Sales of Top 100 arms companies rated by SIPRI continue to grow amid pandemic
Sales of arms and military services by the industry’s 100 largest companies totaled $531 billion in 2020—an increase of 1.3 percent in real terms compared with the previous year. This is according to new data released on December 6 by the Stockholm International Peace Research Institute (SIPRI).
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In 2020, the U.S. once again hosted the highest number of companies ranked in the Top 100. Together, the arms sales of the 41 US companies amounted to $285 billion—an increase of 1.9 percent compared with 2019—and accounted for 54 percent of the Top 100’s total arms sales (Picture source: Army Recognition)
The arms sales of the Top 100 arms companies in 2020 were 17 percent higher than in 2015—the first year for which SIPRI included data on Chinese firms. This marked the sixth consecutive year of growth in arms sales by the Top 100.
Arms industry weathers Covid-19 pandemic and economic downturn
Arms sales increased even as the global economy contracted by 3.1 percent during the first year of the pandemic. ‘The industry giants were largely shielded by sustained government demand for military goods and services,’ said Alexandra Marksteiner, Researcher with the SIPRI Military Expenditure and Arms Production Programme. ‘In much of the world, military spending grew and some governments even accelerated payments to the arms industry in order to mitigate the impact of the Covid-19 crisis.’
Nevertheless, operating in the military market did not guarantee immunity to the effects of the pandemic. French arms manufacturer Thales, for example, ascribed a drop in arms sales of 5.8 percent to lockdown-induced disruptions in the spring of 2020. Some companies also reported supply chain disruptions and delayed deliveries.
U.S. companies continue to dominate the ranking
The United States once again hosted the highest number of companies ranked in the Top 100. Together, the arms sales of the 41 US companies amounted to $285 billion—an increase of 1.9 percent compared with 2019—and accounted for 54 percent of the Top 100’s total arms sales. Since 2018, the top five companies in the ranking have all been based in the USA.
The US arms industry is undergoing a wave of mergers and acquisitions. To broaden their product portfolios and thus gain a competitive edge when bidding for contracts, many large US arms companies are opting to merge or acquire promising ventures. ‘This trend is particularly pronounced in the space sector,’ said Marksteiner. ‘Northrop Grumman and KBR are among several companies to have acquired high-value firms specialized in space technology in recent years.’
Chinese firms account for the second-largest share of Top 100 arms sales
The combined arms sales of the five Chinese companies included in the Top 100 amounted to an estimated $66.8 billion in 2020, 1.5 percent more than in 2019. Chinese firms accounted for 13 percent of total Top 100 arms sales in 2020, behind US companies and ahead of companies from the United Kingdom, which made up the third-largest share.
‘In recent years, Chinese arms companies have benefited from the country’s military modernization programmes and focus on military-civil fusion,’ said Dr. Nan Tian, SIPRI Senior Researcher. ‘They have become some of the most advanced military technology producers in the world.’ NORINCO, for example, co-developed the BeiDou military-civil navigation satellite system and deepened its involvement in emerging technologies.
Mixed results among European arms companies
The 26 European arms companies in the Top 100 jointly accounted for 21 percent of total arms sales, or $109 billion. The seven British companies recorded arms sales of $37.5 billion in 2020, up by 6.2 percent compared with 2019. Arms sales by BAE Systems—the only European firm in the top 10—increased by 6.6 percent to $24.0 billion.
‘Aggregated arms sales by the six French companies in the Top 100 fell by 7.7 percent,’ said Dr. Lucie Béraud-Sudreau, Director of the SIPRI Military Expenditure and Arms Production Programme. ‘This significant drop was largely due to a sharp year-on-year decline in the number of deliveries of Rafale combat aircraft by Dassault. Safran’s arms sales grew, however, driven by increased sales of sighting and navigation systems.’
Arms sales by the four German firms listed in the Top 100 reached $8.9 billion in 2020—an increase of 1.3 percent compared with 2019. Together, these firms accounted for 1.7 percent of the Top 100’s total arms sales. Rheinmetall—the largest German arms manufacturer—recorded an increase in arms sales of 5.2 percent. Shipbuilder ThyssenKrupp, in contrast, reported a drop of 3.7 percent.
