Iran War Changes US War Strategy, Era of Expensive Missiles Begins to End

Major US defence contractors are beginning to compete to produce cheaper and faster interceptor missiles. The US must race against time and cost because the Iran war is draining Patriot interceptor missiles, which are a vital US air defence weapon.

Large US defence companies are also partnering with smaller firms to offer alternatives to the ‘premium’ missiles long known for being expensive, complex, and time-consuming to produce. The price of this type of missile can even reach more than US$4 million per unit, or around Rp 72 billion per unit (US$1 = Rp 18,000).

Boeing, Lockheed Martin, Northrop Grumman, and Raytheon, owned by RTX, presented their strategies at the Space and Missile Defense Symposium in Huntsville, Alabama, recently.

‘We want to change the approach to a number of products,’ said Jim Bryan, Executive Director for Integrated Air and Missile Defense at Boeing, as quoted by Reuters.

According to him, advanced products do have high capability, but the consequence is high cost. For that reason, Boeing is now working to deliver missiles that are more affordable and can be produced in large quantities.

For decades, the US defence industry has continued to add advanced technology to missiles, from target-seeking sensors to propulsion technology. These capabilities have indeed increased missile effectiveness in facing increasingly complex threats. However, the consequence is long production times and very high costs.

The problem is that missiles worth millions of dollars must face one-way attack drones that are far cheaper. The Shahed drones used by Iran and Russia, for example, can cost around US$30,000 per unit. This cost gap is now a major problem for the US military.

President Donald Trump previously dismissed concerns about dwindling US ammunition stocks during the war with Iran. However, at the same time, the Pentagon has asked Congress to provide emergency funding to replenish various weapons.

The Pentagon is now also opening space for new companies in the defence industry to develop interceptor missiles at much lower cost. In recent months, the US Department of Defense has awarded contracts to a number of small companies such as Castelion, Anduril Industries, CoAspire, and Zone 5.

Brigadier General RJ Mikesh, a US Army weapons acquisition official, said not all targets require the most advanced and expensive defence systems. ‘This may be one of the defining problems in modern warfare,’ he said.

Boeing is developing a very low-cost target-seeking technology, or seeker. That component usually accounts for nearly 30% of the total missile cost. Boeing wants to reduce it to around 10% by using commercial-standard components. The technology has been tested in flight on rocket bodies and aircraft. Boeing is targeting an interception test next year.

Lockheed Martin, the maker of the Patriot air defence system, is also developing a cheaper version of its interceptor missile. The product, named Patriot Advanced Capability-3 Adapted Capability Effector (PAC-3 ACE), is estimated to cost around US$2 million per unit. That price is less than half of the most advanced version, the PAC-3 Missile Segment Enhancement (MSE), which reaches around US$4 million.

ACE capability is estimated at about two-thirds of the most advanced version, depending on the type of threat and flight distance. Lockheed is also simplifying a number of components and replacing technology that requires a direct hit with a method that allows the missile to explode close enough to the target to destroy it.

However, the ACE missile cannot be produced in the near term. The first flight is scheduled for early 2028, while production is expected to be ready about 18 months after that. This means that, although cheaper, the missile is still far more expensive than drones such as the Shahed.

Northrop Grumman introduced Raid Hunter, a guided 50 mm cannon-based air defence system. The system is designed to face mixed attacks, including drones and cruise missiles, at lower cost.

Meanwhile, Raytheon is developing cheaper propulsion technology for the Standard Missile-3 (SM-3) interceptor. Raytheon is also expanding the use of Coyote, a lower-cost interceptor missile designed to counter drones and currently used in the Middle East.

The ultimate goal is to reduce interception costs so that the US military does not need to use Patriot missiles worth millions of dollars to destroy enemy drones that cost only tens of thousands of dollars.

This change highlights a major problem in modern warfare: not only who has the most advanced weapons, but who is able to produce weapons cheaply enough and in large enough quantities to win a long-term war.

The Iran war has eroded US defensive missile stockpiles. Since the war broke out in late February 2026, the US has continued to use Patriot and Terminal High Altitude Area Defense (THAAD) missiles to face Iranian missile attacks, with usage far exceeding production capacity.

In about five months, Patriot and THAAD stockpiles are estimated to have fallen by 1,700 units, from around 2,782 units before the war to only 993-1,105 units as of 27 July 2026, based on estimates from the Center for Strategic and International Studies (CSIS).

Patriot stockpiles shrank by nearly two-thirds, from 2,330 to 759-827 units, while THAAD fell from 452 to 234-278 units. With a price of around US$5 million for one PAC-3 MSE and nearly US$12 million for one THAAD, the cost of replenishment is enormous.