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Western Arms Companies Struggle to Meet Surging Demand Despite Global Military Tensions

by Anna

In 2022, numerous Western arms manufacturers faced challenges in scaling up production despite a substantial increase in demand for military equipment, according to a report by the Stockholm International Peace Research Institute (SIPRI). The institute’s annual assessment revealed that factors such as labor shortages, escalating costs, and disruptions in the supply chain were exacerbated by Russia’s invasion of Ukraine.

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The SIPRI Top 100 report highlighted that the combined arms revenue of the world’s largest arms-producing and military services companies in 2022 amounted to $597 billion, marking a 3.5% decrease from the previous year.

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Lucie Béraud-Sudreau, Director of SIPRI’s Military Expenditure and Arms Production Program, noted, “Many arms companies faced obstacles in adjusting to production for high-intensity warfare.” The difficulties in meeting this demand were attributed to a combination of labor shortages and disruptions in the supply chain.

In the United States, which accounted for 51% of total arms sales among the top 100 companies, the revenues of the 42 listed firms fell by 7.9% to $302 billion in 2022. Thirty-two of these companies reported a decline in year-on-year arms revenue, with many citing ongoing challenges related to supply chain disruptions and labor shortages linked to the COVID-19 pandemic.

Nan Tian, a senior researcher with SIPRI, highlighted that despite an increase in orders related to the conflict in Ukraine, major U.S. companies like Lockheed Martin and Raytheon Technologies faced difficulties due to existing order backlogs and challenges in ramping up production capacity. The report suggested that the revenue from these orders might only be reflected in the companies’ accounts in the coming two to three years.

Interestingly, arms companies in Asia and the Middle East experienced significant growth in arms revenues in 2022. SIPRI noted that this demonstrated their ability to respond to increased demand more swiftly. Notably, Israel and South Korea were singled out for their noteworthy performance.

Despite the year-on-year drop, the total Top 100 arms revenue in 2022 was still 14% higher than in 2015, the first year SIPRI included Chinese companies in its ranking.

The report also highlighted that the surge in demand was not fully reflected in the 2022 revenues due to the time lag between countries placing new orders and the production of the ordered military equipment. SIPRI anticipates that new contracts, particularly for ammunition, could contribute to higher revenue for arms companies in 2023 and beyond.

In conclusion, the SIPRI report underscores the complex challenges faced by Western arms manufacturers in meeting the rising demand for military equipment amid global tensions. The lingering impact of the COVID-19 pandemic, coupled with geopolitical events, has created a dynamic landscape for the arms industry, with potential repercussions for years to come.

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