The independent resource on global security

6. Arms production

Contents

Summary

Global arms production is increasing. Arms sales by the 100 largest
arms-producing companies in the world (excluding China)—the SIPRI Top
100—amounted to $315 billion in 2006, an increase of 9 per cent in
nominal terms and 5 per cent in real terms. Forty-one US companies
accounted for 63 per cent of the combined arms sales of the Top 100,
while 34 West European companies accounted for 29 per cent. Generally,
companies specializing in armoured vehicles—in demand by the USA for
the conflict in Iraq—and in expanding sectors, such as military
services and high-technology electronics and communications, had the
biggest increases in arms sales in 2006. Russian companies also
experienced high growth rates during 2006, primarily in aerospace and
air defence.

There were 53 significant mergers and acquisitions in the North
American and West European arms industry in 2007. Three of these were
cross-border deals within Europe and 16 were transatlantic deals.
Almost all the transatlantic mergers and acquisitions were between
British and US companies. Most of the merger and acquisition activity
was related to military services or to subsystems, especially
electronics and aerospace. Seven acquisitions had values over $1
billion. Four of these were domestic US acquisitions, two involved the
acquisition of US companies by a British firm, and one the acquisition
of a British operation by a US company.

In Western Europe, 2007 saw major naval consolidation deals in
France and the UK, both actively encouraged by the respective
government. The French state-owned shipbuilder DCN took over the naval
operations of Thales in a deal worth $714 million, while in the UK BAE
Systems and VT Group agreed a joint venture amalgamating their surface
shipbuilding and service operations.

There was a continued political push within the European Union (EU)
in 2007 to promote a more integrated intra-EU arms industry and market.
The European Defence Agency (EDA) agreed two strategy documents, one on
building a European defence-technological and industrial base and the
other on a military research and technology strategy. The European
Commission proposed two directives, one to open up intra-EU arms
procurement, the other to relax export control regulations for intra-EU
arms transfers.

The Russian Government continued to consolidate the arms industry
into large state-owned conglomerates. In 2007 the United Aircraft
Corporation (UAC)—which amalgamates most of Russia’s civil and military
fixed-wing aircraft production—commenced operation and two new
conglomerates were created: the United Shipbuilding Corporation
(USC)—which consolidates the shipbuilding sector—and
Rostekhnologii—which amalgamates military and civilian manufacturers
and raw materials suppliers with Rosoboronexport, the state arms export
agency.

 

Dr Sam Perlo-Freeman (United Kingdom) is a Researcher with the SIPRI Arms Production Project.

Elisabeth Sköns (Sweden) is Leader of the SIPRI Military Expenditure and Arms Production projects.

English