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  • Spacex, United Launch Alliance, Virgin Orbital, these are the companies you

  • think of when you think of commercial rockets, but another venture

  • involving rocket motors rakes in heaps of cash every year.

  • Missiles are guided rockets used in war, both defensively and offensively.

  • There are large missiles, small missiles, missiles designed to destroy

  • tanks, missiles designed to take out planes in just about everything

  • in-between, including missiles designed to shoot down other missiles.

  • And they are the number two defense expert in the U.S.

  • behind aircraft.

  • The major players in the United States are by far Lockheed Martin,

  • Raytheon, Boeing, Northrop Grumman.

  • Those would be the top missile sellers in the United States.

  • Like with aircraft, missile sales are based on international alliances and

  • treaties. And these sales can become hot button issues like a recent sale

  • proposal of Boeing harpoon missiles to Taiwan or a failed bid to sell the

  • Patriot missile system produced by Raytheon to Turkey.

  • As technology advances, the line between drones and missiles is blurring,

  • and this has the potential to disrupt the entire industry.

  • I'd like to say that in some some respects we've we've entered a kind of

  • new missile age with a really significant global supply and demand

  • signal. What will the new missile age hold for companies that sell these

  • weapons of war?

  • Raytheon, the producer of the iconic Patriot missile system, is one of the

  • top manufacturers of guided missiles in the world during a recent missile

  • tests by the U.S. Navy, a Raytheon standard missile, three or sm three

  • intercepted an intercontinental ballistic missile or ICBM shooting down an

  • incoming ballistic missiles, a very difficult problem.

  • They move very, very fast and they tend to be surrounded by debris.

  • That's also moving very fast.

  • So you have to hit them quickly, target them quickly and differentiate

  • between the actual missile and the surrounding debris.

  • We tested a ship based interceptor against an ICBM, considerably expanding

  • our capability to defend against those kinds of threats.

  • That makes the sm three a potential deterrent against an ICBM launched by

  • North Korea or Iran.

  • I think the most important takeaway of the sm three to a ICBM intercept is

  • that it increases the reliability and our confidence in it against some

  • really stressing regional threats.

  • Raytheon introduced cost saving measures due to the drop in commercial air

  • travel during the covid-19 pandemic.

  • But its missile and defense division has continued to drive sales and has

  • had an operating profit of 453 million in the third quarter of twenty

  • Twenty. American aerospace giant Boeing sells missile systems like the

  • harpoon. It's also involved in fielding missiles designed to kill ICBMs

  • like the ground based midcourse defense system.

  • Boeing is now competing for the bid to produce the potential next

  • generation interceptor, or NDEYE.

  • Boeing has pivoted towards defense sales to make up for commercial losses

  • and has made six point eight billion dollars in that sector in the third

  • quarter of 2020 alone.

  • Some missiles in the U.S.

  • are designed and built by multiple companies.

  • The next generation of interceptor bid from Boeing, for example, also

  • involves General Atomics and Aerojet Rocketdyne, the winner of the next

  • generation interceptor bid could secure four point nine billion over five

  • years from the Pentagon's Missile Defense Agency to build the interceptor

  • of the future. Lockheed Martin and Northrop Grumman are also bidding on

  • the right to produce Yanhai.

  • Northrop Grumman is involved in making rocket motors for many other

  • missiles, including the Air to Air Sidewinder.

  • Northrop Grumman saw its sales increase in the third quarter of 2020 by

  • seven percent from 2019, rising to nine point one billion dollars.

  • General Dynamics is involved in creating warheads in other parts in

  • various missile programs, and Lockheed Martin is also involved in

  • upgrading the missile fired by the Patriot system designed by Raytheon,

  • which is just one more example of how these companies tend to work

  • together on these complex projects.

  • Thanks to the advanced technology used to make these missile systems, all

  • of these companies remain dependent on relationships between the U.S.

  • government and other countries to make international sales.

  • After all, the U.S. needs to trust customers before allowing defense

  • contractors to sell them cutting edge weaponry.

  • When Turkey fielded fresh bids to buy a new missile system in November of

  • 2013, the Patriot was an assumed frontrunner.

  • But things quickly went off the rails when Turkish demands became too much

  • to make the deal doable.

  • Turkey's decision to buy the Russians four hundred is probably one of the

  • messiest arms deals that's ever gone down in history.

  • Turkey wanted to buy the United States Raytheon's patriot system.

  • The United States passed a couple of years in a row and Russia scooped up

  • to pick up Turkey and sell them to us for the failure of Raytheon's

  • reported three point five dollars billion bid also affected relations

  • between the U.S. and Turkey.

  • The manufacturing for some components of the F-35, the cutting edge

  • American stealth fighter jet from Lockheed are being moved out of the

  • country to other F-35 partner states.

  • Russian and Chinese companies also sell advanced missiles in all

  • categories and are always looking to enlarge their market share and

  • compete with American offerings in countries that are on the fence about

  • who to buy from in the case of Russia.

