The defence surge — turning a shrinking industry into a national-policy growth business (2023)

Growth carried by national policy — and the challenge beyond it

What marks this decision is the speed with which the company folded a shift in its external environment into its own growth. Mitsubishi Heavy Industries did not merely wait for the state’s decision to raise defence spending and then take the orders. In the immediate wake of the policy turn it set a target of doubling defence and space, and it built out its production to reach for mass production of long-range missiles and even the export of escort ships. In lifting defence — long seen as a shrinking industry — into the business carrying the whole company’s growth within a few years, the difference from the other heavy-industry majors shows through. IHI and Kawasaki Heavy Industries rode the same tailwind to record defence profits, but the scale of Mitsubishi Heavy Industries’ expansion stood out.

That said, this growth leans heavily on an external factor — the national budget. What underpins the sales is the increase in defence spending, and if that level changes, the premise of the orders wavers too. A sudden ramp-up in output runs into constraints: a parts supply chain long left to wither, and a shortage of skilled engineers. Exports, too, remain uncertain revenue, swayed by the circumstances of the buying country and the state of international affairs. How to carry these few years — in which a shrinking industry turned into a growth business by riding national policy — past the point where the rise in defence spending has run its course? For Mitsubishi Heavy Industries, the task remains of reworking its dependence on state policy into the strength of a business that earns on its own.