World’s top arms makers profit from wars and regional tensions

Earnings top $632bn in 2023

Revenues from the world’s top arms producers surged in 2023, with the 100 largest companies in the sector collectively generating $632 billion, a real-terms increase of 4.2 per cent compared with the previous year.

As the Stockholm International Peace Research Institute (SIPRI) recently revealed, this global trend reflects the growing demand for military equipment driven by ongoing conflicts, geopolitical tensions, and national rearmament programmes.

The increase in arms revenues was widespread across all regions, with particularly sharp rises in Russia and the Middle East.

Notably, smaller producers demonstrated remarkable agility in responding to the surge in demand linked to the wars in Gaza and Ukraine and rising tensions in East Asia. In total, almost three-quarters of the companies in the SIPRI Top 100 saw their revenues increase in 2023, a testament to the industry’s adaptability and resilience.

According to SIPRI researcher Lorenzo Scarazzato, arms revenues significantly increased in 2023, a trend expected to continue into 2024.

Scarazzato also pointed out that these revenues still do not fully reflect the scale of global demand. Many companies have launched recruitment campaigns, which suggests they are optimistic and confident about future sales prospects.

US companies lead

Among the top producers, companies based in the United States continued to dominate the industry. The 41 US-based firms in the Top 100 generated $317 billion in arms revenues, half of the total revenue generated by the top 100 firms. This represented a 2.5 per cent increase compared with 2022.

Since 2018, the top five companies in the SIPRI Top 100 have all been based in the US. However, despite this overall growth, some of the largest US arms producers, such as Lockheed Martin and RTX, saw declining revenues. These companies’ challenges were partly attributed to the complexity of their multi-tiered supply chains, which were still affected by lingering supply chain disruptions in 2023, especially in the aeronautics and missile sectors.

Meanwhile, Europe’s arms industry saw more modest growth. The combined revenues of the 27 European companies in the Top 100 (excluding Russia) increased by just 0.2 per cent, totalling $133 billion. This was the smallest increase in any region.

The low growth was due to many European companies, which produce complex weapons systems, working on contracts already in place before the surge in demand linked to the Ukraine war. These companies were slower to respond to the uptick in orders, as the production of such advanced systems takes longer.

However, several European firms saw significant revenue increases, particularly those producing ammunition, artillery, air defence, and land systems. Companies in Germany, Sweden, Ukraine, Poland, Norway, and Czechia were particularly well-positioned to capitalise on the demand generated by the war in Ukraine.

For example, Germany’s Rheinmetall saw its revenues rise as it increased production of 155-mm ammunition and delivered Leopard tanks to Ukraine, benefitting from war-related “ring-exchange” programmes.

Russian position

Russian arms manufacturers also experienced substantial growth, with their combined revenues increasing by 40 per cent to an estimated $25.5 billion. This was driven by a 49 per cent rise in revenues for Rostec, a state-owned holding company that oversees several of Russia’s major arms producers.

The surge in revenue was attributed to the increased production of new military equipment and the refurbishment and modernisation of Russia’s existing arsenal, which included combat aircraft, helicopters, uncrewed aerial vehicles (UAVs), tanks, munitions, and missiles. This increase in arms production was closely linked to Russia’s ongoing offensive in Ukraine.

In Asia and Oceania, arms producers saw a 5.7 per cent increase in revenues, totalling $136 billion. South Korean and Japanese companies led the growth in the region. South Korea’s four companies recorded a combined 39 per cent rise in revenues to $11 billion, while Japan’s five companies saw their revenues increase by 35 per cent to $10 billion.

This growth was driven by a regional military build-up in response to heightened threats and an expansion in the global arms market. Japanese companies, in particular, benefitted from an army expansion policy that began in 2022. This policy involved a significant increase in the country’s defence budget and a shift towards domestic production, resulting in a substantial rise in domestic orders.

Some companies saw the value of new orders increase by more than 300 per cent. South Korean firms also sought to expand their market share, capitalising on demand related to the war in Ukraine.

Middle East perspective

Arms producers in the Middle East also enjoyed strong growth. Companies in Israel, in particular, saw their revenues reach a record high of $13.6 billion, driven by the ongoing conflict in Gaza.

Similarly, arms companies in Turkey benefited from increased exports linked to the war in Ukraine and the Turkish government’s push for greater self-reliance in arms production. Turkish firms saw their arms revenues rise by 24 per cent to $6 billion. In the Middle East, arms revenues increased 18 per cent to $19.6 billion.

China’s arms industry saw a more modest revenue increase, with nine companies in the Top 100 recording only a 0.7 per cent rise to $103 billion. This was the smallest year-on-year growth since 2019, reflecting the country’s broader economic slowdown.

India, however, saw a 5.8 per cent increase in arms revenues, totalling $6.7 billion. Taiwan’s NCSIST, the only company from Taiwan in the Top 100, recorded a 27 per cent rise in revenues to $3.2 billion.

The United Kingdom’s Atomic Weapons Establishment, which designs and manufactures nuclear warheads, saw the most significant percentage increase among UK companies in the Top 100. Its revenues rose by 16 per cent to $2.2 billion.

Hero image: An Italian Air Force F-16 flies over Aviano Air Base in Italy on December 17, 2024. Credit: Italian Air Force