U.S. Defense Firms Falter in Asia

The Wall Street Journal ^ | May 31, 2015 | TREFOR MOSS

[sukhoi-30mki]

SINGAPORE—Surging military spending across Asia has made it the world’s second-biggest region for such spending over the past decade, but U.S. companies, the biggest sellers of military equipment, are struggling to take full advantage of that growth, even as revenues back home stagnate.

Demand in Asia for defense equipment—and calls for greater U.S. military involvement—have grown as China’s display of military might in the South China Sea intensifies regional tensions.

Total global spending on defense in 2014 was $1.719 trillion, of which Asia and Oceania contributed $423 billion, or 25%, behind only North America’s $596 billion, according to the Stockholm International Peace Research Institute. The figures are calculated using a 2011 base dollar value.

The total for Asia was over $30 billion more than Europe, which it leapfrogged for the No. 2 spot compared with the previous 10-year period, and up 62% over the past decade. China—a closed market for U.S. defense companies because of a long-standing arms embargo—accounted for $208 billion of the Asia and Oceania total, spurring its neighbors to boost their spending. Asia and Oceania bought 48% of the weaponry that U.S. companies exported during that period, up from 39% in 2009.

But capitalizing on that boom has proved difficult for U.S. defense companies, which are struggling to dominate Asia’s important emerging markets as they once did. Many of their weapons systems are too expensive and unnecessarily sophisticated for those customers. There is also more competition from upstarts and established European competitors better able to meet Asia’s defense needs.

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Some of the Asian manufacturers are big exporters, such as Daewoo Shipbuilding & Marine Engineering Co. of South Korea. But many others are small compared with U.S. giants such as Boeing Co.

[Regulator]

But Wait.

I thought opening our markets to them would result in “billions of new customers” for us.

How could this be?

[MadIsh32]

The free market

From the piece

“Many of their weapons systems are too expensive and unnecessarily sophisticated for those customers. There is also more competition from upstarts and established European competitors better able to meet Asia’s defense needs.”

Adapt or die. Our defense industry can no longer rely on the welfare of Congress and the American people as we no longer will write it a blank check