2023-12-04T12:50:21+00:00
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/ The Stockholm International Peace Research Institute (SIPRI), in its report that examined the 100 largest arms companies in the world, saw that crises, wars, and tensions are raging in many parts of the world, but arms sales declined in 2022.
The report, published by the DW website, concluded that these companies achieved approximately 600 billion US dollars from the sale of weapons and military services. It is a huge amount. However, its revenues shrank significantly by 3.5 percent compared to 2021. This was the first decline since the launch of the SIPRI Top 100 Defense Companies list in 2015.
Production problems in the United States
“Revenues have mainly declined in the United States,” Xiao Liang, one of the report’s authors, said in an interview with DW.
Many American and European defense companies have not been able to significantly increase their production capabilities. This is due to labor shortages, rising costs, the consequences of the Corona pandemic, and supply chain disruptions, which were exacerbated by the aggressive war launched by Russia against Ukraine.
Most of the weapons delivered to Ukraine came from European and American stocks, which did not bring much income to the arms factories. Another reason for the decline in revenues is the focus of the largest defense companies on expensive offensive and defensive systems such as aircraft, ships and missiles, explains SIPRI expert Xiao Liang. But in 2022, the weapons “that were in greater demand due to the war in Ukraine were not necessarily more expensive, but rather armored vehicles, ammunition and artillery.”
In particular, revenues of the 42 US defense companies on the list fell significantly by 7.9 percent to $302 billion. This amount represents 51 percent of the total defense revenues in the 100 companies. However, the Stockholm International Peace Research Institute believes that long-term orders will have a positive impact on these companies’ returns in the coming years.
Modest growth in Europe
Defense sales to the 26 European companies on the list rose 0.9 percent to $121 billion in 2022. The war in Ukraine has created a demand for materials “suitable for a war of attrition, such as ammunition and armored vehicles,” according to the report. Many European manufacturers of these goods were able to increase their sales. For example, the Stockholm International Peace Research Institute cites Polish defense company PGZ, which increased its revenues by 14% and thus benefited from “the country’s military modernization programme.”
The revenues of the four German defense companies among the top 100 companies in 2022 amounted to about $9.1 billion, an increase of 1.1 percent compared to 2021. The only German company that witnessed a decline was ThyssenKrupp, whose sales decreased by 16 percent, reaching $1.9 billion. The decline is due to the fact that the company delivered a smaller number of ships compared to the previous year. According to the institute’s analysis, the ranking of German companies in the top 100 was: Rheinmetall in 28th place, ThyssenKrupp in 62nd place, Hensoldt in 69th place, and Diehl in 93rd place.
Hans-Christoph Atzbudian, Director General of the Federal Association of the German Security and Defense Industry (BDSV), believes that the difficulty facing German companies does not lie in a shortage of workers nor in interrupted or broken supply chains. “The main problem is that the work is not being planned for many years,” Atzbudian said in an interview with DW, referring to the political decision.
What about Russia production?
SIPRI was unable to fully assess the revenue development of Russian companies due to lack of data. This is one of the reasons why only two Russian companies are included in the list. The two companies’ sales fell by twelve percent to $20.8 billion. The institute’s report indicates that Russia’s lack of transparency is not a new trend, but has increased after the invasion of Ukraine.
Xiao Liang believes that “the Kremlin has prevented Russian companies from disclosing any information because it might clash with the official narrative of the war in Ukraine.”
Asia and China
Companies in Asia, Oceania, and the Near and Middle East recorded significant growth. “Companies there often have to deal with very difficult security conditions and face a kind of constant war situation, like Israel or South Korea,” Xiao Liang says. Therefore, these companies had “perpetual production capacity.” This means you can quickly ramp up production in the event of sudden spikes in demand.
Moreover, some companies in China, India or Turkey are receiving support from their governments with long-term modernization plans.
Xiao Liang cites another advantage: “Many of the suppliers there are local. Most of the demand is local for their militaries, which helps them mitigate the impact of global supply chain disruptions.”
Sales of the 22 companies included in the ranking from Asia and Oceania rose by 3.1 percent to reach US$134 billion. This is the second year in a row that revenues in Asia and Oceania were higher than those in Europe, the report confirms. There are 22 companies from this region on the list of the top 100 companies for 2022.
The list includes eight Chinese companies, three of which are in the top ten. Defense revenues for all eight companies amounted to $108 billion, representing 18% of total global arms sales. This means that it recorded the second largest share of total sales after American companies.
The fastest growing Turkish marching company
The Middle East witnessed the largest increase in sales of any region in 2022. The revenues of the seven companies located there rose to $17.9 billion, at a rate of eleven percent.
The total revenues of the four Turkish companies on the list rose to $5.5 billion, an increase of 22 percent from 2021. In its report, the Stockholm International Peace Research Institute highlighted the Turkish company Baykar with its production of drones. Paykar entered the Top 100 list for the first time at No. 76 after its sales rose 94 percent, the fastest growth of any company on the list.
What conclusions emerge from the developments recorded by the SIPRI study? “I think there are two big lessons being learned around the world, especially because of the war in Ukraine,” military expert Markus Baer of the Bonn-based International Center for Conflict Studies (BICC) told DW. “The first lesson is that drones and automated systems are becoming very important and will be crucial in future wars. The second lesson is that wars between highly armed nations consume enormous amounts of resources.”