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SIPRI: World arms manufacturers are struggling to keep up with demand

04 Dec, 2023
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SIPRI: World arms manufacturers are struggling to keep up with demand

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Despite the increase in weapon orders amid the war in Ukraine, the combined revenue from the sale of weapons and military services by the world's top 100 defense companies amounted to $597 billion in 2022. This represents a 3.5% decrease compared to 2021, as reported in a study by the Stockholm International Peace Research Institute (SIPRI).

It is noted that Russia's full-scale invasion of Ukraine and geopolitical tensions worldwide contributed to a sharp increase in demand for weapons and military equipment in 2022.

However, despite receiving new orders, many American and European arms companies were unable to significantly increase production capacities due to a shortage of labor, rising costs, and supply chain disruptions exacerbated by the war in Ukraine. Additionally, countries placed new orders late in the year, so the increase in demand has not yet reflected in the revenues of these companies.

At the same time, unfulfilled orders and a sharp increase in the number of new contracts suggest that global revenues from weapon sales could significantly increase in the coming years, according to SIPRI.

"Many arms companies faced challenges in transitioning to the production of weaponry for high-intensity warfare. However, new contracts have been signed, particularly for the supply of ammunition, which is expected to lead to revenue growth in 2023 and in the subsequent years," SIPRI notes.

Analysts note that the decline in revenue is primarily associated with American companies: 42 representatives from the United States in the ranking earned 7.9% less in 2022 compared to the previous year.

European companies in the top 100 recorded a slight growth of 0.9%. Weapon manufacturers from Asia and Oceania increased sales faster, by 3.1%, and for the second consecutive year, they outpaced their European competitors in total annual revenue, with Asian firms generating $134 billion compared to $121 billion for European ones.

"Companies from China, India, Japan, and Taiwan benefited from ongoing state investments in the modernization of armed forces," notes Xiao Lian, a researcher in the SIPRI Program on Military Expenditure and Arms Production.

At the same time, as SIPRI points out, companies specializing in less technologically complex products were able to increase production volumes more quickly in response to the sharp rise in demand. An example is the Turkish company Baykar, the manufacturer of the Bayraktar TB-2 drone, which almost doubled its revenue from weapon sales and entered the top 100 for the first time.

Data on Russian defense companies:

Only two Russian companies made it to the SIPRI top 100 for 2022 - "Rostec" and "United Shipbuilding Corporation." Researchers explain this by the opacity of the Russian defense industry and the lack of available data. The combined revenue from the sale of weapons of these two named firms decreased by 12% in 2022. This contradicts statements from Russian authorities about increasing arms production, analysts acknowledge. In part, SIPRI attributes this contradiction to high inflation rates and a decline in Russian arms exports. Experts also point out that companies may have reported work on restoring weapons from Soviet times as new production. Such work would not generate as much income as real new production.

At the same time, due to the lack of transparency in reporting, companies like "Almaz-Antey" or the "Tactical Missile Weapons" corporation are not accounted for in the SIPRI report. These companies "produce categories of equipment in high demand due to the war, such as air defense systems and missiles," write the authors of the report.

The Odessa Journal

The Odessa Journal

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