The world is not calming down; crises and wars are multiplying. Nevertheless, arms sales by the largest arms industry companies declined in 2022. The Stockholm Institute for Peace Research SIPRI explains why in its new study, reports DW.
Due to many global political hot spots, gun sales have been booming for years. That trend, however, was stopped in 2022 – although most likely only temporarily. This follows from the latest report of the Stockholm International Peace Research Institute (SIPRI), which analyzed the operations of the 100 largest arms production companies during the past year, reports DW .
According to that report, the companies made a total of almost 600 billion dollars from the sale of weapons and military services. That’s a huge sum. However, their incomes have noticeably decreased compared to 2021 by 3.5 percent. This is the first decline since 2015, that is, since SIPRI formed the list of the largest 100 companies for the production of weapons.
“Despite the volume of new orders, which reached record levels for many companies, revenue fell primarily in the US,” Xiao Liang, one of the authors of the SIPRI report, told DW.
USA: Reduced production due to production problems
Many American and European arms companies have not been able to significantly increase their production capacity. Due to labor shortages, rising costs, the effects of the coronavirus pandemic, and supply chain disruptions caused by Russia’s war of aggression in Ukraine.
In addition, most of the weapons supplied to Ukraine were military aid from European and American stockpiles, which did not bring much revenue to the industry. Another reason is that the focus of major manufacturers has shifted to expensive systems such as aircraft, ships, and missiles, Liang explains.
But in 2022, the weapons “that were most in demand because of the war in Ukraine – armored vehicles, ammunition and artillery—were not necessarily more expensive.”
In particular, the revenues of the 42 American companies on the list fell significantly – by 7.9 percent, or to $302 billion. They accounted for 51 percent of the total revenue from arms sales of the 100 largest companies in the arms industry. However, SIPRI estimates that longer-term orders will have a positive impact on the balance in the coming years.
Modest sales growth in Europe
Arms sales of 26 European companies that are among the top 100 in the world increased in 2022 by 0.9 percent, i.e. to 121 billion dollars. The war in Ukraine has created demand for products “suitable for a war of attrition, such as ammunition and armored vehicles,” according to the SIPRI study.
Many European producers of these goods managed to increase their revenues. As an example, SIPRI cites the Polish defense company PGZ, which increased its revenue by 14 percent and thus benefited “from the country’s military modernization program.”
The revenue of the four German arms manufacturers among the hundred highest-earning companies in 2022 was $9.1 billion, an increase of 1.1 percent compared to 2021. The only German company that recorded an increase in sales was ThyssenKrupp.
Its sales fell by 16 percent, i.e. to 1.9 billion dollars, because the company, according to the analysis of the SIPRI institute, delivered fewer ships than the previous year. By the way, the order of German companies on the list is as follows: “Rheinmetall” in 28th place, “ThiessenKrupp” in 62nd place, “Hensolt” in 69th place and “Deal” in 93rd place.
Speculation on Russian weapons production
Due to the lack of data, SIPRI was not able to fully assess the development of the income of Russian companies. That is why only two Russian companies made the list: “Rostec” (10th place) and the United Shipbuilding Corporation (36). Their total sales fell by 12 percent, i.e. to 20.8 billion dollars. Russia’s lack of transparency is not a new trend, but it has increased since its invasion of Ukraine, according to the SIPRI report.
An expert from the Stockholm Liang Institute estimates that “the Russian government has prevented the companies there from disclosing any information because it could call into question the official narrative about their war efforts in Ukraine.”
Companies in Asia, Oceania, and the Near and Middle East recorded significant growth. “Companies there often face very difficult security conditions, even some kind of constant war, like Israel or South Korea,” says Liang. That is why these companies had “constant production capacity”, which means that they were able to quickly increase production in the event of a sudden increase in demand.
At the same time, some companies in China, India, or Turkey support their governments in long-term modernization plans. Liang cites another advantage: “Many suppliers are domestic. Most of the demand is also domestic – that is, to supply its own military. It helps those countries mitigate the impact of global supply chain disruptions.”
The sales of the 22 companies from Asia and Oceania listed in the ranking rose by 3.1 percent, or to 134 billion US dollars. It is the second year in a row that incomes in Asia and Oceania are higher than those in Europe, the SIPRI report points out. In the first hundred in 2022, there are 22 companies from that region. There are eight Chinese companies on the list, three of which are in the top ten. Arms revenues from all eight companies totaled $108 billion and accounted for 18 percent of total global arms sales. This means that they recorded the second-largest share of total sales by country, just behind American companies.
The Turkish drone manufacturer has the fastest growth
The Middle East saw the largest percentage increase in sales of any region in 2022. Revenue for the seven companies located there rose to $17.9 billion, an 11 percent increase. According to SIPRI’s findings, companies from the region benefit from specializing in less technologically sophisticated products. They are able to “scale up production more quickly in response to increasing demand.”
This is especially true for four Turkish companies, whose total revenue increased to 5.5 billion dollars – 22 percent more than in 2021. In its report, SIPRI specifically points to the Turkish company “Baykar” and its drone production. “Baykar” has now entered the top 100 for the first time (76th place) after its sales increased by 94 percent. That’s the fastest growth of any company in the SIPRI rankings.
