Then there's this reality:
Supply-Chain Issues Slow Global Arms Sales
China, Asia and Europe close gap on U.S. companies struggling with parts and labor shortages as war in Ukraine increases demand
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By
Doug Cameron
Dec. 6, 2022 9:00 am ET
Supply-chain snarls are threatening to break a seven-year run of rising global arms sales, even with increasing demand from
the war raging in Ukraine and simmering
Taiwan-related tensions.
Sales by the world’s 100 largest defense companies rose 1.9% last year to $592 billion, slowing from prepandemic levels and led by gains among suppliers in Europe and Asia, according to the Stockholm International Peace Research Institute, a think tank.
U.S. companies fill the first five spots in the top 10 ranking, with China taking another four, a sign of the latter’s
crash military modernization as well as consolidation among its state-controlled suppliers. Sales at Norinco, China’s biggest defense company, rose 11% last year.
The slowdown in sales amid an increase in demand illustrates the paradoxical nature of
the current arms market, and speaks to the larger challenges of an industrial base geared to peacetime production. While Ukraine’s allies have pumped billions of dollars of existing arms stocks into the country, worker and supply-chain challenges, as well as obsolete components, are hampering efforts to refill inventories.
Sales among North American defense companies fell 0.9% last year from a year earlier, according to SIPRI.
Lockheed Martin Corp., the world’s biggest defense contractor by sales, doesn’t expect its annual revenues to rise until 2024 as it
works through logistics and worker challenges.
“Increasing output takes time,” said Dr. Diego Lopes da Silva, a senior researcher at SIPRI. “If supply-chain disruptions continue, it may take several years for some of the main arms producers to meet the new demand created by the Ukraine war.”
Lockheed and second-ranked
Raytheon Technologies Corp. jointly produce in-demand Javelin antitank missiles, but they expect it will take two years to double output that is now at around 400 a month.
Defense companies are seeking more certainty that increasing production now
won’t leave them with excess capacity at a later date.
Jim Taiclet, Lockheed Martin’s chief executive, said at a recent industry conference that munitions production needs to rise by two standard deviations—effectively double—from peacetime levels.
Greg Hayes, chief executive at Raytheon, said that Ukraine has burned through five years of Javelin production since February and 13 years worth of Stinger antiaircraft missiles.
“The question is, how are we going to restock, resupply?” said Mr. Hayes last week at the Reagan National Defense Forum.
The ability of U.S. companies to meet rising demand extends beyond Ukraine. The U.S. is also facing a nearly
$19 billion backlog in arms sales to Taiwan.
Production problems have been
less of a challenge in Europe and Asia, which executives said reflected less-stressed labor markets, helping sales last year by companies in those regions rise by 4.2% and 5.8%, respectively.
Sales at Russian companies in the ranking were flat last year, but industry analysts expect them to drop in 2022 because of sanctions-induced export bans and shortages of components such as microelectronics. Russia meanwhile
has been burning through so much military equipment to pursue its war in Ukraine that it has turned to foreign suppliers.
Available weapons inventory is expected to widen the gap between growth rates at U.S. companies and their foreign competitors, especially in Asia. South Korea has signed billions of dollars in deals with Poland and others this year. The Pentagon has also
turned to South Korea for munitions as part of the continuing U.S. efforts to supply Ukraine.
China, Asia and Europe close the gap on U.S. companies struggling with parts and labor shortages as the war in Ukraine increases demand.
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