Wars and what the Stockholm International Peace Research Institute (SIPRI) terms “regional tensions” are given as the major contributors to an over four percent increase in revenue for the top 100 defence industry companies internationally.
The “independent resource on global security” as the think tank headquartered in Sweden’s capital bills itself, said in a statement this week that revenues from sales of arms and military services by the 100 largest companies in the industry reached $632 billion in 2023, a real terms increase of 4.2 percent compared with 2022.
There were arms revenue increases in all regions, with “particularly sharp rises” among companies in Russia and the Middle East. Overall, smaller producers were more efficient at responding to new demand linked to the wars in Gaza and Ukraine, growing tensions in East Asia and rearmament programmes elsewhere.
“In 2023 many arms producers ramped up production in response to surging demand. The total arms revenues of the Top 100 bounced back after a dip in 2022. Almost three quarters of companies increased arms revenues year-on-year. Notably, most of the companies that increased their revenues were in the lower half of the Top 100,” the statement reads in part.
It goes on to quote SIPRI Military Expenditure and Arms Production Programme Researcher Lorenzo Scarazzato, as saying: “There was a marked rise in arms revenues in 2023 and this is likely to continue in 2024”.
“The arms revenues of the Top 100 arms producers still did not fully reflect the scale of demand and many companies have launched recruitment drives, suggesting they are optimistic about future sales.”
The 41 companies in the Top 100 based in the United States (US) recorded arms revenues of $317 billion, half the total arms revenues of the Top 100 and 2.5 percent more than in 2022. Since 2018, the top five companies in the Top 100 are all based in the US.
Of the 41 US companies, 30 increased arms revenues in 2023. On the other side of the ledger Lockheed Martin and RTX, the world’s two largest arms producers, were among those registering a drop.
“Larger companies like Lockheed Martin and RTX manufacturing a wide range of arms products often depend on complex, multi-tiered supply chains, which made them vulnerable to lingering supply chain challenges in 2023,” said Dr Nan Tian, Director of SIPRI’s Military Expenditure and Arms Production Programme. “This was particularly the case in the aeronautics and missile sectors.”
The combined arms revenues of the 27 Top 100 companies based in Europe (excluding Russia) totalled $133 billion in 2023. This was 0.2 percent more than in 2022, the smallest increase in any world region.
Behind the low growth figure the picture is more nuanced, according to SIPRI. European arms companies producing complex weapon systems were mostly working on older contracts during 2023 and revenues for the year consequently do not reflect any influx of orders.
“Complex weapon systems have longer lead times. Companies that produce them are inherently slower in reacting to changes in demand. That explains why their arms revenues were relatively low in 2023, despite a surge in new orders,” Scarazzato is quoted as saying.
At the same time, a number of other European producers saw arms revenues grow substantially, driven by demand linked to the war in Ukraine, particularly for ammunition, artillery and air defence and land systems.
Notably, companies in Germany, Sweden, Ukraine, Poland, Norway and Czechia were able to tap into this demand. As an example Germany’s Rheinmetall increased production capacity of 155 mm ammunition and its revenues were boosted by deliveries of Leopard tanks and new orders, including through war-related ‘ring-exchange’ programmes, under which countries supply military goods to Ukraine and receive replacements from allies.
The two Russian companies listed in the Top 100 saw combined revenues increase by 40% to reach an estimated $25.5 billion. This was almost entirely due to the 49% increase in arms revenues recorded by Rostec, a state-owned holding company controlling many arms producers, including seven previously listed in the Top 100 for which individual revenue data could not be obtained.
“Official data on Russian arms production is scarce and questionable but most analysts believe that the production of new military equipment increased substantially in 2023, while Russia’s existing arsenal underwent extensive refurbishment and modernization,” said Tian. “In particular, combat aircraft, helicopters, UAVs (unmanned aerial vehicles), tanks, munitions and missiles are all thought to have been produced in greater numbers as Russia continued its offensive in Ukraine.”
The 23 companies in the Top 100 based in Asia and Oceania recorded 5.7 percent arms revenue growth year-on-year, to reach $136 billion. The four South Korea-based companies recorded a combined 39% increase in arms revenues to reach $11.0 billion. The five companies in Japan saw combined arms revenues rise by 35 per cent to $10.0 billion. A policy of military build-up in Japan since 2022 drove a flurry of domestic orders, with some companies seeing the value of new orders increase more than 300 per cent.
“The sharp growth in arms revenues among South Korean and Japanese companies reflects the bigger picture of military build-ups in the region in response to heightened threat perceptions,” said Xiao Liang, a Researcher with the SIPRI Military Expenditure and Arms Production Programme. “South Korean firms are trying to expand their share of the global arms market, including demand in Europe related to the war in Ukraine.”
Six of the Top 100 arms companies were based in the Middle East and their combined arms revenues grew by 18 per cent to $19.6 billion. With the outbreak of war in Gaza, arms revenues of three companies in Israel in the Top 100 reached $13.6 billion. This is the highest figure ever recorded by Israeli companies in the SIPRI Top 100. The three companies in Türkiye saw arms revenues grow by 24 per cent to $6 billion, benefiting from exports prompted by the war in Ukraine and from the Turkish government’s continued push towards self-reliance in arms production.
“The biggest Middle Eastern arms producers in the Top 100 saw arms revenues reach unprecedented heights in 2023 and growth looks set to continue,” said Dr Diego Lopes da Silva, Senior Researcher with the SIPRI Military Expenditure and Arms Production Programme. “In particular, as well as taking in record arms revenues in 2023, Israeli arms producers are booking more orders as the war in Gaza rages on and spreads.”
