World arms sales still on the rise – SIPRI


Sales of arms and military services by the 100 largest companies in the industry reached $592 billion in 2021, a 1.9% increase compared with 2020 in real terms, according to new data released by the Stockholm International Peace Research Institute (SIPRI).

The increase marked the seventh consecutive year of rising global arms sales. While the rate of growth in 2020/21 was higher than in 2019/20 (1.1%), it was below the average for the four years leading up to the COVID-19 pandemic (3.7%), SIPRI found.

Many parts of the arms industry were affected by pandemic related disruptions in global supply chains in 2021, which included delays in global shipping and vital component shortages.

“We might have expected greater growth in arms sales in 2021 without persistent supply chain issues. Larger and smaller arms companies said sales were affected during the year. Some companies, such as Airbus and General Dynamics, reported labour shortages,” Dr Lucie Béraud-Sudreau, Director of the SIPRI Military Expenditure and Arms Production Programme, said.

Russia’s invasion of Ukraine in February 2022 added to supply chain challenges for arms companies, not least because Russia is a major supplier of raw materials for arms production. This could hamper ongoing efforts in the United States (US) and Europe to strengthen armed forces and replenish stockpiles after sending billions of dollars’ worth of ammunition and other equipment to Ukraine.

“Increasing output takes time. If supply chain disruptions continue, it may take several years for some main arms producers to meet new demand created by the Ukraine war,” said Dr Diego Lopes da Silva, SIPRI Senior Researcher.

Reports indicate Russian companies are increasing production but because of the war they have had difficulty accessing semi-conductors. They are also being impacted by war related sanctions. As an example, Almaz-Antey (not included in the Top 100 for 2021 due to lack of data) stated it has not been able to receive payments for some arms export deliveries.

The arms sales of the 40 US companies in the listing totalled $299 billion in 2021. North America was the only region to see a drop in arms sales compared with 2020. The 0.8% real term decline was partly due to high inflation during 2021. Since 2018, the top five companies in the Top 100 have all been US-based.

The recent wave of mergers and acquisitions in the US arms industry continued in 2021. One of the most significant acquisitions was Peraton’s purchase of Perspecta, a government IT specialist, for $7.1 billion.

“We can probably expect stronger action from the US government to limit arms industry mergers and acquisitions in the next few years,” said Dr Nan Tian, SIPRI Senior Researcher. “The US Department of Defence expressed concern that reduced competition in the industry could have knock-on effects on procurement costs and product innovation.”

Europe: Aerospace sales fall, shipbuilding rises

In 2021 there were 27 Top 100 companies headquartered in Europe. Their combined arms sales increased by 4.2% compared with 2020, reaching $123 billion, SIPRI data revealed.

“Most European companies specialising in military aerospace reported losses for 2021 blamed on supply chain disruptions,” said Lorenzo Scarazzato, a researcher with the SIPRI Military Expenditure and Arms Production Programme. “By contrast, European shipbuilders seem to have been less affected by the pandemic fallout and were able to increase sales in 2021.”

Dassault Aviation Group bucked the trend in the military aerospace sector. The company’s arms sales saw a 59% increase to $6.3 billion in 2021, driven by deliveries of 25 Rafale combat aircraft.

Chinese companies drive rapid growth in Asian arms sales

The combined arms sales of the 21 companies in Asia and Oceania included in the Top 100 reached $136 billion in 2021—5.8% more than in 2020. The eight Chinese arms companies in the listing had total arms sales of $109 billion, a 6.3% increase, according to SIPRI.

“There has been a wave of consolidation in the Chinese arms industry since the mid-2010. In 2021 this saw China’s CSSC becoming the biggest military shipbuilder in the world, with arms sales of $11.1 billion, after a merger between two existing companies,” Xiao Liang, SIPRI Military Expenditure and Arms Production Programme researcher, said.

The combined arms sales of the four South Korean companies in the Top 100 grew by 3.6% compared with 2020, reaching $7.2 billion. This was largely due to a 7.6% rise in arms sales by Hanwha Aerospace, to $2.6 billion. Hanwha’s arms sales are expected to grow significantly in the coming years, after it signed a major arms deal with Poland in 2022, following the Russian invasion of Ukraine.

Six Russian companies are included in the Top 100 for 2021. Their arms sales totalled $17.8 billion—an increase of less than half a percent over 2020. There were signs that stagnation was widespread across the Russian arms industry.

The five Top 100 companies based in the Middle East generated $15.0 billion in arms sales in 2021. This was a 6.5% increase compared with 2020, the fastest pace of growth of all regions represented in the Top 100.

Aggregated arms sales of the four Top 100 companies based in Japan was $9.0 billion, a decline of 1.4% compared with 2020.

This is the first year a Taiwanese firm appears in the Top 100. At sixtieth, NCSIST, specialising in missiles and military electronics, recorded arms sales of $2.0 billion in 2021.

Private equity companies are becoming more active in the arms industry, particularly in the US. This could affect transparency of arms sales data, due to less stringent financial reporting requirements compared with public companies, according to the Stockholm think tank.