Shortages caused by the COVID-19 pandemic played a role in suppressing growth to 1.9% in 2021 compared to 2020, the report released on Monday noted. SIPRI predicted that the war in Ukraine could cause similar problems for the industry in the short to medium term.
What did the report predict about Ukraine?
While both Russia’s invasion of Ukraine and the West’s response have increased demand for weapons, they have also left producers facing challenges in sourcing raw materials and parts. SIPRI, an international institute focusing on conflict, armaments, arms control and disarmament research, noted that Russia is a major supplier of raw materials used in weapons production. “This could hamper ongoing efforts in the United States and Europe to bolster their armed forces and replenish their stockpiles after sending billions of dollars worth of ammunition and other equipment to Ukraine,” the report said. Although Russian companies are ramping up production because of the war, the SIPRI report noted that they have faced difficulties accessing semiconductors. Companies are also affected by war-related sanctions, for example when it comes to receiving payments. “Increasing production takes time,” said Diego López da Silva, senior researcher at SIPRI. “If supply chain disruptions continue, it may take several years for some of the major arms producers to meet the new demand created by the Ukraine war.”
Who benefits from the global arms trade?
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What happened in 2021
The report’s main focus was on industry patterns in 2021, when it found supply chain issues related to the pandemic appeared to slow growth. “We might have expected an even bigger increase in arms sales in 2021 without persistent supply chain problems,” said Lucie Beraud-Sudreau, director of SIPRI’s military spending and arms production program. “Both the largest and smallest arms companies said their sales had been affected during the year. Some companies, such as Airbus and General Dynamics, also reported labor shortages.”
North America
Companies in the United States dominated the list of the top 100 arms suppliers, with 40 of the companies based there. They also took more than half the sales, $299 billion (€284 billion) out of a worldwide total of $592 billion. As of 2018, the top five companies in the top 100 are headquartered in the United States. North America was the only region to see a decline in arms sales compared to 2020. The 0.8% drop in real terms was partly due to high inflation in the US economy in 2021.
Europe
For 2021, 27 of the top 100 arms suppliers were based in Europe. Combined arms sales in the region increased by 4.2% compared to 2020, totaling $123 billion. While it was a profitable year for shipbuilders, aircraft manufacturers in the region did not fare so well. “Most European companies specializing in military aerospace reported losses for 2021, which they blamed on supply chain disruptions,” said SIPRI researcher Lorenzo Scarazzato. “In contrast, European shipbuilders appear to have been less affected by the effects of the pandemic and managed to increase their sales in 2021.” With arms sales of $4.5 billion, Rheinmetall (ranked 31st) remained Germany’s largest arms company. However, its arms sales fell by 1.7% in 2021 due to the pandemic and supply chain disruptions.
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Asia
The combined arms sales of the 21 companies in Asia and Oceania in the top 100 reached $136 billion in 2021 — up 5.8% from 2020. The eight Chinese arms companies on the list had total arms sales of $109 billion , an increase of 6.3%. These include China’s CSSC, now the world’s largest military shipbuilder, with $11.1 billion in arms sales, following a merger of two existing companies. The combined arms sales of the four South Korean companies in the top 100 increased by 3.6% compared to 2020, reaching $7.2 billion. They included a 7.6 percent rise in sales for cross-sector Hanwha Group, which is expected to post further growth after a major arms deal with Poland that followed Russia’s invasion of Ukraine. It was the first year that a Taiwanese company, NCSIST, which specializes in missiles and military electronics, appeared on the list — with $2 billion in arms sales.
Russia and the Middle East
Six Russian companies made the top 100 for 2021 with sales totaling $17.8 billion — up 0.4 percent from 2020. SIPRI noted that, before the Russian invasion of Ukraine, there were signs that the stagnation was widespread in the Russian arms industry. The five companies based in the Middle East generated $15.0 billion in arms sales in 2021. This was a 6.5% increase compared to 2020, the fastest growth rate of any region represented in the Top 100. Editor: Sean Sinico
