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Thearms industry, also known as thedefense (ordefence)industry,military industry, or thearms trade, is a globalindustry whichmanufactures and sellsweapons and othermilitary technology to a variety of customers, including thearmed forces ofstates and civilian individuals and organizations. Products of the arms industry includeweapons,munitions,weapons platforms,communications systems, and other electronics, and related equipment. The arms industry also provides defense-related services, such as logistical and operational support. As a matter of policy, many governments ofindustrialized countries maintain or support a network of organizations, facilities, and resources to produce weapons and equipment for their military forces (and sometimes those of other countries). This is often referred to as adefense industrial base. Entities involved in arms production for military purposes vary widely, and includeprivate sectorcommercial firms,state-owned enterprises andpublic sector organizations, and scientific and academic institutions.[1] Such entities perform a wide variety of functions, includingresearch and development,engineering, production, and servicing ofmilitary material, equipment, and facilities. The weapons they produce are often made, maintained, and stored inarsenals.
In some regions of the world, there is a substantial legal trade infirearms for use by individuals (commonly cited purposes include self-defense and hunting/sporting). Illegalsmall arms trade occurs in many countries and regions affected bypolitical instability.
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During theearly modern period, England, France, Sweden, and the Netherlands became self-sufficient in arms production, with diffusion and migration of skilled workers to more peripheral countries such as Portugal and Russia.[citation needed]
The modern arms industry emerged in the second half of the nineteenth century as a product of the creation and expansion of the first largemilitary–industrial companies. As smaller countries and even newly industrializing countries like Russia and Japan could no longer produce cutting-edge military equipment with their Indigenous capacity-based resources, they increasingly began to contract the manufacturers of military equipment, such asbattleships,artillery pieces andrifles to foreign government military entities.[citation needed] In 1854, theBritish government awarded a contract to theElswick Ordnance Company to supply the latest loading artillery pieces. This galvanized the private sector into weapons production, with the surplus increasingly exported to foreign countries.William Armstrong became one of the first international arms dealers, selling his systems to governments across the world from Brazil to Japan.[2][non-primary source needed] In 1884, he opened a shipyard atElswick to specialize in warship production – at the time, it was the only factory in the world that could build a battleship and arm it completely.[3] The factory produced warships for foreign naval forces, including theImperial Japanese Navy. Several Armstrong cruisers played an important role in defeating the Russian fleet at theBattle of Tsushima in 1905.[citation needed] In the American Civil War in 1861the North had about ten times the manufacturing capacity of theeconomy of the Confederate States of America. This advantage overthe South included the ability to produce (in relatively small numbers)breech-loading rifles for use against the muzzle-loadingrifled muskets of the South. This began the transition to industrially produced mechanized weapons such as the Gatling gun.[4]
This industrial innovation in the defense industry was adopted byPrussia in its 1864, 1866, and 1870–71 defeats of Denmark, Austria, and, France respectively. By this time the machine gun had begun entering arsenals. The first examples of its effectiveness were in 1899 during theBoer War and in 1905 during theRusso-Japanese War. However, Germany led the innovation of weapons and this advantage in theweapons of World War I nearly defeated the allies.[citation needed]
