EconomyAmerican arms industry booms amidst global conflicts

American arms industry booms amidst global conflicts

The American arms industry is gaining strength. Current wars have demonstrated not only the high quality of American weapons but have also allowed them to break new sales records. Last year, U.S. arms corporations earned $238 billion, and their profits might increase again next year. Much will depend on Donald Trump.

HIMARS system launchers. One of the USA's export hits.
HIMARS system launchers. One of the USA's export hits.
Images source: © East News | ANDREW LEESON

3:01 PM EST, November 13, 2024

The majority of revenue for American arms companies comes from one client: the U.S. government. This client has deep pockets and a long history of reliably paying its bills. The stability of the federal government provides arms companies and investors with predictability regarding the regularity of income.

The previous year was record-breaking in almost every aspect, and the American arms industry earned $238 billion—16% more than in 2022. The current year is expected to be even better, thanks to ongoing conflicts and increased global orders.

Poland was among the main foreign recipients of American arms last year, ordering equipment worth $26 billion. All other countries spent just under $55 billion in the United States, gaining much greater benefits for their domestic arms industries.

The best recommendation is the fights in Ukraine

The war in Ukraine allowed not only the sale of equipment to Kyiv but also provided an excellent showcase for NATO allies. Many manufacturers benefited from this. However, it was the Americans who, thanks to excellent political support, lobbying, and, above all, a well-functioning arms industry, took the largest share of the market.

Leading the pack is primarily Lockheed Martin, which produces, among other things, the M142 HIMARS and M270 MLRS rocket systems along with a wide range of missiles. The best advertisement was the effectiveness of these systems during the battles for the western bank of the Dnieper and their ability to paralyze Russian forces.

The line of those eager to acquire them is quite long, but a potential issue could be the relatively low production capacity compared to demand within the American industry. Last year, about 420 HIMARS systems were produced, while demand is estimated at 900 units.

HIMARS launchers are adapted to be transported aboard C-130 Hercules aircraft. GMLRS missiles guarantee effective range at distances from 9 to 52 miles, and MGM-140 ATACMS cover distances from 43 to 186 miles, hitting targets with an accuracy of up to 6 feet. Currently, Lockheed Martin is working on additional versions capable of engaging targets up to 311 miles away.

The MIM-104 Patriot air and missile defense systems already had a strong reputation. Recent nights defending Kyiv demonstrated to the world that Raytheon's product, even when operated by inexperienced staff and equipped with older missiles, can effectively counter the latest Russian cruise and ballistic missile threats.

Lockheed Martin produces PAC-3 missiles for the MIM-104. They cost around $4 million. The missiles are just over 16 feet long, weigh 707 pounds, and are guided to the target by radar. Depending on needs, the missile can carry either a kinetic warhead, which must directly hit the target, or a 161-pound fragmentation warhead, which can explode near the target, dispersing fragments. The latter was instrumental in stopping Russian attacks on the Ukrainian capital.

Lockheed Martin guarantees a range—depending on the missile type—of up to 99 miles and a maximum altitude of 12 miles. It flies toward the target at speeds of up to Mach 5. The PAC-3 can shoot down almost anything in the air and is one of the most popular Western air defense systems.

Unmatched in the air

In recent years, Lockheed Martin has become the world's largest arms company and the biggest beneficiary of U.S. government orders. It is the main producer of the F-35 Lightning II multirole fighters that have gained popularity.

The aircraft had interested many countries for years, but Russian aggression sparked a surge in orders, even from nations that previously spent cautiously on defense, like the Czech Republic, Germany, and Romania. Romania is set to become the largest F-35 user, initially ordering 32 units and, following the outbreak of the Russian-Ukrainian war, another 16 units.

In its most popular version, the F-35A, Lightning II can carry a maximum of 27,699 pounds of armament, including external hardpoints. In stealth configuration, it can carry about 5,512 pounds for a mission within a 684-mile radius. Currently, it is the world's only mass-produced fifth-generation combat aircraft, capable of penetrating the most advanced air defense systems and attacking the most strategically important targets, according to the manufacturer.

Orders for the F-35, F-16, C-130, and related weapons have led the Air Force's foreign arms sales department to expect weapon sales worth over $46 billion in fiscal year 2024, compared to $28.7 billion in 2023.

What will businessman Trump do?

Following Donald Trump's election as the 47th President of the United States, there were concerns that he might limit military aid to Ukraine. On the other hand, those connected to the American arms industry note that Trump is foremost a businessman, and the industry may convey to him that limiting aid could negatively affect the stock value of defense companies.

Nothing drives business like war, and Americans know this very well.

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