High-quality expensive weapons? Cost-effectiveness is now the trend in wartime arms
Global defense companies are enjoying unprecedented windfalls as war with Iran erupts on top of the ongoing Ukraine conflict, the Financial Times reported Sunday.
The Trump administration is preparing to submit a $1.5 trillion defense budget proposal for next year to Congress, according to the report. The Pentagon has also requested an additional $200 billion from the White House to fund the Iran war.
The Royal United Services Institute (RUSI) said U.S. and coalition forces have expended more than 11,200 munitions in the 16 days since the war began on February 28, at a cost of $26 billion. The tally includes some 1,200 RTX Patriot missiles, hundreds of Tomahawk cruise missiles, and roughly 300 Lockheed Martin THAAD interceptors.
Tom Karako, director of the Missile Defense Project at the Center for Strategic and International Studies (CSIS), warned that "the number of missiles being consumed is frankly at a frightening level," adding that "the situation is even more serious when you consider the assets needed to respond to a potential Taiwan contingency."
Major U.S. defense contractors including RTX, Lockheed Martin, and Northrop Grumman are seen as the biggest beneficiaries of $16.5 billion in Foreign Military Sales (FMS) to Persian Gulf states approved by the State Department. Boeing has also signed a seven-year framework contract with the Pentagon and agreed to triple its production of Patriot-related components.
With a single Patriot missile costing $3 million, countries are seeking cheaper alternatives. That is why South Korea's LIG Nex1 and its Cheongung-2 medium-range surface-to-air missile system are drawing attention. Cheongung-2 has already been exported to Saudi Arabia, Iraq, and the UAE. Shares of LIG Nex1 (079550.KQ) surged more than 40% in the early days of the war.
Israeli defense firm Elbit Systems rose to become the largest company by market capitalization on the Tel Aviv Stock Exchange in mid-March. U.S. drone startup Spectroworks deployed its low-cost drone "Lucas," developed by reverse-engineering Iran's Shahed drone, to the battlefield within 24 hours of the war's start.
Venture capital is also flowing rapidly into counter-drone technology firms. Dozens of companies — including Germany's Titan Technologies, the U.K.'s Cambridge Airspace, and Latvia's Origin Robotics — have secured funding. MBDA, Europe's largest missile manufacturer, is also developing a low-cost air defense missile called "DefendAir" for delivery to the German government.