The advanced countries in defense manufacturing are capable of producing sophisticated weapons, but are unable to develop and produce cheap weapons in large quantities. Let’s explore the reason for this issue.
Historically, NATO countries or western nations in general have focused on technological superiority and having qualitative weapons. However, the Ukrainian war has come to tell everyone that the depth of stock and the ability to produce in quantity are no less important than quality and advanced weapons, especially when we're talking about long wars. After 2022, we saw that NATO itself needed to rebuild its industrial capabilities, to the extent that TNT itself was not available locally in America.
However, the common information mentioned in the previous paragraph is not always true. Western weapons are not always more expensive than Russian or Chinese weapons, for example. The issue of cost is real but it is not equal across all categories and is not fixed.
In many areas, we find that prices are quite close to each other. For example, Russian missiles like Kalibr and KH-101 cost between one and two million dollars per missile, which is very close to the cost of the Tomahawk, which the US Navy purchased for about 2.2 million dollars per missile.
In some cases, like the American JASSM missile, the price may be lower than its Russian counterpart despite its better warhead and stealth capabilities. The same logic applies to ballistic missiles; the Russian Iskander is priced between 2-3 million dollars, which is approximately the same level as a new American missile like the PrSM.
However, in warships, the gap becomes clearer. South Korea built three Aegis destroyers for about three billion dollars, while the cost of a single Arleigh Burke-class destroyer in America exceeds two billion dollars. In UAVs, the gap is enormous: a UAV costs 6,000 dollars in NATO armies, while an alternative Ukrainian model can be manually made for around only 600 dollars.
If we consider what factors control the cost of weapon production, we find them as follows:
Production volume: The higher the quantity, the lower the cost. This is the basic principle in economies of scale, like any other industry.
Specifications: Demanding advanced performance raises costs.
The environment in which the weapon is produced: which determines labor costs and regulations in the country.
Confidence: When there is confidence in the existence of numerous requests, more investment can be made and resource waste can be reduced. The most influential factor on weapon cost is certainty in demand. When companies know they will produce the same weapon in fixed quantities for many years, they can invest in cheaper and more efficient production lines, significantly reducing unit costs. But when demand is sporadic or seasonal, costs rise.
So, why is defense manufacturing expensive?
The main reason, if we think about the issue from an economic perspective, is the word "incentives."
What does this mean?
It means that the parties involved in the defense manufacturing equation are three, each with different incentives:
The military institution: which wants better weapons, higher protection, and excellent efficiency, regardless of cost.
Governments and politicians: who want impressive weapons that are suitable for promoting their projects, and they also want defense manufacturing to create job opportunities with high value for citizens, even if the projects are inefficient or uneconomical.
Manufacturing companies: and their goal is profit. Most defense contracts operate on a "cost + profit margin percentage of the cost" basis, so companies have no qualms about increasing costs, because that means an increase in their profits.
There is another reason, which is that there are indeed technical and administrative barriers. I mentioned them before, which is that from the moment it is said "we will produce a new weapon," you find that different forces, each one requests certain specifications, and every technical addition significantly increases costs.
For example, the American "Constellation" frigates have changed their design several times to the extent that the last modification was 70% different from the original design.
Another reason is that orders for new weapons are not quick, leading to hesitation among decision-makers in investing in massive production lines.
After the Ukrainian war, some countries began to think slightly differently in order to reduce costs.
There has been a trend towards using civilian components in weapon manufacturing instead of having every part made specifically for military purposes, using ready-made and tested parts from the civilian market instead of reinventing the wheel from scratch.
Other countries have also started to agree among themselves on collective purchasing, so that orders are large and stable, which gives factories confidence to invest and increase production.
Another idea has emerged, which is to mix very expensive and advanced weapons in limited quantities with simpler and cheaper weapons produced in large numbers, such as drones and low-cost smart munitions.
There is another important trend; instead of replacing the expensive weapon, we support it with a cheaper weapon that completes its role. That is to have a limited number of advanced systems, along with simpler and cheaper systems in large numbers, whether they are drones, guided munitions, or even low-cost torpedoes used against small targets instead of depleting expensive ammunition.
The danger of the matter lies in the fact that the ability to bear the cost is not merely a technical decision but the result of interaction between three different parties: the military that seeks maximum possible performance, the politician who prefers large symbolic projects, and the companies that are, by their nature, seeking profit and reducing risks. Thus, these three parties drive the entire system towards more complexity and higher costs, even if no one intends that directly.
It’s important to clarify that the goal is not merely to have cheap weapons, but for the combat capability to be cost-effective, for armies to be able to provide the necessary number of weapons required, maintain them, and replace them in times of pressure without their budgets collapsing.
This is an AI-generated English translation. The original text is in العربية
PhD Researcher in Defense Contracting and Cooperation Policies