In 1885, France decided to capitalize on this increasingly lucrative trade and repealed its ban on weapon exports. The regulatory framework for the period up to theFirst World War was characterized by alaissez-faire policy that placed little obstruction in the way of weapons exports. Due to the carnage of World War I, arms traders began to be regarded with odium as "merchants of death" and were accused of having instigated and perpetuated the war for earning their profits from weapons sales. An inquiry into these allegations in Britain failed to find evidence to support them. However, the sea change in attitude about war more generally meant that governments began to control and regulate the trade themselves.[citation needed] The volume of the arms trade greatly increased during the 20th century, and it began to be used as a political tool, especially during theCold War when the United States and the USSR supplied weapons to their proxies across the world, particularlythird world countries (seeNixon Doctrine).[5]
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This category includes everything fromlight arms toheavy artillery, and the majority of producers are small. Many are located in third-world countries. International trade inhandguns,machine guns,tanks,armored personnel carriers, and other relatively inexpensive weapons is substantial. There is relatively little regulation at the international level, and as a result, many weapons fall into the hands of organized crime, rebel forces, terrorists, or regimes under sanctions.[6]
One billion firearms were in global circulation in 2017; of those, 857 million (85%) were possessed by civilians, 133 million (13%) were possessed by national militaries, and 23 million (2%) belonged to law enforcement agencies.[7] 1,135 companies based in more than 98 countries manufactured small arms as well as their various components and ammunition as of 2003.[8]
One billion firearms were in global circulation in 2017; of those, 857 million (85%) were possessed by civilians, 133 million (13%) were possessed by national militaries, and 23 million (2%) belonged to law enforcement agencies.[9]
Encompassing military aircraft (both land-based andnaval aviation), conventional missiles, andmilitary satellites, this is the most technologically advanced sector of the market. It is also the least competitive from an economic standpoint, with a handful of companies dominating the entire market. The top clients and major producers are virtually all located in thewestern world and Russia, with the United States easily in the first place. Prominent aerospace firms includeRolls-Royce,BAE Systems,Saab AB,Dassault Aviation,Sukhoi,Mikoyan,EADS,Leonardo,Thales Group,Lockheed Martin,Northrop Grumman,RTX Corporation, andBoeing. There are also severalmultinational consortia mostly involved in the manufacturing offighter jets, such as theEurofighter. The largest military contract in history, signed in October 2001, involved the development of theJoint Strike Fighter.[6]
Several of the world'sgreat powers maintain substantialnaval forces to provide a global presence, with the largest nations possessingaircraft carriers,nuclear submarines and advancedanti-air defense systems. The vast majority of military ships are conventionally powered, but some arenuclear-powered. There is also a large global market in second-hand naval vessels, generally purchased bydeveloping countries fromWestern governments.[6]
The cybersecurity industry is expected to be of increasing importance to defense, intelligence, and homeland security agencies.[10][11][better source needed]
According to research instituteSIPRI, the volume of international transfers of major weapons in 2010–14 was 16 percent higher than in 2005–2009. The five biggest exporters in 2010–2014 were the United States, Russia, China, Germany, and France, and the five biggest importers were India, Saudi Arabia, China, the United Arab Emirates, and Pakistan. The flow of arms to the Middle East increased by 87 percent between 2009–13 and 2014–18, while there was a decrease in flows to all other regions: Africa, the Americas, Asia and Oceania, and Europe.[13]
SIPRI has identified 67 countries as exporters of major weapons in 2014–18. The top 5 exporters during the period were responsible for 75 percent of all arms exports. The composition of the five largest exporters of arms changed between 2014 and 2018 and remained unchanged compared to 2009–13, although their combined total exports of major arms were 10 percent higher. In 2014–18, significant increases in arms exports from the US, France and Germany were seen, while Chinese exports rose marginally and Russian exports decreased.[13]
In 2014–18, 155 countries (about three-quarters of all countries) imported major weapons. The top 5 recipients accounted for 33 percent of the total arms imports during the period. The top five arms importers – Saudi Arabia, India, Egypt, Australia, and Algeria – accounted for 35 percent of total arms imports in 2014–18. Of these, Saudi Arabia and India were among the top five importers in both 2009–13 and 2014–18.
