Why Are Countries Unable To Produce Cheap Weapons?

Countries that are advanced in the defense industry are capable of manufacturing sophisticated weapons, but they are unable to develop and produce cheap weapons in large quantities. Let’s examine the reason for this problem.

Historically, NATO countries and Western countries in general have focused on technical superiority and the possession of high-quality weapons. However, the war in Ukraine has shown everyone that the depth of stockpiles and the capacity for mass production are no less important than quality and advanced weapons, especially when it comes to 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 the US.

However, the common belief I mentioned in the previous paragraph is not always true. Western weapons are not always more expensive than Russian and Chinese weapons, for example. The problem of high prices is real, but it is not the same across all categories and is not constant.

In many areas, we find that prices are similar. For example, Russian missiles such as the Kalibr and KH-101 cost between $1 million and $2 million per missile, which is very close to the cost of the Tomahawk purchased by the US Navy at around $2.2 million per missile.

In some cases, such as the American JASSM missile, the price may even be lower than the Russian one, despite its warhead and superior stealth capabilities. The same logic applies to ballistic missiles; the Russian Iskander ranges in price from $2 million to $3 million, which is roughly the same level as a new American missile such as the PrSM.

However, the gap is more evident in warships. South Korea built three Aegis destroyers for about $3 billion, while the cost of a single Arleigh Burke-class destroyer in the US exceeds $2 billion. As for UAVs, the gap is huge: a UAV costs $6,000 in NATO armies, and a Ukrainian alternative can be made manually for only about $600.

If we think about the factors that control the cost of weapons production, we find the following:

• Production volume: the greater the quantity, the lower the cost. This is the basic principle of economies of scale, as in any other industry.
• Specifications: Demanding advanced performance makes the cost higher.
• The environment in which the weapon is manufactured: This determines labor costs and regulations in the country.
• Confidence: When there is confidence that there will be high demand, it is possible to invest more and reduce waste of resources. The factor that most influences the cost of weapons is certainty of demand. When companies know that they will be producing the same weapon in consistent quantities for many years, they can invest in cheaper and more efficient production lines, which significantly reduces the unit cost. But when demand is intermittent or seasonal, the cost goes up.

So why is defense manufacturing so expensive?

The main reason, if we think about it from an economic perspective, is the word “incentives.”

What does that mean?

It means that there are three parties involved in the defense manufacturing equation, and each has different incentives:

• The military: It wants better weapons, greater protection, and excellent efficiency, regardless of the cost.
• Governments and politicians: They want impressive weapons that are suitable for promoting their projects, and they want defense manufacturing to create high-value jobs and employment opportunities for citizens, even if the projects are ineffective or uneconomical.
• Manufacturers: Their goal is profit. Most defense contracts operate on a “cost + profit margin relative to cost” basis, so companies have no qualms about increasing costs, because that means increasing their profits.

There is another reason, which is that there are indeed technical and administrative obstacles. I have mentioned this before: from the moment it is decided that “we will manufacture a new weapon,” you find that the various forces each request specific specifications, and every technical addition greatly increases the cost.

For example, the design of the American Constellation frigates was changed several times, to the point that the latest modification was 70% different from the original design.

Another reason is that orders for new weapons are not quick, which makes decision-makers reluctant to invest in huge production lines.

After the war in Ukraine, some countries began to think a little differently in order to reduce costs.

There has been a trend toward using civilian components in weapons manufacturing instead of manufacturing each part specifically for military purposes, such as using ready-made and tested parts in the civilian market instead of reinventing the wheel from scratch.

Other countries began to agree among themselves on collective purchasing, so that orders would be large and consistent, giving factories the confidence to invest and increase production.

Another idea has also emerged, which is to combine a limited number of expensive, highly advanced weapons with simpler, cheaper weapons produced in large numbers, such as drones and low-cost smart munitions.

There is another important trend: instead of replacing expensive weapons, supporting them with cheaper weapons that complement their role. This means having 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 munitions.

The danger lies in the fact that the ability to bear the cost is not only a technical decision, but also the result of the interaction of three different parties: the military, which seeks maximum performance; politicians, who prefer large-scale projects with symbolic and propaganda value; and companies, which by their nature seek profit and risk reduction. Thus, these three parties push the entire system toward greater complexity and higher costs, even if no one directly intends to do so.

It is important to clarify that the goal is not only for weapons to be cheap, but also for combat capabilities to be cost-effective, and for armies to be able to procure, maintain, and replace the necessary number of weapons in times of stress without breaking their budgets.