacturing capabilities, such as Israel and South Korea, where supply chains are shorter or where production of less technologically sophisticated weapons could be ramped up faster, as in the case of Türkiye’s Baykar, whose arms revenues rose by 94% mainly driven by its signature product, the Bayraktar TB-2 drone.