In 2014–18, the volume of major arms international transfers was 7.8 percent higher than in 2009–13 and 23 percent higher than that in 2004–08. The largest arms importer was Saudi Arabia, importing arms primarily from the United States, United Kingdom, and France. Between 2009–13 and 2014–18, the flow of arms to the Middle East increased by 87 percent. Also including India, Egypt, Australia, and Algeria, the top five importers received 35 percent of the total arms imports, during 2014–18. The five largest exporters were the United States, Russia, France, Germany and China.[13]
Imports of major arms by states in Europe increased by 155 per cent between 2015–19 and 2020–24, while the global volume of international arms transfers decreased marginally, by 0.6 per cent. The five largest arms importers in 2020–24 were Ukraine, India, Qatar, Saudi Arabia and Pakistan, while the five largest arms exporters were the United States, France, Russia, China and Germany.[14]
The following are estimates from theStockholm International Peace Research Institute's Arms Transfers Database.[16]
| 2020-2024 rank | Exporter | Share of global arms exports (%) |
|---|---|---|
| 1 |  United States | 43 |
| 2 |  France | 9.6 |
| 3 |  Russia | 7.8 |
| 4 |  China | 5.9 |
| 5 |  Germany | 5.6 |
| 6 |  Italy | 4.8 |
| 7 |  United Kingdom | 3.6 |
| 8 |  Israel | 3.1 |
| 9 |  Spain | 3.0 |
| 10 |  Republic of Korea | 2.2 |
While Russian, Chinese and German arms exports fell from 2015-2019, US and French arms exports rose. The top 25 arms exporters accounted for 98 per cent of the world’s arms exports in 2020–24. States in North America and Europe together accounted for 87 per cent of all arms exports in the period. The five largest exporters in Western Europe supplied around one quarter of total global arms exports in 2020–24.[17]
SIPRI uses the "trend-indicator values" (TIV). These are based on the known unit production costs of weapons and represent the transfer of military resources rather than the financial value of the transfer.[18]
| 1950–2022 rank | Supplier | Arms export (in billion TIV) |
|---|---|---|
| 1 | United States | 729,161 |
| 2 |  Soviet Union (1950-1991) | 450,786 |
| 3 | Russia (1992-present) | 155,926 |
| 4 | United Kingdom | 144,569 |
| 5 | France | 136,347 |
| 6 | Germany | 90,701 |
| 7 | China | 61,283 |
| 8 | Italy | 37,328 |
| 9 |  Czechoslovakia (1950-1992) | 31,066 |
| 10 |  Netherlands | 25,632 |
Arms import rankings fluctuate heavily as countries enter and exit wars. Accordingly, 5-year moving averages present a much more accurate picture of import volume, free from yearly fluctuations.[19]
| 2020-2024 rank | Importer | Share of global arms imports (in %) |
|---|---|---|
| 1 |  Ukraine | 8.8 |
| 2 |  India | 8.3 |
| 3 |  Qatar | 6.8 |
| 4 |  Saudi Arabia | 6.8 |
| 5 |  Pakistan | 4.6 |
| 6 |  Japan | 3.9 |
| 7 |  Australia | 3.5 |
| 8 |  Egypt | 3.3 |
| 9 | United States | 3.1 |
| 10 |  Kuwait | 2.9 |
In the period from 2020 to 2024, the top five arms importers together received 35.3 per cent of all arms imports. States in Asia and Oceania accounted for 33 per cent of all arms imports in 2020–24, followed by Europe (28 per cent), the Middle East (27 per cent), the Americas (6.2 per cent) and Africa (4.5 per cent).[20]
This is a list of the world's largest arms manufacturers and other military service companies who profit the most from thewar economy, their origin is shown as well. The information is based on a list published by theStockholm International Peace Research Institute for 2023.[21]
| 2023 rank | Company name | Arms revenue (US$ billions) | % of total revenue from arms |
|---|---|---|---|
| 1 |  Lockheed Martin | 60.81 | 90 |
| 2 | RTX Corporation | 40.66 | 59 |
| 3 | Northrop Grumman | 35.57 | 90.5 |
| 4 | Boeing | 31.10 | 40 |
| 5 | General Dynamics | 30.20 | 71.4 |
| 6 | BAE Systems | 29.81 | 98.2 |
| 7 | Rostec | 21.73 | 65 |
| 8 | Aviation Industry Corporation of China | 20.85 | 25 |
| 9 | NORINCO | 20.56 | 26.8 |
| 10 | China Electronics Technology Group Corporation | 16.05 | 28.7 |
| 11 | L3Harris Technologies | 14.76 | 76 |
| 12 |  Airbus | 12.89 | 18.2 |
| 13 | Leonardo | 12.39 | 75 |
| 14 | China Aerospace Science and Industry Corporation | 12.35 | 30 |
| 15 | China State Shipbuilding Corporation | 11.48 | 23.5 |
... in all countries, markets for military goods work poorly. This is to a large extent independent of the constitution of the state and the social and economic system. In all countries, whether ownership is private or collective, and whether rulers are democratic or authoritarian, the agents on each side of the defense market are powerful and well connected. On one side a senior minister manages a governmentmonopsony: there is only one significant customer for such items as heavy artillery, aircraft, and battleships. On the other side is a charmed circle of big defense contractors. A few large-scale corporations supply such weapons; their ability to squeeze money out of government is augmented by the fact that they are too important for production, employment, and national security for the government to let them fail. As a direct result, defense markets everywhere are notorious for cost overruns, delayed deliveries, quality shortfalls, subsidies, and kickbacks. It would be a mistake, however, to conclude that defense markets everywhere are uniformly the same.
