Despite increasing demand, arms sales have been hampered by production problems

Revenues for the world’s top arms suppliers fell in 2022 as production problems prevented companies from meeting rising demand, boosted in particular by the war in Ukraine, according to Sipri researchers.

According to a new report from the Stockholm International Peace Research Institute (Sipri), sales of arms and military services from the world’s 100 largest defense companies reached $597 billion ($549 billion) in 2022, a decline of 3.5% in comparison corresponds to 2021.

At the same time, geopolitical tensions and the Russian invasion of Ukraine have only fueled global demand for weapons and military equipment.

In this context, the decline in sales is “unexpected,” comments Diego Lopes da Silva, researcher at Sipri, to AFP.

“What this decline actually shows is the gap between a demand shock such as that caused by the war in Ukraine and the ability of companies to increase production to respond to it,” explains Mr. Lopes da Silva.

According to the research institute, this situation is largely explained by declining revenues of major arms manufacturers in the United States, where they faced “supply chain issues and labor shortages” due to the Covid-19 pandemic.

The United States alone saw a 7.9% decline in arms sales in 2022, but still accounted for 51% of global arms revenue in the same year, with 42 US companies ranking in the top 100.

U.S. arms suppliers are particularly vulnerable to disruptions in supply chains because the weapons systems they produce are often more complex than those found elsewhere.

“As a result, the supply chain is more complex and has more stages, which makes it more vulnerable,” analyzes Diego Lopes da Silva.

Russian arms manufacturers’ revenue also fell significantly by 12% to $20.8 billion, the report shows.

This decline is partly due to the sanctions imposed against Russia, but could also be due to delays in payments by the Russian state, the researcher notes.

In addition, the transparency of weapons manufacturers in Russia has decreased and only two Russian companies were included in the top 100 “due to a lack of available data,” notes Sipri.

Elsewhere in the world

In other regions of the world where the military equipment produced is less complex, manufacturers have been able to meet demand, such as the Middle East and Asia-Pacific.

The increase was strongest in the Middle East, with growth of 11% to $17.9 billion.

A boon for Turkish companies in particular: Baykar, which makes drones widely used in Ukraine, reported a 94% increase in sales.

Total sales of arms suppliers from Asia and Oceania rose 3.1% to $134 billion in 2022.

China, one of the world’s largest arms exporters, reported a 2.7 percent increase in total revenue from its eight ranked defense companies to $108 billion.

Looking ahead, Mr Lopes da Silva sees no signs of demand slowing down.

“Companies’ order intake and backlog are increasing significantly,” he told AFP.

Additionally, many European countries have committed to increasing their military spending in light of Russia’s invasion of Ukraine, with some targets extending to 2030.

“This demand will continue for many years to come. We therefore assume that military spending will continue to rise and with it arms revenue, the researcher predicts.