American arms industry thrives amid global conflicts and demand

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, with the American arms industry earning CAD 332 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 CAD 36 billion. All other countries spent just under CAD 77 billion in the United States, gaining significant benefits for their domestic arms industries.

The war in Ukraine not only allowed for the sale of equipment to Kyiv but also served as an excellent showcase to 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, captured 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 various types of missiles. The effectiveness displayed by these systems during the battles for the western bank of the Dnipro and the paralysis of Russian forces served as the best recommendation.

There is a long line of those eager to acquire them, but the challenge could be the relatively low production capacity compared to demand in the American industry. Last year, approximately 420 HIMARS systems were produced, with a demand estimated at 900 units.

HIMARS launchers are designed to be transported aboard C-130 Hercules aircraft. GMLRS missiles guarantee an effective range of 14 to 84 kilometres, and MGM-140 ATACMS at distances of 69 to 299 kilometres, hitting targets with an accuracy of up to 1.8 metres. Currently, Lockheed Martin is working on additional versions capable of engaging targets up to 500 kilometres away.

The MIM-104 Patriot air and missile defence 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 CAD 5,5 million. The missiles are just over 4.8 metres long, weigh 321 kilograms, and are guided to the target by their radar. Depending on the need, the missile can carry either a kinetic warhead, which must hit the target directly, or a 73-kilogram fragmentation warhead, which can explode near the target, showering it with fragments. The latter stopped Russian attacks on the Ukrainian capital.

Lockheed Martin guarantees a range of up to 160 kilometres and a maximum altitude of 19 kilometres, depending on the missile type. 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 defence systems.

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

Many countries had been interested in the aircraft for years, but Russian aggression caused a surge in orders. Even countries that previously spent cautiously on defence, like the Czech Republic, Germany, and Romania, will soon become the largest F-35 users, initially ordering 32 units and, after 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 12,564 kilograms of armament, including external hardpoints. In stealth configuration, it can carry about 2,500 kilograms for a mission within a 1,100-kilometre radius. It is currently the world's only mass-produced fifth-generation combat aircraft, capable of penetrating the most advanced air defence 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 CAD 64 billion in fiscal year 2024, compared to CAD 40 billion in 2023.

After Donald Trump was elected the 47th President of the United States, there were concerns he might limit military aid to Ukraine. On the other hand, those connected with the American arms industry note that Trump is foremost a businessman, and the industry may explain to him that limiting aid could negatively affect defence companies' stock value.

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