— Harrison & Markevich[22]: 156
Afree market for weapons cannot exist within a state because the market is necessarily amonopsony where there is a single buyer and a small number of suppliers.[23]: 5, 30–31, 69 The high cost of weapons together with the lack of a free market makes pricing controversial and allegations of corruption and inefficiency common.[23]: 1 Furthermore, the complexity and specialization involved in weapons together withbarriers to entry created by thegovernment procurement process frequently result in monopolistic situations where suppliers are able to charge high prices and dictate long delivery times.[23]: 6 The cyclic nature of the business has driven consolidation which further impedes pricing.[23]: 11
Whileprofiteering by the arms industry is frequently blamed for the costs of defense procurement, a comparison between commercial and defense companies found little difference in profitability. Rather, cost overruns appear to be caused by a variety of complicated factors inherent in the structure of military procurement including needless levels of technological sophistication, a bidding process that rewards underbidding, a profit formula that rewards inefficiency by paying contractors a percentage of the total cost, procurement organization structure that hampers decision-making, andconcurrent engineering that requires rework of already produced equipment.[24]: 18–19 Technological determinism may arise where competition between weapons systems drives relentless development of new weapons, not because they are needed, but because they are possible.[25]: 32–33 Pressure on the US government has resulted in an inefficient procurement system where the government negotiates with the objective of low contractor profit rather than low overall cost.[23]
Poorly managed procurement during theAmerican Civil War resulted in generals and states competing against each other when buying arms which resulted in a seller’s market where prices were ten times higher than before the war and the goods were sometimes unusable.[26]: 178 Similar problems occurred at the start of WWII before procurement was centralized to theWar Production Board to prevent useless competition.[27]: 119
Bids for government contracts may involve collusion among the bidders to extract exorbitant profits.[28]: 94 High profitability of companies involved in the manufacture of armor plate for ships resulting from their anti-competitive tactics around the year 1900 lead to much public controversy. This culminated in the Budget and Accounting Act of 1921 to limit the sort of abuses perpetrated by the nickel-steel cartel.[29]: 56 The period leading up to WWI saw Navy Department funds being used as a source of federalpatronage.[30]: 60
A continuing community of interests between the military and industry creates the potential for anold boy network in control of weapons procurement that threatens the public interest.[31]: 256–257 This may involve a revolving door dynamic were personnel frequently change their employment between government and private industry, thus making their allegiance unclear.[26]: 179
Multinational corporations form a global network stitched together by reciprocal agreements and interlocking ownership that may pursue objectives contrary to that of the nations whose resources they employ.[28]: 94 [32]: 43 For example, the English arms makerVickers supplied field guns to Germany prior to 1914. These guns were then used against British troops during WWI.[28]: 95
Furthermore, a tradeoff exists between procuring the best specialized parts and materials from international businesses, or attempting to achieveautarky by developing purely domestic substitutes. During theGulf War, a shortage of advanced ceramic components for Tomahawk missiles occurred. This was caused by a ceramics manufacturer located in the US being pressured by its Japanese parent company, which was in turn pressured bySocialist members of theNational Diet to withhold support for the war.[32]: 43–44
Arms control refers to international restrictions upon the development, production, stockpiling, proliferation, and usage of small arms, conventional weapons, andweapons of mass destruction.[33] It is typically exercised through the use ofdiplomacy, which seeks to persuadegovernments to accept such limitations through agreements andtreaties, although it may also be forced upon non-consenting governments.
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