FARNBOROOH, England, July 17 (Reuters) - Britain's Farnborough Airshow is expected to focus on the defense and arms sector amid rising security risks, as aircraft and weapons manufacturers struggle to meet increasing demand while simultaneously trying to solidify a fragile recovery in civilian aircraft and engine production.

With the war in Ukraine entering its fifth year and the ceasefire in the Gulf region collapsing, these risks are likely to push the traditional rivalry between Boeing and Airbus over commercial aircraft orders to a backlog during the show scheduled for July 20-24.

"It is fair to say that the security environment in the world today is more complex and volatile than we have seen for many decades, and we are seeing security threats evolve at a very rapid pace," said Air Chief Marshal Harf Smith, commander of the Royal Air Force, during an international conference of air force commanders ahead of the exhibition.

Arms manufacturers are participating in the biennial exhibition, which comes amid the largest increase in defense spending in Europe since the Cold War, and questions that remain about how and where this money is being spent.

Some industry leaders warn that defense technology startups developing AI-powered drones and targeting software could transform the sector, much like SpaceX did in the rocket industry. Conflicts like those in Ukraine and Iran have highlighted the growing need to accelerate development cycles and mass-produce systems.

Tom Enders, president of the German Council on Foreign Relations and co-chairman of German defense startup Helsing, told Reuters, "Startups are bold and don't shy away from risk... they spend their own money."

Some of the available budget funds will, of course, be allocated to purchasing warplanes and renowned fighters such as Lockheed Martin's F-35 and the Eurofighter, aircraft that will be featured in next week's air shows. However, startups like the US-based Andorel and Hellzing are pushing for the adoption of AI-powered systems, including swarms of unmanned combat aerial vehicles, despite initial setbacks.

Organizers told Reuters that the defense sector will represent half of the exhibitors at the show, with 1,600 exhibitors this year, an unprecedented increase compared to about 40 percent previously, with a significant rise in artificial intelligence, advanced technology and finance companies.

On the commercial front, Airbus and Boeing are expected to announce new purchase orders and reveal the identity of the customers behind deals already concluded.