The defence industry is a global business that manufactures weapons and military technology and equipment. It consists of commercial industry involved in research, development, production, and the service of military material, equipment and facilities. Arms producing companies, also referred to as defence contractors or military industry, produce arms mainly for the armed forces of states. Departments of government also operate in the arms industry, buying and selling weapons, munitions and other military items. Products include guns, ammunition, missiles, military aircraft, military vehicles, ships, electronic systems, and more. The arms industry also conducts significant research and development and provides other logistics and operations support.
It is estimated that yearly, over 1.5 trillion US dollars are spent on military expenditures worldwide (2.7% of World GDP). This represents a decline from 1990 when military expenditures made up 4% of world GDP. Part of this 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 amounted to an estimated $395 billion in 2012 according to Stockholm International Peace Research Institute. In 2004 over $30 billion was spent in the international arms trade (a figure that excludes domestic sales of arms). The arms trade has also been one of the sectors impacted by the credit crunch, with total deal value in the market halving from US$32.9 billion to US$14.3 billion in 2008. 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 its citizens. An illegal trade in small arms is prevalent in many countries and regions affected by political instability. The Small Arms Survey estimates 875 million small arms in circulation worldwide, produced by more than 1,000 companies from nearly 100 countries.