  • The U.S. has pushed back on Russian missile sales with the threat of

  • sanctions, but the political ramifications of missile sales can cut both

  • ways. China will regard any future arms sales to Taiwan as highly

  • provocative. And if there's anything we know about the incoming

  • administration's policy towards China, it will remain fundamentally on a

  • competitive footing. But the administration won't be looking to simply

  • poke China in the eye in the way that the Trump administration has.

  • So it is very possible that we could see a calibration for some of these

  • sales that could be rolled back.

  • They could be modified, they could be shrunk.

  • Taiwan and some of its neighbors have really been getting into the missile

  • game. They've been doing it for many years.

  • But in the past couple of months and really this past year, some pretty

  • significant sales have been authorized, especially in the anti ship

  • missile category. In Taiwan's case, it it's a major threat on

  • a on an operational level is a Chinese invasion fleet, ships crossing the

  • Taiwan Strait. And if Taiwan can find some way to threaten those

  • ships, threaten to wipe out the invasion force, then it can solve its

  • strategic problem, even if it can't match China's spending and the

  • size of China's other military forces.

  • The incoming Biden administration could handle arms sales differently than

  • the Trump administration has.

  • As of now, Taiwan plans on buying 400 harpoon defense systems from Boeing

  • for two point three seven billion dollars, a hefty investment in missile

  • technology. But as technology advances, could giant purchases like this

  • one be rendered useless by newcomers to the guided weapon world?

  • In the U.S., the design, production and sales of missiles employ thousands

  • of people across almost every state.

  • The reason why all these defense companies see such bipartisan support is

  • because they don't necessarily headquarter at one place.

  • They spread the wealth.

  • So they have depots, maintenance facilities, testing centers throughout

  • the United States, large missile systems are costly to build and maintain.

  • For example, the U.S.

  • approved of a potential sale of 44 terminal high altitude area defense

  • systems for an estimated 15 billion dollars to Saudi Arabia in twenty

  • nineteen. Even smaller missile systems like anti-tank missiles or air to

  • air missiles can cost thousands of dollars per missile or millions of

  • dollars per unit when all costs, such as research and development, are

  • factored in. The U.S.

  • sale of 210 javelin anti-tank missiles and thirty seven launchers for 47

  • million to Ukraine in twenty nineteen is an example of the cost involved

  • even in smaller missiles, advances in guided weapons such as low cost

  • cruise missiles or even suicide drones, which can fly almost undetected

  • and destroy targets defended with expensive air defenses, are changing the

  • game. We can look at the attack last year by the suspected attack by the

  • Houthis on Saudi oil facilities, where Saudi Arabia's Patriot missile

  • defenses can do anything against these low flying drones that basically

  • exploded on impact and caused massive damage.

  • Countries including Iran, a number of other countries around the world,

  • North Korea, have increasingly precise military capabilities.

  • But of course, earlier this year, after the assassination of Qassem

  • Soleimani, the Iranian general saw Iran launch strikes against US military

  • facilities and actually strike with pinpoint accuracy.

  • The U.S. has invested billions into missile defense technology since the

  • 1980s. It remains to be seen whether current systems can actually

  • intercept ICBM launches in a real world scenario, the best defense against

  • a nuclear tipped ICBM, which is a annihilation level weapon,

  • right? I mean, that's the kind of weapon.

  • If you fire one, you're going to get one shot back at you back and forth,

  • back and forth until all the human civilization has been destroyed.

  • So anyway, that's the ICBM and it's a it's an existential problem for all

  • of us. But you don't defeat the problem of ICBMs

  • and more broadly, the problems of the problem of nuclear weapons by having

  • the ability to shoot down a few of them, maybe, if you're lucky, at great

  • cost. It's challenges, I think, are here to stay

  • the the genie of missile proliferation is going to be very, very difficult

  • to reverse. In fact, the best tool we have today really seems to be a

  • non-binding export control regimes where states commit on a unilateral

  • basis not to sell missiles to countries that shouldn't have them or really

  • any countries at all to prevent the proliferation of this technology more

  • broadly. So air defenses are always scarier on paper than they are in

  • practice because there are a lot of practical limitations to their use

  • terrain communications networks that might be fragile,

  • sensor networks that also might be fragile.

  • These things just don't work as well in the real world as they do in

  • simulations or in PR copy.

  • So and that probably applies even more so to Russian made systems than to

  • Western systems.

  • The new Missile Age has seen the rise of hypersonic glide vehicles as

  • possible game changers.

  • I would say hypersonic missiles of various kinds are kind of the poster

  • child of this new era of missile warfare, and we're going to have to find

  • ways to contend with that.

  • The incoming Biden administration may take a stronger look at

  • alliances and who's getting what systems and maybe playing a little bit

  • more of a diplomatic role instead of trying to rack up and boost arms

  • sales.

Spacex, United Launch Alliance, Virgin Orbital, these are the companies you

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How Defense Contractors Make Billions Off Missile Sales

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    joey joey posted on 2021/05/15
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