Defense and Armaments

SIC 3480

NAICS 33299

The armaments industry designs and manufactures the world's military equipment and accessories, including air, sea, and ground weapons. Examples of industry products range from military handguns and grenade launchers to planes, missiles, and tanks. Nuclear weapons are not discussed in this section. Certain firms in this industry also produce for the commercial aerospace sector; for more information on these activities, see also Aircraft Manufacturing.

INDUSTRY SNAPSHOT

In the 1980s, toward the end of the Cold War, global military spending peaked at more than US$1.36 trillion. It leveled off at about US$800 billion in the mid-1990s, due primarily to massive reductions in the post-Cold War era. Boosted by the U.S. war on terror and increased defense budgets in China and India, world military spending rose for a sixth consecutive year to reach $1.04 trillion in 2004 which equaled 2.6 percent of global gross domestic product. The United States remains, by far, the world's principal weapons producer and broker, and it is home to a number of leading manufacturers that arm many nations throughout the world. The country accounted for nearly half of all military expenditures in 2004. Russia also retains its position as the world's second-largest armament manufacturer, followed by the European Union and China.

The three basic arms industry segments are land weapons (ordnance), aircraft, and ships. The military equipment industry was helped in the 1990s by the post-Gulf War rearmament in the Middle East as well as the prolonged peacekeeping mission in the former Yugoslavia for which the United States, France, Germany, the United Kingdom, and other participating countries required defense equipment. Continued confrontation between the United States and Iraq kept defense spending a priority in the United States into the late 1990s. The September 11, 2001, terrorist attacks on the World Trade Center and the Pentagon, subsequent military action in Afghanistan, and the U.S.-led war with Iraq in 2003, resulted in spending increases that lasted well into the 2000s.

ORGANIZATION AND STRUCTURE

In 2004 global military expenditures, excluding nuclear weapons and certain aerospace equipment and systems, totaled some US$1.04 trillion, with the United States accounting for nearly half of that figure at $US455 billion. Global arms sales, however, declined for the third year in a row, to $25.6 billion in 2003. The majority of those arms were purchased by the U.S. federal government to supply its armed forces. These purchases were made by nearly every country in the world, and rebel groups as well. Major arms-consuming regions outside of North America included the European Union, the Middle East, Commonwealth of Independent States, and east and central Asia. Developing nations accounted for a little over two-thirds of the global arms export market. The decline in arms sales in the early to mid-2000s was attributed to the growth of protectionist policies in developed countries and an unstable international economy which had developing nations upgrading existing weapons systems rather than purchasing new ones.

The United States and the Soviet Union dominated the arms industry during the latter half of the twentieth century. The United States made slightly over 50 percent of worldwide arms sales in 2000, about US$18.6 billion in all. Russia retained the vast majority of the Soviet Union's military might after the Soviet state was dismantled in the early 1990s. Into the twenty-first century, the former rivals continued to design the world's leading weapons systems, many of which were produced throughout the world. Certain systems manufactured outside the United States have been under licensing agreements with U.S.-based developers. Significant portions of U.S. weapons, for example, were manufactured under license in Italy and Japan. Many weapons have also been produced in the Commonwealth of Independent States (CIS)—a voluntary economic organization that includes all Soviet states except the three Baltic republics—France, Germany, and a few other nations.

The arms industry in the early 1990s represented the culmination of a century of industry volatility. Indeed, arms industry statistics—which can be difficult to pin down accurately—have historically experienced wild fluctuations within the global political landscape. The entire industry can be depressed one year, and within a few months experience a robust turnaround, the result of a major regional conflict that has boosted sales. Likewise, arms sales vary greatly according to procurement budgets set by political bodies in specific countries.

The 1990s saw a nearly invisible shift in the defense industry structure, at least in the United States, where service industries assumed an increasingly important role. That change was due to the growing importance of information technology to modern weapons design. By the end of the decade, service workers—employees who install, maintain, troubleshoot, operate, and integrate hardware and software systems—accounted for almost three out of four of U.S. Defense Department contract jobs, up 50 percent from 1984 levels. IT companies BDM, SAIC, and Computer Sciences Corporation became major suppliers to the American military.