Russian arms sales decline for the third year in a row
The combined arms sales of the nine Russian companies ranked in the Top 100 decreased from $28.2 billion in 2019 to $26.4 billion in 2020—a 6.5 percent decline. This marks a continuation of the downward trend observed since 2017 when arms sales by Russian companies in the Top 100 peaked. Russian firms accounted for 5.0 percent of total Top 100 arms sales.
Some of the sharpest declines in arms sales among the Top 100 were recorded by Russian firms. This coincided with the end of the State Armament Programme 2011–20 and pandemic-related delays in delivery schedules. Almaz-Antey and United Shipbuilding Corporation saw their arms sales fall by 31 percent and 11 percent, respectively. Conversely, United Aircraft Corporation increased its arms sales by 16 percent.
Another key development in the Russian arms industry was the diversification of product lines. Russian companies are currently implementing a government policy to increase their share of civilian sales to 30 percent of their total sales by 2025 and 50 percent by 2030.
Other notable developments in the Top 100
Collectively, the arms sales of companies in the Top 100 based outside the USA, China, Russia, and Europe totaled $43.1 billion in 2020—an increase of 3.4 percent since 2019. This represents 8.1 percent of the Top 100’s total arms sales.
The arms sales of the three Israeli companies listed in the Top 100 reached $10.4 billion, or 2.0 percent of the total.
The aggregated arms sales of the five Japanese companies in the ranking were $9.9 billion in 2020 or 1.9 percent of the total.
Four South Korean companies were included in the ranking. Their combined arms sales amounted to $6.5 billion in 2020, a year-on-year increase of 4.6 percent.
Combined arms sales by the three Indian companies in the Top 100 grew by 1.7 percent. In 2020 the Indian Government announced a phased ban on imports of certain types of military equipment to bolster self-reliance in arms production.
Russian FSVTS chief says SIPRI’s arms market analysis methods do not reflect reality
The methods used by the Stockholm International Peace Research Institute (SIPRI) to analyze the global arms market do not reflect the real situation, Director of Russia’s Federal Service for Military-Technical Cooperation (FSVTS) Dmitry Shugayev told reporters. According to the SIPRI report released on Monday, sales of Russian arms manufacturers are falling: “The calculation methods used by SIPRI to assess the sales of defense companies is their own estimate, which, frankly speaking, does not reflect the real picture. Instead of a specific cost of goods, they use a so-called trend indicator, which has approximately the same meaning for similar products. There is an emphasis on assessing the quantitative side, which, as the institute stresses, cannot be used to assess export volumes,” Shugaev said.
According to him, SIPRI uses only open data, which is not complete: “Such things as spare parts and services, they generally do not take into account,” he said.
As Shugaev noted, the methods for compiling the SIPRI rating presuppose a political bias in the assessment: “SIPRI employees are still representatives of Western institutions and therefore cannot do without a political component,” Shugaev summed up.
On December 6, SIPRI published an annual report on the analysis of the sales of arms and military services of the 100 largest companies in the world in 2020. According to him, Russian manufacturers in the top 100 have been reducing their sales for the third year in a row. In particular, sales of the Almaz-Antey company, which ranks the 17th in the rating, and the United Shipbuilding Corporation, which is in the 33rd place, decreased 31% and 11% respectively.
On the one hand, this is explained by the completion of the state armaments program for 2011-2020, as a result the subsequent financing of the military industry in real terms has decreased. On the other hand, the disruption of the supply schedule was caused by the coronavirus pandemic. At the same time, the report notes that the drop occurred amid the support measures for the military-industrial complex the government took to minimize the negative effect of the pandemic.
Rostec does not consider SIPRI rating as objective
The conclusions of the Stockholm International Peace Research Institute (SIPRI) about falling Russian arms sales cannot be an objective source of information, Rostec said: “We have numerous times said that SIPRI ratings do not offer an objective information source to us for many reasons. Western observers stake on open sources and do not know the real picture,” it said.
SIPRI calculates arms sales in US dollars, while Russian military products are paid for in rubles. “The rating is calculated by dollar proceeds rather than by the number of tanks, airplanes, helicopters, and other arms,” Rostec said. The institute does not take into account the currency exchange difference. “Official statistics show that Rostec income is annually growing and production volumes remain high. It is noteworthy that SIPRI rating reports growing dollar proceeds of such our holdings, as the UAC, UVZ, Roselectronika, KRET,” Rostec said.
