The arms industry, also known as the arms trade, is a global industry which manufactures and sells weapons and military technology, and is a major component of the military–industrial complex. It consists of a commercial industry involved in the research and development, engineering, production, and servicing of military material, equipment, and facilities. Arms-producing companies, also referred to as arms dealers, or as the military industry, produce arms for the armed forces of states and for civilians. Departments of government also operate in the arms industry, buying and selling weapons, munitions and other military items. An arsenal is a place where arms and ammunition - whether privately or publicly owned - are made, maintained and repaired, stored, or issued, in any combination. Products of the arms industry include guns, artillery, ammunition, missiles, military aircraft, military vehicles, ships, electronic systems, night-vision devices, holographic weapon sights, laser rangefinders, laser sights, hand grenades, landmines and more. The arms industry also provides other logistical and operational support.
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The Stockholm International Peace Research Institute (SIPRI) estimated military expenditures as of 2018[update] at $1822 billion. This represented a relative decline from 1990, when military expenditures made up 4% of world GDP. Part of the money goes to the procurement of military hardware and services from the military industry. The combined arms-sales of the top 100 largest arms-producing companies and military services companies (excluding China) totaled $420 billion in 2018, according to SIPRI. This was 4.6 percent higher than sales in 2017 and marks the fourth consecutive year of growth in Top 100 arms sales. In 2004 over $30 billion were spent in the international arms-trade (a figure that excludes domestic sales of arms). According to the institute, the volume of international transfers of major weapons in 2014–18 was 7.8 percent higher than in 2009–13 and 23 percent higher than in 2004–2008. The five largest exporters in 2014–18 were the United States, Russia, France, Germany and China whilst the five biggest importers were Saudi Arabia, India, Egypt, Australia and Algeria.
Many industrialized countries have a domestic arms-industry to supply their own military forces. Some countries also have a substantial legal or illegal domestic trade in weapons for use by their own citizens, primarily for self-defense, hunting or sporting purposes. Illegal trade in small arms occurs in many countries and regions affected by political instability. The Small Arms Survey estimates that 875 million small arms circulate worldwide, produced by more than 1,000 companies from nearly 100 countries.
Governments award contracts to supply their country's military; such arms contracts can become of substantial political importance. The link between politics and the arms trade can result in the development of what U.S. President Dwight D. Eisenhower described in 1961 as a military–industrial complex, where the armed forces, commerce, and politics become closely linked, similarly to the European multilateral defense procurement. Various corporations, some publicly held, others private, bid for these contracts, which are often worth many billions of dollars. Sometimes, as with the contract for the international Joint Strike Fighter, a competitive tendering process takes place, with the decision made on the merits of the designs submitted by the companies involved. Other times, no bidding or competition takes place.