Arms industry
History: During the early modern period, England, France, Sweden and the Netherlands became self-sufficient in arms production, with diffusion and migration of skilled workers to more peripheral countries such as Portugal and Russia.
The modern arms industry emerged in the second half of the nineteenth century as a product of the creation and expansion of the first large military–industrial companies. As smaller countries (and even newly industrializing countries like Russia and Japan) could no longer produce cutting-edge military equipment with their indigenous resources and capacity, they increasingly began to contract the manufacture of military equipment, such as battleships, artillery pieces and rifles to foreign firms.
In 1854, the British government awarded a contract to the Elswick Ordnance Company to supply the latest breech loading rifled artillery pieces. This galvanized the private sector into weapons production, with the surplus increasingly exported to foreign countries. William Armstrong became one of the first international arms dealers, selling his systems to governments across the world from Brazil to Japan. In 1884, he opened a shipyard at Elswick to specialize in warship production – at the time, it was the only factory in the world that could build a battleship and arm it completely. The factory produced warships for many navies, including the Imperial Japanese Navy. Several Armstrong cruisers played an important role in defeating the Russian fleet at the Battle of Tsushima in 1905.
In the American Civil War in 1861 the North had about ten times the manufacturing capacity of the economy of the Confederate States of America. This advantage over the South included the ability to produce (in relatively small numbers) breech-loading rifles for use against the muzzle-loading rifled muskets of the South. This began the transition to industrially produced mechanized weapons such as the Gatling gun.

This industrial innovation in the defense industry was adopted by Prussia in its 1864, 1866 and 1870–71 defeats of Denmark, Austria and France respectively. By this time the machine gun had begun entering arsenals. The first examples of its effectiveness were in 1899 during the Boer War and in 1905 during the Russo-Japanese War. However, Germany led the innovation of weapons and this advantage in the weapons of World War I nearly defeated the allies. In 1885, France decided to capitalize on this increasingly lucrative trade and repealed its ban on weapon exports. The regulatory framework for the period up to the First World War was characterized by a laissez-faire policy that placed little obstruction in the way of weapons exports. Due to the carnage of World War I, arms traders began to be regarded with odium as "merchants of death" and were accused of having instigated and perpetuated the war in order to maximize their profits from arms sales. An inquiry into these allegations in Britain failed to find evidence to support them. However, the sea change in attitude about war more generally meant that governments began to control and regulate the trade themselves.
The volume of the arms trade greatly increased during the 20th century, and it began to be used as a political tool, especially during the Cold War where the United States and the USSR supplied weapons to their proxies across the world, particularly third world countries (see Nixon Doctrine).

Sectors: 

Land-based weapon: This category includes everything from light arms to heavy artillery, and the majority of producers are small. Many are located in third world countries. International trade in handguns, machine guns, tanks, armored personnel carriers, and other relatively inexpensive weapons is substantial. There is relatively little regulation at the international level, and as a result, many weapons fall into the hands of organized crime, rebel forces, terrorists, or regimes under sanctions.

Small arms: The Control Arms Campaign, founded by Amnesty International, Oxfam, and the International Action Network on Small Arms, estimated in 2003 that there are over 639 million small arms in circulation, and that over 1,135 companies based in more than 98 countries manufacture small arms as well as their various components and ammunition.

Aerospace systems: Encompassing military aircraft (both land-based and naval aviation), conventional missiles, and military satellites, this is the most technologically advanced sector of the market. It is also the least competitive from an economic standpoint, with a handful of companies dominating the entire market. The top clients and major producers are virtually all located in the western world and Russia, with the United States easily in the first place. Prominent aerospace firms include Rolls-Royce, BAE Systems, Saab AB, Dassault Aviation, Sukhoi, Mikoyan, EADS, Leonardo, Thales Group, Lockheed Martin, Northrop Grumman, RTX Corporation, and Boeing. There are also several multinational consortia mostly involved in the manufacturing of fighter jets, such as the Eurofighter. The largest military contract in history, signed in October 2001, involved the development of the Joint Strike Fighter.

