Team USA has cleaned up at the Olympics, bringing in more medals than host country France or China, its closest rival. Beyond the world of sports, the United States could claim the top spot in the world of defense, with Lockheed Martin topping the 2023 Top 100 Defense Contractors, released by Defense News on Tuesday.
In total, 48 U.S.-based firms made the rankings.
A regular routine may help athletes reach the podium, but chaotic times have resulted in a boom for the military aerospace and defense industry. The sector saw a 13% increase from fiscal year 2022 to fiscal year 2023 – driven by ongoing conflicts around the world, as well as China’s increased military build-up. Defense spending reached $603.9 billion for FY23, the report found.
“In response to these events, governments around the world are spending more on defense, which in turn boosts industry earnings,” Defense News stated.
The Gold Medalist of Defense Firms
Lockheed Martin found itself on the top of the list, with $64.65 billion in defense revenue, up 4% from FY22 – and 96% of its total revenue from defense. However, the growth of second place, the Aviation Industry Corporation of China, which saw its revenue increase from $30.97 billion to $44.92 – a 45% jump. One more year of such growth could see AIC closing the gap significantly.
It should be noted that just 38% of AIC’s total revenue was from defense.
In third place was RTX, which fell from the second to third spot with 3% growth – from $39.6 to $40.6 billion – while Northrop Grumman lost its place on the proverbial podium, even as it saw its revenue increase from $32.43 billion to $35.19 billion, up 9%. Defense accounted for about 59% of the former’s revenue but 90% of the latter’s.
Northrop Grumman has also previously announced it expects to lose upwards of $1 billion on the first batch of its B-21 Raider stealth bombers.
Contractors In The Top 10
American firms largely rounded out the top 10 defense firms for FY23, with General Dynamics coming in fifth with $33.51 in defense revenue; Boeing fell from fifth last year to sixth with $32.68 billion; and L3Harris Technologies landed in the 10th spot with $15.53 billion.
Currently, less than half – 42% — of Boeing’s revenue is from defense, however.
Two Chinese firms made the top 10, including China State Shipbuilding Corporation Limited, which was new to the list in the eighth spot, with $21.16 billion in defense revenue; and China North Industries Group Corporation Limited in the ninth position with $16.51 billion in defense-based revenue.
The UK-based BAE Systems was the only non-U.S./non-Chinese firm to crack the top 10, and it saw its defense revenue increase by 9% from $25.23 to $27.55 billion.
In total, six Chinese and six British firms were in the top 100.
International Conflicts Driving Growth
There is no denying that the ongoing conflicts in Ukraine, the Middle East, and elsewhere are driving defense spending. But so too has been China’s build-up.
Moreover, the U.S. and its allies have sent ordnance and hardware to Ukraine, and much of that has been nearing the end of its “shelf life.”
“The ongoing conflicts in Ukraine and the Middle East are indeed contributing to renewed defense spending, but it’s worth noting that much of the spending is going towards rebuilding the capacity of various weapons such as the Stingers, which have been largely out of commission since the Cold War, the Tomahawk missiles which had been rapidly expended on the airstrikes against the Houthis in the Red Sea, and other type of weapons which had been used sparingly,” said Irina Tsukerman, geopolitical analyst and president of political risk assessment agency Scarab Rising.
Coming Soon Cold War 2.0?
That aforementioned military expansion of China has also created fears of a Cold War 2.0 taking hold, while Russia’s war in Ukraine spurred an increase in defense spending beyond the NATO alliance’s desired 2% of GDP levels.
“The increased defense spending is being spurred by the global geopolitical climate as a whole and not by any particular war,” added Ari Sacher, senior policy advisor at the U.S. Israel Education Association.
He told ClearanceJobs that there had been the accepted thought that the dissolution of the Soviet Union would make war extinct.
“This was true for about a short while but over the past few years, an axis of Russia, China, and Iran has coalesced and has begun to use hard military force to further their goals,” Sacher told ClearanceJobs. “Russia invaded Ukraine and now threatens the Baltics, Scandinavia, and Western Europe. Since 2022, yearly defense expenditures in NATO countries have more than quadrupled.”
China’s saber-rattling in the Indo-Pacific – including its claims to the near entirety of the South China Sea has also resulted in a regional military build-up.
“China has been making overtures that indicate a potential invasion of Taiwan, spurring the creation of the AUKUS Defense Alliance and causing Australia to vastly increase its defense budget and its reliance on American equipment,” Sacher continued, noting the trilateral alliance between Australia, the United Kingdom, and the United States.
“Meanwhile, Iran and its proxies are threatening Israel with a “ring of fire” in Gaza, Lebanon, Iraq, Syria, and Yemen. The result is that many countries in Europe, East Asia, and the Middle East see themselves as facing a credible threat and are arming themselves for war that some see as inevitable,” said Sacher.
The American Defense Sector Boom
As noted by the Defense News Top 100 list, nearly the entirety of the U.S. defense sector has seen significant growth, outpacing many other industries. The “good times” aren’t likely to end soon either.
“The defense industry could be doing even better, the U.S. defense sector is growing at a rate not seen since the Cold War,” Tsukerman told ClearanceJobs. “Part of the reason is that the U.S. is, in fact, facing a new Cold War, which is far more demanding than Cold War 1.0, thanks to advancements in technology, the rise of middle powers as defense producers, and the increased cooperation between various state actors which in the past were more at odds, or had lower level cooperation – meaning Russia, China, Iran, and North Korea, which are becoming a much more integrated coalition, and also have strengthened bilateral defense relations among themselves and various satellite or smaller states.”
Another factor still is the increased participation of non-state actors which since the Cold War acted independently but are now strengthening their relations with state actors and adding dimensions to the geopolitical tensions.
“America has some of the largest defense contractors in the world,” explained Sacher. “These companies are seeing their sales explode. American explosives manufacturers such as ATK and Aerojet are churning out warheads and rocket motors as fast as they can.
“The U.S. is a global leader in the defense space because of its infrastructure and innovative capabilities and projections for economic opportunity, providing some explanation as to why nearly half of the top 100 defense contractors are American-based firms,” he added.
In addition, platforms like the Lockheed Martin F-35, which has seen adoption across Europe will further drive the sector in the long term. Sales of the fifth-generation aircraft will help the aerospace giant, but other defense contractors that manufacture the components. At the same time, the ordnance carried by the aircraft could be good for the short term.
“Aircraft are not purchased on the spur of the moment. The decision of which aircraft to purchase can take more than a decade,” Sacher continued. “The biggest selling military items now are guided missiles, artillery shells, and command and control equipment. Again, these are items for which the U.S. is a global leader.”