Weapons Types

The three basic arms industry segments are: (1) ordnance, or land weapons; (2) aircraft; and (3) ships, including destroyers, submarines, carriers, and smaller ships. Land weapons, for the purposes of this discussion, include artillery, land vehicles, and small arms such as rifles and hand grenades. Major categories of artillery, or heavy weapons, include cannon, which typically fire low-velocity, exploding projectiles; mortars, which fire shells at a high, arcing trajectory; howitzers, which fire a variety of shells; and rocket launchers. Land weapons also include anti-aircraft weapons and missiles, which account for a comparatively large proportion of weapons expenditures worldwide.

Types of missiles include: guided, which are directed by remote control or internal mechanisms; surface-to-surface, including small tactical and larger strategic missiles; air-launched; and surface-to-air. Leading U.S. missile systems in the 1990s included the AIM-9M Sidewinder and AIM-7F Sparrow air-to-air missiles; the RGM-84A Harpoon antiship system; the TOW-2 antitank missile; and the Patriot antimissile system. Equivalent Russian missiles included the Aphid, Atoll, and Apex air-to-air missiles; the Styx antiship system; and the Spigot and Spandrel antitank missiles. Italy, the United Kingdom, and France also possessed several similar missile systems.

Land vehicles include tanks, personnel and equipment carriers and transports, and other armed and unarmed vehicles. The dominant armored vehicle in the mid-1990s was the U.S. M1A1 Abrams battle tank. Developed at a cost of US$20.4 billion, each tank cost about US$4.4 million to produce and was designed to absorb direct hits from certain armor-piercing shells. The high-tech M1 was powered by a turbine engine that allowed the massive vehicle to cruise at 60 miles per hour while a damper allowed the operator of the 120 mm cannon to fire laser-aimed projectiles with high accuracy. The tank was also equipped with infrared sights for night vision. The M1's peers included the Russian-designed T-80 and T-72, as well as tanks built in Germany (the Leopard series), the United Kingdom (Challenger, Chieftan, and Vickers), and France (AMX-30B2), among others.

Major weapons in the aircraft segment include the U.S. F-22, F-16 Falcon, F-15 Eagle, and F/A-18 Hornet—all fighter/attack jets. Similar Russian planes were the aging MIG-29 Fulcrum, Su-27 Flanker, and Su-24 Fencer. North Atlantic Treaty Organization (NATO) contributions to the fighter jet segment have included the Mirage (France), and the Tornado (United Kingdom, Germany, and Italy). In addition to these fighters were larger craft such as the U.S. C-17 airlift-type plane and the B-2 (Stealth) Bomber. Also included in the aircraft group are helicopters, among the most respected of which has been the U.S. UH-60 Blackhawk developed in the early 1990s.

BACKGROUND AND DEVELOPMENT

Organized warfare was first recorded around 3500 B.C. following the first settlements of Western civilization. As communities expanded to accommodate growing herds and populations, conflicts rose between neighboring villages. Crude weapons, such as catapults and hunting tools, were used throughout the period. It was not until about A.D. 1300, particularly with the invention of gunpowder, that more advanced weaponry evolved. After pikes and longbows were introduced in the fourteenth century, for example, the French invented the cannon in the fifteenth century. The first ship-borne cannon was introduced in the sixteenth century, and breakthrough inventions such as the rifled gun barrel followed in the 17th and 18th centuries. Despite advances, weapons remained crude by modern standards until later in the eighteenth century.

By the eighteenth century artillery had become a staple of every serious war machine. Soldiers were usually armed with guns, and horse-drawn cannon were common. However, up to that time, the arms industry was relatively undeveloped, as most armies expected their soldiers to supply their own weapons and ammunition. The onset of the Industrial Revolution in Europe changed the arms industry during the early 1800s...

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