When it comes to defense contractors, there's almost nobody bigger than Boeing (NYSE:BA).
One of America's biggest defense contractors, Boeing sold $32.6 billion worth of defense, space, and security products in 2012. This month, Boeing published a tally of all the hi-tech arms it's shipped out to military customers in calendar year 2013. Among the revelations: In all of last year, Boeing customers accepted delivery of only 29 of the company's upgraded "Harpoon II" anti-ship missiles.
Just two weeks into 2014, Boeing has already beaten that record.
Missiles for peace
Boeing this year began delivering some three-dozen advanced Harpoon II missiles to Taiwan. In addition to four missiles earmarked for certifying the product for use, and use in training exercises, Taiwan bought 32 UGM-84L Harpoon II missiles for active duty. For Boeing, it's a modest-sized arms deal, worth about $196 million to the defense contractor. But for Taiwan, the Harpoons will arm its two diesel-electric attack submarines, dubbed the "Sea Dragon" and "Sea Tiger" with an advanced ship killing capability -- aimed at deterring a Chinese strike across the Taiwan Straits.
Granted, in a world where most leading naval powers have "gone nuclear," diesel-electric submarines may sound like an anomaly. And it's true -- diesel-electrics are rather low-tech. Burning their fuel, and needing oxygen to burn it to generate electric power, these boats have both a more limited range than, and an increased vulnerability to air attack relative to nuclear boats. But diesels are also cheaper than nuke boats, and when moving stealthily under electric power, are practically invisible to an aggressor force.
This opens up the possibility for Taiwan to wage "asymmetric warfare" should it ever be attacked by the much larger, much more heavily armed People's Liberation Army. Able to strike targets as far out as 67 nautical miles out, the Harpoons will expand the submarines' range of attack beyond the reach of their torpedoes.
Also, in addition to being used to simply "sink ships," the advanced Harpoons that Taiwan bought have a land attack capability (hence the "L" designation in UGM-84L). Tactically speaking, this means that unless an invading force can sink or incapacitate Taiwan's subs, it must constantly "watch its back," lest the subs slip past the pickets and launch a missile attack on the Chinese mainland.
Thus, arming Taiwan with Harpoons creates a situation of "mutually assured destruction" writ small. By threatening some small measure on harm on the Chinese mainland in the event it attacks Taiwan, Boeing may have helped ensure the two countries never come to blows at all.
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Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.