Global Arms industry booms amid global instability, rising conflicts

New Delhi, Dec 2: The global arms industry reported record revenues in 2023 as conflicts in Ukraine and Gaza, combined with escalating tensions in East Asia drove surging demand for weapons and military services. Revenues for the world’s top 100 arms producers reached $632 billion, a real-term increase of 4.2% from 2022, according to the Stockholm International Peace Research Institute (SIPRI).

“Arms revenue increases were seen in all regions, with particularly sharp rises among companies based in Russia and the Middle East,” said Lorenzo Scarazzato, a SIPRI researcher. “Smaller producers were more efficient at responding to new demand linked to these conflicts and rearmament programs.”

United States: The Powerhouse of Arms Production

The United States continues to dominate the global arms trade, with 41 companies in SIPRI’s Top 100 contributing $317 billion to the total—half of the global arms revenues. While 30 of these companies reported increases, major players such as Lockheed Martin and RTX saw declines due to lingering supply chain issues.

“Larger companies like Lockheed Martin and RTX, which depend on complex supply chains, were particularly vulnerable to disruptions,” said Dr. Nan Tian, Director of SIPRI’s Military Expenditure and Arms Production Programme. Despite these challenges, U.S. firms remain poised for long-term growth, with many launching recruitment drives to meet demand driven by global conflicts.

Europe: Modest Growth Masks Wartime Boosts

European companies, excluding those in Russia, saw slower revenue growth, collectively reaching $133 billion—just 0.2% more than in 2022. The lag reflects the longer lead times required for complex weapon systems, as many firms fulfilled older contracts rather than new wartime orders.

“Complex weapon systems have longer lead times,” Scarazzato explained. “That explains why their arms revenues were relatively low in 2023, despite a surge in new orders.”

However, the research of SIPRI suggested that firms specialising in ammunition, artillery, and air defence systems saw a boost, particularly in countries like Germany, Poland, and Sweden. Germany’s Rheinmetall, for instance, ramped up production of 155-mm ammunition and delivered Leopard tanks under ring-exchange programs supporting Ukraine.

Russia: Wartime Demand Fuels a Boom

Russian arms producers experienced a gain of 40% revenue increase, reaching an estimated $25.5 billion. Rostec, a state-owned holding company, accounted for much of this growth, increasing arms revenues by 49%. “Official data on Russian arms production is scarce, but most analysts believe that production increased substantially in 2023, particularly for combat aircraft, tanks, and munitions,” Dr Tian noted.

Asia and Oceania: Regional Militarization Takes Hold

Asia’s arms industry also gained around 5.7% revenue increase according to SIPRI totalling $136 billion. South Korea and Japan led with revenues jumping 39% and 35%, respectively. South Korea’s arms firms benefited from European demand linked to the Ukraine war, while Japan’s military build-up fuelled a flurry of domestic orders. “Sharp growth in arms revenues reflects the broader military build-ups in response to heightened threat perceptions,” said Xiao Liang, a SIPRI researcher.

West Asia: Conflict-Driven Growth

West Asia or Middle Eastern arms companies also capitalised on regional instability, growing their revenues by 18% to $19.6 billion. Israeli firms recorded a historic high of $13.6 billion, driven by wartime production linked to the Gaza conflict. “The growth looks set to continue,” said Dr. Diego Lopes da Silva, a SIPRI senior researcher. “Israeli arms producers are booking many more orders as the war in Gaza rages on.” Turkey’s arms industry also expanded, with revenues reaching $6 billion, largely due to exports tied to the Ukraine war and a push for self-reliance.

China and India also saw mixed trends in 2023. China’s nine companies in the Top 100 recorded a revenue increase of just 0.7%, reaching $103 billion. This according to SIPRI is their smallest growth since 2019. Meanwhile, India’s three companies in the ranking saw their combined revenues rise by 5.8% to $6.7 billion, driven by the government’s push for self-reliance and increased defense spending.

Taiwan’s NCSIST posted a 27% increase in arms revenues, reaching $3.2 billion. Turkey’s Baykar recorded a 25% growth, with exports accounting for 90% of its $1.9 billion revenues, bolstered by demand for its armed UAVs used in the Ukraine conflict. The United Kingdom also stood out, with the Atomic Weapons Establishment seeing the largest percentage increase among UK firms, up 16% to $2.2 billion, reflecting heightened focus on nuclear deterrence.

The Outlook for Global Arms Production

With continuing geopolitical tensions, recruitment drives and rising orders across regions, SIPRI says that arms producers are preparing for sustained growth in 2024.

However, the industry faces challenges, including supply chain constraints and balancing peacetime contracts with wartime demand. “The arms revenues of the Top 100 still did not fully reflect the scale of demand,” Scarazzato said. “But the optimism among producers signals that this is only the beginning of a long-term surge in global arms production.”

These figures highlight the diverse strategies and geopolitical drivers shaping the global arms trade, as nations balance regional security concerns with broader economic and industrial goals.