Israel’s Defense Ministry said last week that Israel had set a new record in defense exports in 2024. Israel exported $14.7 billion last year. This is a thirteen percent increase over 2023. Another key aspect of 2024’s success was that around half the value of exports was to Europe. Defense exports have more than doubled over the past five years, the ministry said.

Israel’s defense industry is large and innovative. It consists of three large companies: Rafael Advanced Defense Systems, Israel Aerospace Industries, and Elbit Systems. Rafael is the historic research and development pillar of Israel’s defense sector.

Its roots were in 1948, and Israeli Prime Minister David Ben-Gurion was very keen on establishing this kind of innovative aspect to make sure Israel’s defense relied on local designs and pioneering. IAI has its roots in the 1950s and is Israel’s main aerospace company. Along with Rafael, it is also a government-owned company. Elbit Systems was also originally founded with government support, but is now a publicly traded company.

The rest of Israel’s defense market is made up of smaller companies that generally specialize in certain things, such as drones, ammunition, firearms, and other products.

The goal in general in Israel is to have an ecosystem of defense companies that combine to be able to produce most of what Israel needs in terms of systems for war. The only place Israel can’t produce its own systems is in large platforms, such as ships, submarines, or airplanes.

Lite Beam 250. (Illustrative) (credit: RAFAEL ADVANCED DEFENSE SYSTEMS)
Lite Beam 250. (Illustrative) (credit: RAFAEL ADVANCED DEFENSE SYSTEMS)
Israel acquired military aircraft from the US, such as the F-35, F-16, F-15, and helicopters. Israel acquires ships from Germany. However, in many cases, Israel adds its own systems onto these platforms. Israel also has partnerships with companies abroad, so that it is closely knitted into the global defense market. This has increased as Israel has proven its technology on the battlefield.

The recent export numbers provide us with a few key details

First of all, Europe is gobbling up defense products, and expensive ones. This is because Western militaries always acquire expensive defense items. Israel makes combat-proven systems that Europe needs. Ten years ago, this was not the case.

Europe is expected to be peaceful in the future. Now, with the Russian invasion of Ukraine, Europe is rearming. Israeli systems are needed to defend Europe. Any controversy over the Gaza war or other issues has not yet impacted this. For instance, Germany acquired the Arrow air defense system, and Finland acquired David’s Sling. IAI makes the arrow, and Rafael makes David’s Sling. Both were created with US partnerships and backing.

European countries also acquire Israeli radars and various types of anti-tank missiles and other missiles. In addition to Rafael’s Trophy system, which defends armored vehicles from missiles and RPGs, it has also seen increasing success in Europe. At the upcoming Paris Air Show, Rafael is expected to show off its new laser defense systems, which it recently announced. Laser makes air defense a lot cheaper than using expensive interceptor missiles.

While Europe is re-arming, and this is clearly a boost for Israel, there are other regions and countries that are changing their needs. Asia is a major market for Israeli systems. This includes partnerships that Israeli companies have in India. India is a market that, like Israel, wants to make things locally. This means Israeli companies have joint ventures in India. Israel also has positive ties with Singapore, South Korea, the Philippines, Australia, Vietnam, and other countries.

Many Asian countries are buying up battle-proven systems because they are concerned about China. This means there is a major market there. Some of these countries, such as South Korea, have their own robust industries. Israel has often found inroads or partnerships. However, exports are fluctuating. Back in 2023, they were half of Israel’s exports, but in 2024, they were only a quarter.

Another place where the exports fluctuate is the Abraham Accords countries. After 2020, Israel began counting this as a region of exports. These countries only consist of a few markets, such as the UAE, Bahrain, and Morocco. That means that a few large deals in a year can redefine the amount of exports in this “region.” In 2022, it accounted for billions in exports, but in 2024, it was around twelve percent of the overall $14.7 billion.

By contrast, North America is a stable market. North America has partnerships with many Israeli companies that make items such as Iron Dome that may be relevant for the US in the future. In addition, smaller Israeli companies such as Smartshooter, which makes a system that makes it easier for rifles to shoot down drones, are making inroads in the US. Overall, the US has among the largest defense companies in the world and doesn’t want to rely on foreign companies for defense, so this means partnerships or local subsidiaries are key.

Israel once used to sell more items to Africa and Latin America. Today, these regions account for only several hundred million dollars in exports. The reason that they make up less is not because the amount they acquire is less. They are acquiring around the same amount, but the overall exports of expensive items such as air defense for Europe are increasing. Therefore, the percentage acquired by Africa or Latin America is less. These countries don’t have large defense budgets, and they have less need for some of the big-ticket items. What they want are smaller, cheaper, innovative items.

Israel is excelling in exporting missiles and air defenses. This is obvious because Israel’s air defenses are likely the best and most battle-tested in the world. The last war saw thousands of projectiles intercepted, usually more than 90 percent of those that Israel sought to intercept.

That makes Arrow, David’s Sling, Iron Dome, and other systems, such as Barak and Spyder, necessary for global clients. Israel also makes the radar and other systems linked to these. The lasers are the latest innovation. In addition, Israel makes a number of types of missiles, from air-to-air missiles, to air-to-ground and also ground-to-ground missiles, such as the Lora. It also makes the Spike line of missiles and others.

While missile and air defense exports have increased, the number of drone exports appears to have decreased a lot in recent years. They once accounted for around a quarter of exports. Israel makes a number of drone lines from Elbit’s Hermes to IAI’s Heron. However, more countries now make drones. Also, Ukraine has shown that soldiers want to use smaller, cheaper drones in large numbers.

They don’t need large, expensive drones that can be shot down. Therefore, the world of drone warfare is shifting. Israel will need to catch up. One drone niche is loitering munitions that are sometimes defined as missiles, because they have a warhead. Israel makes a number of these unique systems. They are also increasingly battle-proven, not just in Israel but also by countries that acquired these systems.

Israel has also seen increasing success in the satellite and space field. This is because Israel is one of the few countries that are able to make sophisticated technology related to space and satellites. On other exports, Israel has stayed relatively stable. This includes radars as well as vehicles, as well as aircraft and avionics.

Israeli companies also make a number of key devices for observation and optics. The use of AI and new technology that enables help in identifying and classifying targets is important for these systems. In general, when it comes to things like ammunition and the maritime arena, Israel does not export a lot of systems as a percentage of the total. Israel is not a historic maritime power. Where Israel excels in the maritime sphere is in add-ons to ships, such as radar or the naval version of Iron Dome, or Typhoon gun systems.

A lot of the deals for Israel are big-ticket items such as Arrow. The ministry said that “more than half of the deals were valued at over $100 million.” Israel believes the recent war’s “operational achievements and the proven battlefield performance of Israeli systems have driven strong international demand for Israeli defense technology, concluding 2024 on a remarkably high note with record-breaking export deals.”

The ministry noted that: Significant tiers of defense exports included: “Missile, rocket, and air defense systems (48%), vehicles and APCs (9%), satellites and space systems (8%), radar and EW (8%), manned aircraft and avionics (8%), observation and optronics (6%), intelligence, information and cyber systems (4%), ammunition and armaments (3%), weapon stations and launchers (2%), C4I and communication systems (2%), drones and UAVs (1%), and maritime systems and platforms (1%).”