The world’s top 100 arms producers continued to increase sales in 2021, but supply chain issues have slowed industry growth, according to a new report from the Stockholm International Peace Research Institute (SIPRI).
Shortages caused by the COVID-19 pandemic played a role in stifling growth to 1.9% in 2021 from 2020, the report released on Monday noted. SIPRI predicted that the war in Ukraine could cause similar problems for the industry in the short to medium term.
What the report predicts about Ukraine
While Russia’s invasion and Ukraine’s and the West’s response have boosted demand for weapons, they have also left producers struggling to source raw materials and components.
SIPRI, an international institute that focuses on research on conflict, armaments, arms control and disarmament, noted that Russia is a major supplier of raw materials used in the production of weapons.
“This could hamper ongoing efforts in the United States and Europe to bolster their armed forces and replenish their stockpiles after sending billions of dollars worth of ammunition and other equipment to Ukraine,” the report said.
Although Russian companies are increasing their production due to the war, the SIPRI report notes that they have had difficulty gaining access to semiconductors. Businesses are also affected by war-related sanctions, for example when it comes to receiving payments.
“Scaling up production takes time,” said SIPRI senior researcher Diego Lopes da Silva. “If supply chain disruptions continue, it may take several major arms producers several years to meet the new demand created by the war in Ukraine.”
What happened in 2021
The report focused primarily on industry patterns in 2021, when it found that pandemic-related supply chain issues appeared to be slowing growth.
“We could have expected even greater growth in arms sales in 2021 without lingering supply chain issues,” said Lucie Beraud-Sudreau, director of SIPRI’s military expenditure and arms production program. . “Arms companies large and small said their sales were affected during the year. Some companies, such as Airbus and General Dynamics, also reported labor shortages.”
American companies dominated the list of the top 100 arms suppliers, with 40 of them based there. They also took more than half of the sales, 299 billion dollars (284 billion euros) out of a worldwide total of 592 billion dollars. As of 2018, the top five companies in the top 100 are based in the United States.
North America was the only region to record a decline in arms sales compared to 2020. The 0.8% decline in real terms was partly due to high inflation in the US economy in 2021 .
For 2021, 27 of the top 100 arms suppliers were headquartered in Europe. The region saw its combined arms sales increase by 4.2% from 2020, to $123 billion.
While it was a profitable year for shipbuilders, aircraft manufacturers in the region fared less well.
“Most European military aerospace companies reported losses for 2021, which they blamed on supply chain disruptions,” said SIPRI researcher Lorenzo Scarazzato. “In contrast, European shipbuilders appear to have been less affected by the pandemic fallout and were able to increase sales in 2021.”
With arms sales of $4.5 billion, Rheinmetall (ranked 31st) remained the largest arms company in Germany. However, its arms sales fell 1.7% in 2021 due to the pandemic and supply chain disruptions.
Combined arms sales of the 21 companies from Asia and Oceania included in the top 100 reached $136 billion in 2021, a 5.8% increase from 2020. The eight Chinese arms companies of the list achieved total arms sales of $109 billion, an increase of 6.3%.
These include China’s CSSC, now the world’s largest military shipbuilder, with arms sales of $11.1 billion, after a merger between two existing companies.
Combined arms sales of South Korea’s four top 100 companies rose 3.6% from 2020, reaching $7.2 billion. They included a 7.6% increase in sales of cross-industry conglomerate Hanwha, which is expected to see further growth after a major arms deal with Poland following Russia’s invasion of Ukraine.
It was the first year that a Taiwanese company, NCSIST, which specializes in missiles and military electronics, made the list – with arms sales of $2 billion.
Russia and the Middle East
Six Russian companies were included in the top 100 for 2021 with sales totaling $17.8 billion, an increase of 0.4% from 2020. SIPRI noted that prior to Russia’s invasion of Ukraine, there were signs of widespread stagnation in the Russian arms industry. .
The five Middle East-based companies generated $15.0 billion in arms sales in 2021. This is a 6.5% increase from 2020, the fastest pace of growth in all regions represented in the Top 100.
Edited by: Sean Sinico
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