The defence industry fulfils each of the criteria required for an oligopoly to establish itself.  Weapons, especially high-tech weaponry is expensive to produce and there are considerable advantages to scale in the production of these products - research and development costs, automation, the use of specialist production machinery e.t.c. 

It is also an industry where there is considerable scope for product differentiation, which allows natural competition to take place, between businesses competing for sales.

Very high start up costs, particularly with heavy weaponry and increasingly sophisticated devices such as GPS tracking technology and laser guided weapons.

Intellectual barriers are also evident in the industry with established nations such as UK, USA, France and Russia possessing a clear head start in terms of skills and know how.  Amongst emerging nations only China has established itself as a major player within the industry and much of their output is produced for domestic consumption, rather than exported.

There are also considerable legal barriers to entry within this industry with many governments insisting on purchasing weapons built in their own country, rather than those made overseas, for a combination of strategic and security reasons.  It would surely be risky for a nation to be dependent entirely on imported arms for their defence, given that alliances can quickly turn?

As the reasons above highlight, many nations prefer to purchase their own produced goods, rather than relying on foreign made ones, for obvious security reasons.  Therefore, even a firm / nation producing vastly superior goods would not be able to achieve the level of market share enjoyed by say Apple in the smart phone market.  This is especially true of nations on less than peaceful terms.  It would be hard to imagine the USA, for example, selling weapons to certain Middle eastern groups (regardless of the price offered) hostile to their ally Israel.  Similarly, many NATO nations are restricted by who they can sell weaponry to, while other nations such as North Korea and Iran are subject to a military embargo, which prevents any (legal) sales from Nato members.