Despite heightened demand driven by the conflict in Ukraine, the world’s leading arms suppliers experienced a 3.5% decline in revenue in 2022, totaling $597 billion, according to a report by the Stockholm International Peace Research Institute (SIPRI). The decrease was attributed to production issues that prevented companies from scaling up production to meet increased demand.
The sales of weapons and military services by the top 100 arms companies dropped unexpectedly, with the United States witnessing a 7.9% decrease, comprising 51% of the total arms revenue but facing supply chain issues due to the COVID-19 pandemic.
Diego Lopes da Silva, a senior researcher at SIPRI, explained that the decline highlighted a time lag between a demand shock, such as the war in Ukraine, and the ability of companies to meet that demand by scaling up production. The complexity of weapons systems in the United States makes its supply chain more vulnerable. Russian arms makers also saw a 12% decline in revenue to $20.8 billion, partly due to sanctions imposed over the conflict in Ukraine and potential delayed payments from the Russian state.
The Middle East witnessed the largest percentage increase, growing by 11% to reach $17.9 billion, driven by heightened demand for weapons. Turkish companies, particularly Baykar, which produces unmanned drones widely used in Ukraine, saw a significant increase in revenue. Asia and Oceania experienced a combined 3.1% growth in revenue to $134 billion, with China’s eight arms companies in the ranking increasing their combined revenues by 2.7% to $108 billion.
Despite the revenue dip, SIPRI noted that there were no signs of demand slowing down. Company reports indicated increasing order intake and backlogs, suggesting sustained demand for arms. Additionally, many European countries have pledged increased military spending targets in response to Russia’s invasion of Ukraine, indicating a continuation of the upward trend in military spending and arms revenues in the coming years.
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