Naval systems: Several of the world's great powers maintain substantial naval forces to provide a global presence, with the largest nations possessing aircraft carriers, nuclear submarines and advanced anti-air defense systems. The vast majority of military ships are conventionally powered, but some are nuclear-powered. There is also a large global market in second-hand naval vessels, generally purchased by developing countries from Western governments.

Cybersecurity: The cybersecurity industry is expected to be of increasing importance to defense, intelligence and homeland security agencies.

International arms transfers: 

Over time: 

2010–2014: According to research institute SIPRI, the volume of international transfers of major weapons in 2010–14 was 16 percent higher than in 2005–2009. The five biggest exporters in 2010–2014 were the United States, Russia, China, Germany and France, and the five biggest importers were India, Saudi Arabia, China, the United Arab Emirates and Pakistan. The flow of arms to the Middle East increased by 87 percent between 2009–13 and 2014–18, while there was a decrease in flows to all other regions: Africa, the Americas, Asia and Oceania, and Europe.

2014–2018: SIPRI has identified 67 countries as exporters of major weapons in 2014–18. The top 5 exporters during the period were responsible for 75 percent of all arms exports. The composition of the five largest exporters of arms changed between 2014 and 2018 remained unchanged compared to 2009–13, although their combined total exports of major arms were 10 percent higher. In 2014–18, significant increases in arms exports from the US, France and Germany were seen, while Chinese exports rose marginally and Russian exports decreased.
In 2014–18, 155 countries (about three-quarters of all countries) imported major weapons. The top 5 recipients accounted for 33 percent of the total arms imports during the period. The top five arms importers – Saudi Arabia, India, Egypt, Australia and Algeria – accounted for 35 percent of total arms imports in 2014–18. Of these, Saudi Arabia and India were among the top five importers in both 2009–13 and 2014–18.
In 2014–18, the volume of major arms international transfers was 7.8 percent higher than in 2009–13 and 23 percent than that in 2004–08. The largest arms importer was Saudi Arabia, importing arms primarily from the United States, United Kingdom and France. Between 2009–13 and 2014–18, the flow of arms to the Middle East increased by 87 percent. Also including India, Egypt, Australia and Algeria, the top five importers received 35 percent of the total arms imports, during 2014–18. The five largest exporters were the United States, Russia, France, Germany and China.

Post-2018: The 2022 Russian invasion of Ukraine changed the National Shooting Sports Foundation members ability to obtain an export license from taking a month to taking just four days. This was due to the United States Department of Commerce and agencies associated with ITAR expediting weapons shipments to Ukraine. In addition, the time it took to obtain a permit to buy a firearm in Ukraine also decreased from a few months to a few days.

World's largest arms exporters: Figures are SIPRI Trend Indicator Values (TIVs) expressed in millions. These numbers may not represent real financial flows as prices for the underlying arms can be as low as zero in the case of military aid. The following are estimates from Stockholm International Peace Research Institute.

Overall global arms exports rose of about 6 per-cent in the last 5 years compared to the period 2010–2014 and increased by 20 per-cent since 2005–2009.
Rankings for exporters below a billion dollars are less meaningful, as they can be swayed by single contracts. A much more accurate picture of export volume, free from yearly fluctuations, is presented by 5-year moving averages.
Next to SIPRI, there are several other sources that provide data on international transfers of arms. These include national reports by national governments about arms exports, the UN register on conventional arms, and an annual publication by the U.S. Congressional Research Service that includes data on arms exports to developing countries as compiled by U.S. intelligence agencies. Due to the different methodologies and definitions used different sources often provide significantly different data.

World's largest arms exporters since 1950: SIPRI uses the "trend-indicator values" (TIV). These are based on the known unit production costs of weapons and represent the transfer of military resources rather than the financial value of the transfer.