IDEX weapons fair spotlights bonanza years ahead for weapons companies

Few things illustrate the health of the arms industry like a major defense fair.

Over the past week, Abu Dhabi’s biennial defense exhibition, known as IDEX, has showcased a bustling sector. Soldiers, government officials and arms company executives are interspersed with giant drone and rocket displays, while young men donned “armour” “intelligent” like a terminator conducts a battle simulation as fake explosions light up a giant LED screen.

Spanning land just enough for a small town and attracting around 130,000 visitors from 65 countries, this year’s IDEX is the largest and most attended event in years.

It’s no secret why. Russia’s full-blown invasion of Ukraine a year ago pushed much of the industrialized world out of its comfort zone, in which a Western-led security order prevented military incursions. large that the Western powers do not want. Since that violent turn in late February 2022, governments inside and outside NATO have committed to spending more on defense than ever before.

“In our opinion, Putin is the best arms seller,” a US defense contractor at IDEX told CNBC, speaking on condition of anonymity because he was not authorized to comment to the press.

“If Putin didn’t go to war, no one would buy all this stuff.”

Indeed, many countries are increasing their defense spending to unprecedented levels.

“With Russia’s invasion of Ukraine, many European countries have now committed to meeting or exceeding NATO goals – in some cases, years before they intended to do so,” a daily report said. aerospace and defense by McKinsey & Co. from December said. The crisis prompted “a rethinking of long-held assumptions that large-scale conflict on the continent is unlikely in the 21st century.”

And NATO allies Japan aims to double defense spending to 2% of GDP by 2027, as regional threats from North Korea and China increase. China And Saudi Arabia also set a corresponding record for their government’s defense spending in 2022 which, despite inflation, shows no signs of slowing down.

“Unfortunately, business is very good,” said an employee of a French drone maker exhibiting at IDEX.

America’s largest defense contractor, Lockheed Martin And Raytheon, received record orders. Lockheed’s net revenue for the fourth quarter was $19 billion, about 3% higher than internal plans and up from $17.7 billion in 2021.

Raytheon’s order backlog exceeded $150 billion last year, and fourth-quarter revenue for the missile and defense unit jumped 6.2% to $4.1 billion. But the companies say they are plagued by supply chain problems and labor shortages, and that they would have far more sales without them.

For Europe, however, there is a real sense of urgency – after years of underinvestment in the sector, reliance on the US and now months of sending arms and ammunition to Ukraine, European nations need to prevent their own arsenals from being completely depleted.

“The military stocks of most [European NATO] Josep Borrell, the EU’s high representative for foreign affairs and security policy, said: said in september.

“It’s becoming more and more urgent. There’s more discussion, more requests,” said a manager at a British drone company, who requested anonymity because of occupational restrictions. Karma. When asked if demand for his company’s drones would increase, he replied: “Astronomically.”

French multinational defense company Thales is one of a number of private sector companies working to meet the needs of the French and allied military as supplies are dwindling.

Christophe Salomon, executive vice president of Land and Air Systems at Thales, told CNBC: “Certainly the conflict in Ukraine has forced us to increase our capacity. His division focuses on radar, missiles, missiles, vehicles and other ground systems.

“You have to strengthen your industrial footprint. You have to buy your stock. And we’re talking about products with a delivery time of about two years,” he said, describing the challenge of raising. Increased production when the supply chain for a single weapon system involves hundreds of different suppliers.

Salomon said companies need government help to speed up the production process. The French government has outlined measures in this direction, including simplifying military contracts and administrative procedures, pursuing import substitution for more French-made products, improving public-private partnership and provide billions of euros in funding to replenish ammunition stocks.

The French Caesar self-propelled howitzer, already highly effective in combat for the Ukrainian army, normally takes two years to build; the government aims to cut that time in half.

Thales in May will supply Ukraine with the advanced GM200 radar system, which usually takes two years to build. Due to increased investment in its supply chain last year and pre-purchase of complex radar subsystems, Thales said it was able to assemble Ukraine’s GM200 within four months.

“We speed it up because our team works 24 hours a day,” says Salomon. “We take on the investment responsibility, we invest, and we buy every subsystem before we know who’s going to buy it.”

Many in the Western defense sector complain that Europe’s largest economy, Germany, is still sluggish. The expansion of its military footprint remains controversial and divisive in German politics, and Berlin has made it clear that it wants to help Ukraine but avoid provoking Russia.

A German who attended the private sector at IDEX described disappointment at the speed of government regulation, but admitted that “because of history, it’s a bit problematic.” He requested anonymity to speak freely.

Germany’s major policy changes last year – most notably allowing the country’s weapons to be used in foreign combat zones for the first time since World War II – have made all the difference. large, said the attendee. “But,” he insisted, “we need to change our processes and move faster now.”