Giancarlo Elia Valori
New data from Sipri’s Arms Industry Database, released last December, show that arms sales by the world’s twenty-five largest defence equipment and military services companies totalled 361 billion dollars in 2019. This is an 8.5% increase in real terms in arms sales compared to 2018. All this emerged from the studies by the Stockholm-based International Peace Research Institute founded in 1966.
In 2019 the top five arms companies were all based in the United States: Lockheed Martin, Boeing, Northrop Grumman, Raytheon and General Dynamics. These five companies together recorded 166 billion dollars in annual sales. In total, twelve U.S. companies rank among the top 25 for 2019, accounting for 61% of total sales.
For the first time, a Middle East company appears in the top twenty-five. Edge, based in the United Arab Emirates, was established in 2019 from the merger of over twenty-five smaller companies. It ranks twenty-second and accounts for 1.3% of the total arms sales of the top twenty-five companies. This demonstrates that oil revenues in the Near and Middle East are also invested in businesses that produce jobs and money, and are not just accumulated for the personal expenses of the ruling elite. Edge is an example of how high domestic demand for military products and services, combined with the desire to become less dependent on foreign suppliers, is driving the growth of arms companies in the Near and Middle East.
Another newcomer to the top twenty-five list in 2019 was L3Harris Technologies (ranking tenth). It was created by the merger of two U.S. companies that were both in the top twenty-five in 2018, namely Harris Corporation and L3 Technologies.
The top twenty-five list also includes four Chinese companies. Three of them are in the top ten: Aviation Industry Corporation of China (AVIC, ranking sixth), China Electronics Technology Group Corporation (CETC, ranking eighth) and China North Industries Group Corporation (Norinco, ranking ninth).
The combined revenue of the four Chinese companies in the top 25 list, which also includes China South Industries Group Corporation (CSGC, ranking twenty-fourth), grew by 4.8% between 2018 and 2019. Chinese arms companies are benefiting from the People’s Liberation Army’s military modernisation programmes.
Conversely, the revenues of the two Russian companies in the top twenty-five, namely Almaz-Antey and United Shipbuilding, declined between 2018 and 2019, for a combined total amount of 634 million dollars. A third Russian company, United Aircraft, lost 1.3 billion dollars in sales and dropped off the top 25 list in 2019. Domestic competition and reduced government spending on modernising the Russian Navy were two of the main challenges for United Shipbuilding in 2019.
After the United States, the People’s Republic of China recorded the second largest share of 2019 arms sales by the top twenty-five companies, accounting for 16%.
The six Western European companies together account for 18%. The two Russian companies in the ranking account for 3.9%. Nineteen of the top twenty-five arms companies increased arms sales in 2019 compared to 2018. The largest absolute increase in arms sales revenue was recorded by Lockheed Martin: 5.1 billion dollars (11% in real terms). The largest percentage increase in annual arms sales (105%) was reported by French manufacturer Dassault Aviation Group. A strong increase in export deliveries of Rafale fighter aircraft pushed Dassault Aviation into the top 25 arms companies for the first time.
The Sipri report also examines the international presence of the 15 largest arms companies in 2019. These companies are present in a total of 49 countries, through majority-owned subsidiaries, joint ventures and research facilities. With a global presence in 24 countries each, Thales and Airbus are the two most internationalised companies, followed closely by Boeing (21 countries), Leonardo (21 countries) and Lockheed Martin (19 countries).
The United Kingdom, Australia, the United States, Canada and Germany host the largest number of these companies.
Outside the North American and Western European arms industries, the largest number of foreign corporate entities is hosted by Australia (38), Saudi Arabia (24), India (13), Singapore (11), United Arab Emirates (11) and Brazil (10).
There are many reasons why arms companies might want to establish themselves abroad, including better access to growing markets, collaborative arms programmes or policies in host countries that link arms purchases to technology transfers.
Of the 49 countries hosting foreign industries in the top 15 arms companies, seventeen countries are low- and middle-income ones. Southern countries seeking to restart their arms production programmes have welcomed foreign arms companies as a means for benefiting from technology transfers.
Chinese and Russian arms companies in the top 15 list have only a limited international presence. Sanctions against Russian companies and government limits on takeovers by Chinese companies seem to have played a role in limiting their global presence.
All these data were collected by the Sipri Arms Industry Database founded in 1989. At that time, it excluded data for companies in Eastern European socialist countries, including the Soviet Union. The updated version contains 2015 data, including data for companies in the People’s Republic of China and the Russian Federation. An archive of the first one hundred data sets for the period 2002-2018 is available on the Sipri website (www.sipri.org), while for the first twenty-five ones it has been updated with the latest available information.
Arms sales are defined as sales of military goods and services to military customers at national and international levels. Unless otherwise stated, all changes are expressed in real terms. Comparisons (e.g. between 2018 and 2019 or between 2015 and 2019) are based on the groups of companies listed in the respective year (i.e. the comparison is between different groups of companies).
For 2020-2021, Sipri is releasing its dataset on arms sales of the world’s largest companies along with the results of a mapping on the internationalisation of this industry. For this reason, a new dataset was created, including 400 subsidiaries, joint ventures and research facilities linked to the top fifteen arms companies in 2019. Data sources included corporate investment documents, information on company websites, public records and newspaper and magazine articles.
To be included in the mapping, an arms industry must have been active for the majority of its fiscal year, as well as be located in a country other than that in which its parent company is headquartered and also (i) produce military goods or provide military services to military customers; (ii) produce or provide services for dual-use goods to military customers.
This is the first of the key data handovers in view of the publication of the next Sipri Yearbook in mid-2021. Before that, Sipri will release its data on international arms transfers (details of all major international arms transfers in 2020), as well as its data on global military expenditure (comprehensive information on global, regional and national trends in military expenditure). We will inform readers of all this in due course.