The Iran war is likely to offer numerous lessons for the United\nStates (US). One that is already becoming apparent is the exorbitant\ncost of using conventional weaponry to counter far cheaper threats, such\nas Iranian-made drones.<\/p>\n
Citing The Economist, Emil Michael, a former Silicon Valley executive\nnow serving as a senior Pentagon official, stated that the dynamics of\nmodern warfare have changed. According to him, it no longer makes sense\nto use a US$1 million missile to shoot down a drone worth around\nUS$50,000.<\/p>\n
This situation is one of the reasons why the Trump administration has\nbegun approaching a new group of defence companies aiming to transform\nthe way the US wages war. This group is led by Palantir, SpaceX, and\nAnduril.<\/p>\n
Palantir is known as a software giant supplying intelligence systems.\nSpaceX provides surveillance and connectivity capabilities through its\nStarshield satellite network. Meanwhile, Anduril is gaining prominence\nthrough the production of aerial drones, sea drones, and anti-drone\nweapons.<\/p>\n
These three companies are often referred to as \u2018neo-primes\u2019, the new\ngeneration of prime defence contractors. Their closeness to figures in\nthe Trump administration is now making the old major companies in the US\nmilitary-industrial complex anxious.<\/p>\n
The US government views traditional defence contractors, or legacy\nprimes, as too slow, expensive, and risk-averse. This stems from their\nenjoyment of large, profitable contracts over the years.<\/p>\n
Michael said that if these new players can prove themselves, they\nwill begin to capture portions of business that previously almost\ncertainly went to the old defence contractors.<\/p>\n
New Players Starting to Gain Ground<\/p>\n
Throughout this year, these challenger companies have begun receiving\nsignificant support from the US government.<\/p>\n
In January, US Secretary of Defense Pete Hegseth used a SpaceX base\nin Texas as the backdrop for launching the latest artificial\nintelligence (AI) strategy. On that occasion, he promised that the US\nDepartment of War would emulate Elon Musk\u2019s management style and move\nmuch faster.<\/p>\n
Then in March, the government declared Palantir\u2019s AI-based command\nand control system, named Maven, as a programme of record. This status\nlocks in funding for the project over the long term, though it will\nstill be overshadowed by considerable bureaucracy.<\/p>\n
In the same month, the US Army also consolidated several contracts\nwith Anduril into a single large contract worth up to US$20 billion,\nequivalent to Rp342.7 trillion (assuming an exchange rate of\nRp17,135\/US$1), for a 10-year period.<\/p>\n
In terms of value, this commitment still appears small compared to\nthe F-35 stealth fighter programme led by Lockheed Martin. The F-35\nprogramme is even estimated to cost more than US$2 trillion over several\ndecades.<\/p>\n
Last year, the three largest traditional US defence\ncontractors\u2014Lockheed Martin, RTX, and Northrop Grumman\u2014collectively\nrecorded sales about eight times larger than those of the three new\nplayers.<\/p>\n
Moreover, most of SpaceX and Palantir\u2019s revenue comes from\nnon-Pentagon customers.<\/p>\n
The Reputation of Neo-Primes Continues to Rise<\/p>\n
Nevertheless, investors remain highly optimistic. The combined\nvaluation of Palantir, SpaceX, and Anduril is now more than three times\nthat of the three largest defence contractors mentioned.<\/p>\n
This optimism arises partly because the market sees them as having a\nsignificant opportunity to disrupt the arms industry.<\/p>\n
In the coming months, SpaceX is even expected to go public through\nthe largest initial public offering (IPO) in history.<\/p>\n
Meanwhile, Anduril, which derives nearly all its revenue from defence\ncontracts, is reportedly raising funds at a valuation of US$60 billion.\nYet, its sales last year were only about US$2 billion, and the company\nis still operating at a loss.<\/p>\n
This high valuation also reflects the strong influx of venture\ncapital into US defence startups. Not only the three major names, but\nsecond-tier companies aiming to advance are also flooding with\nfunds.<\/p>\n
Among them are Shield AI, which develops autonomous pilots for air\ncombat, and Saronic, which produces maritime drones.<\/p>\n
This enthusiasm is also supported by President Trump\u2019s ambition to\nhave Congress increase the defence budget for the next fiscal year by\nmore than 40% from current levels to US$1.5 trillion.<\/p>\n
Under this plan, the government aims to expand spending on drones,\nanti-drone systems, and AI. Although traditional contractors will still\nreceive the largest share, Emil Michael hopes that the budget allocation\nfor innovative challengers, currently around 1-2%, can rise by several\npercentage points each year to foster greater competition.<\/p>\n
The Pentagon\u2019s Way of Procuring Weapons Is Starting to Change<\/p>\n
From the Pentagon\u2019s perspective, one of the main attractions of the\nnew players is that they generally dislike cost-plus contracts, a model\nwhere the government reimburses all costs incurred by the company and\nthen adds a profit margin on top.<\/p>\n
This model is indeed considered suitable for large and complex\nprojects where initial costs are hard to estimate. However, on the other\nhand, this pattern is also seen as encouraging inefficiency and making\ncompanies sluggish.<\/p>\n
In contrast, the new challengers prefer fixed-price contracts. In\nthis model, they bear the research and development costs upfront but can\nenjoy large margins if the project is completed on time and within\nbudget.<\/p>\n
This contract structure helps them stay lean and provides incentives\nto move faster. They are also driven to continuously refine their\nproducts.<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/palantir-and-spacex-are-teaching-america-a-new-way-to-fight-war-how-powerful-is-it-1776779471", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }