The Stockholm International Peace Research Institute has published its list of the world’s top 100 arms manufacturers. Overall, the 100 largest defense contractors totaled $401 billion in sales 2014, though the actual number is probably even higher, because the list excludes Chinese companies “due to the lack of data.”
This is a healthy chunk of the total worldwide military expenditure during the same year, which was $1.776 trillion including China.
In other words — of every dollar that governments around the world spent on their militaries in 2014, about 23 cents ended up in the pockets of one of the 100 companies on SIPRI’s list, many of which are privately owned.
However, there are some interesting regional discrepancies. To put it simply, nobody profits from selling weapons nearly as much as U.S. defense companies and even among those, Lockheed Martin is the 800-pound gorilla. The Maryland-based firm sold arms and services worth $37.47 billion in 2014, according to SIPRI, leaps and bounds ahead of its closest rival, Boeing, which still made a cool $28.30 billion.
SIPRI predicts Lockheed Martin’s revenue from defense goods and services to exceed $40 billion in 2015, owing to the acquisition of Sikorsky Aircraft, which manufactures the UH-60 Black Hawk helicopter among other products, and would be ranked 24th on the list by itself.
Overall, American companies take 54.4 percent of the total revenue of all 100 companies on the list. Seven of the top 10 arms manufacturers — and 38 of the top 100 — are based in the United States.
Above — a French Rafale multi-role jet at the Dubai Air Show 2013. Alexander Babashov/Flickr photo. At top — F-35A in 2013. U.S. Air Force photo
The ranking becomes even more lopsided if you look at the Western Hemisphere as a whole. The three non-American companies in the top 10 are all Western European, with British BAE Systems beating out the trans-European Airbus Group and Italian Finmeccanica in terms of arms sales.
Together, Western European and American businesses took home 80.3 percent of the revenue of all companies on the top 100 list. Of course, there is a big red elephant in the room. “China’s military spending increased more than fivefold in real terms between 2000 and 2014 and the country has engaged in major efforts to develop its domestic industry,” SIPRI’s researchers noted.
Based on the data that is available, they estimate that of China’s 10 largest defense contractors, all government owned, nine would be included in the SIPRI top 100 list based on their revenue. Furthermore, four to six would likely be in the top 20, and two — “the aircraft producer AVIC and the land systems producer Norinco” — may even be in the top 10.
There are other indications that Western dominance of the global defense industry may be on the wane. American and Western European companies saw revenues decrease by 3.2 percent compared to 2013, leading to an overall decrease of 1.5 percent of revenues for the whole list. This probably reflects tighter purse strings in Western governments, which are still reeling from the fallout of the 2008 economic crisis.
Among Western countries, only Germany and Switzerland increased their sales, both thanks to a single company. In Germany, shipbuilder ThyssenKrupp saw its revenues increase by almost 30 percent, thanks to a booming market for its diesel-electric submarines. Swiss company Pilatus Aircraft benefited from a higher demand for its trainer aircraft.
Russian troops during a military exercise. Russian Ministry of Defense photo
In contrast, it must have been a year for champagne and caviar for Russian companies on SIPRI’s list, which increased their sales by almost 50 percent compared to 2013. This is not necessarily surprising. Russia is spending lavishly to modernize its military, and spending without a doubt has increased due to Russia’s intervention in Ukraine in 2014.
Now with the Russian intervention in Syria, Russian companies probably again had a breakout year.
But American and Western European firms will likely continue to dominate the rankings for years to come. Their lead over competitors is too great to decline substantially in the short term. But we can expect they will continue to lose revenue — both in absolute and relative terms — to companies from other parts of the world.
Let’s face it. Western military spending, especially in the United States, is already at an absurdly high level. With basically everyone agreeing that the wars in Iraq and Afghanistan were failures and domestic politics focusing on austerity, defense companies should not count on Western governments to go on a spending spree anytime soon.
But at the same time, the defense sector remains a bastion of protectionist policies. While Western businesses are better positioned to profit from the international arms market than anybody else due to their high-tech goods, several up-and-coming countries are trying to build up their own defense sectors.
China may be the obvious example, but others include Brazil, India, South Korea and Turkey. According to SIPRI, these “emergent” players are strategically investing into their defense industries, both to secure a local supply for their own armed forces and to better position their — often state-owned — manufacturers on international markets.
These companies generally offer less advanced but seriously cheaper alternatives to products offered by Western companies. Brazil’s light, multi-role Super Tucano turboprop comes to mind. Add Russia into the mix, which can offer sophisticated military hardware at lower cost, and Western firms could face real problems.
Which is probably why you see companies such as Lockheed Martin spend $10.6 million lobbying Congress in 2015 to keep the faucet open.