Sources and methods
I. Selection criteria and sources of data
The SIPRI Top 100 lists the world’s 100 largest arms-producing companies (excluding Chinese companies), ranked by their arms sales in 2007. The table contains information on the companies’ arms sales in 2006 and 2007 and their total sales, profit and employment in 2006. It includes public and private companies, but excludes manufacturing or maintenance units of the armed services. Only companies with manufacturing activities in the field of military goods and services are listed, not holding or investment companies. Chinese companies are excluded because of the lack of data. Companies from other countries might also have been included at the lower end of the list had sufficient data been available.
Publicly available information on arms sales and other financial and employment data of the arms industry worldwide are limited. The sources of data for the SIPRI Top 100 include: company annual reports and websites; a SIPRI questionnaire; and news published in the business sections of newspapers, in military journals and by Internet news services specializing in military matters. Press releases, marketing reports, government publications of prime contract awards and country surveys were also consulted. Where no data are available from these sources, estimates have been made by SIPRI. The scope of the data and the geographical coverage are largely determined by the availability of information. All data are continuously revised and updated and may change between different editions of the SIPRI Yearbook.
The source for the dollar exchange rates is the International Monetary Fund (IMF), as provided in its International Financial Statistics.
II. Definitions
Arms sales. Arms sales are defined by SIPRI as sales of military goods and services to military customers, including both sales for domestic procurement and sales for export. Military goods and services are those which are designed specifically for military purposes and the technologies related to such goods and services. They exclude sales of general-purpose goods (e.g., oil, electricity, office computers, cleaning services, uniforms and boots). They include all revenue related to the sale of military equipment, that is, not only for the manufacture but also for the research and development, maintenance, servicing and repair of the equipment. This definition serves as a guideline; in practice it is difficult to apply. Nor is there any good alternative, since no generally agreed standard definition of ‘arms sales’ exists. The data on arms sales in the SIPRI Top 100 often reflect only what each company considers to be the defence share of its total sales. The comparability of company arms sales in the SIPRI Top 100 is therefore limited.
Total sales, profit and employment. Data on total sales, profit and employment are for entire companies, not for arms-producing divisions alone. All data are for consolidated sales, including those of national and foreign subsidiaries. The profit data represent profit after taxes. Employment data are year-end figures, except for those companies which publish only a yearly average. All data are presented on the financial year basis reported by the company in its annual report.
III. Calculations
Arms sales are sometimes estimated by SIPRI. In some cases SIPRI uses the figure for the total sales of a ‘defence’ division, although the division may also have some, unspecified, civil sales. When the company does not report a sales figure for a defence division or similar entity, estimates can sometimes be made based on data on contract awards, information on the company’s current arms production programmes and figures provided by company officials in media or other reports.
The data for arms sales are used as an approximation of the annual value of arms production. For most companies this is realistic. The main exception is shipbuilding companies. For these companies there is a significant discrepancy between the value of annual production and annual sales because of the long lead (production) time of ships and the low production run (number). Some shipbuilding companies provide estimates of the value of their annual production. These data are then used by SIPRI for those companies. All data are collected in local currency and at current prices. For conversion from local currencies to US dollars, SIPRI uses the IMF annual average of market exchange rates. The data in the SIPRI Top 100 and most of the tables in the SIPRI arms production chapter are provided in current dollars. Changes between years in these data are difficult to interpret because the change in dollar values is made up of several components: the change in arms sales, the rate of inflation and, for sales conducted in local currency, fluctuations in the exchange rate. Sales on the international arms market are often conducted in dollars. Fluctuations in exchange rates then do not have an impact on the dollar values but affect instead the value in local currency. If the value of the dollar declines, then the company’s revenue in local currency falls and, if its production inputs are paid for in local currency—which most often is the case—this has a negative impact on the company’s profit margins. Calculations in constant dollar terms are difficult to interpret for the same reasons. Without knowing the relative shares of arms sales derived from domestic procurement and from arms exports, it is impossible to interpret the exact meaning and implications of the arms sales data. These data should therefore be used with caution. This is particularly true for countries with strongly fluctuating exchange rates.
