Latest news with #Skydio
Nikkei Asia
a day ago
- Business
- Nikkei Asia
Taiwan needs drone testing that simulates Ukraine warfare: Skydio exec
TAIPEI -- Ukrainian forces have shown the world "what creative drone use could look like" in war, and a testing center that can mimic the electronic warfare conditions of the Russia-Ukraine theater is a "critically important" next step in building Taiwan's capabilities, a major U.S. drone manufacturer's executive said. "You can't learn that unless you actually operate it," Mark Valentine, global head of national security strategy at Skydio, told Nikkei Asia during a visit to Taipei. "If you can create a test range where you can simulate the EW (electronic warfare) conditions that are going on in Russia and Ukraine right now," he said, it would help Taiwan's domestic drone industry and lead to a "highly EW-resilient drone."
CNBC
3 days ago
- Automotive
- CNBC
The Army is testing 40+ new technologies on the battlefield
CNBC's Morgan Brennan speaks exclusively with industry leaders from GM Defense and Skydio to discuss the U.S. army's ongoing technological overhaul that includes hundreds of drones and autonomous Infantry Squad Vehicles.
Yahoo
15-05-2025
- Business
- Yahoo
China dominates the drone industry. The West needs to change that fast
At its factory near San Francisco Bay, the American drone maker Skydio produces hundreds of drones a month. Its small, high-tech quadcopters, typically equipped with cameras and capable of a dizzying variety of tasks, are in demand among utility companies, aircraft manufacturers, police, fire departments and the military. Skydio's X10 drone, for example, can be used to detect hairline cracks in a concrete bridge, read a car's licence plate from 800ft away, or inspect potential faults in an electricity substation. It can also pilot itself autonomously and stay airborne for up to 40 minutes, travelling at speeds of up to 45mph. The company, which is the biggest drone manufacturer in the US, proudly advertises its machines as 'home-grown aircraft' that reflect 'the best of American innovation, trustworthiness and craftsmanship'. But as recent events demonstrate, that is not quite the full story. Skydio has depended on a stream of critical components from China to produce its drones for years. That dependence was brutally exposed in late 2024, when the Chinese government ordered the company's battery pack suppliers to cut ties with the American firm over business it had done in Taiwan. The move forced Skydio to rely on stockpiles and ration deliveries to its customers, as it scrambled to find alternatives. On Wednesday, a spokesman for the company declined to say whether it had succeeded in doing so. The company's situation is far from unique. Across the West, analysts have warned that drone manufacturers and their customers have become reliant on the Chinese Communist Party's goodwill. Unsurprisingly, that is now prompting calls for a major rethink. Adam Bry, Skydio's founder, described Beijing's move against his company as a 'clarifying moment' for the industry. 'If there was ever any doubt, this action makes clear that the Chinese government will use supply chains as a weapon to advance their interests over ours,' the chief executive wrote in a statement on his company's website. 'This is an attempt to eliminate the leading American drone company and deepen the world's dependence on Chinese drone suppliers. It won't work.' Experts say the security risk of relying on China is twofold. On one hand, Chinese-made drones could collect potentially sensitive data that could be shared with Beijing. On another, companies using Chinese components could have their operations crippled if they suddenly face export restrictions of the kind unleashed on Skydio. Yet breaking the West's dependence on China, which has built up over decades, promises to be a costly affair. According to research by Drone Industry Insights, China controls 90pc of the commercial global drone market. One Chinese firm, DJI, possesses 80pc by itself. The communist country also has a stranglehold on key components, some of which it makes almost exclusively, such as motors and flight controllers, Lithium-ion batteries, sensors, cameras, propellers and frames. Credit:They are also produced at rock-bottom prices, making it extremely difficult for Western companies to compete. That partly reflects huge economies of scale reaped by firms such as DJI, which produces drones from a base in Shenzhen, the vast Chinese metropolis famous for its sprawling hardware industry. But it is also the fruit of Chinese policies designed to ruthlessly corner the market. Under Beijing's 'Made in China 2025' plan, drones were among the critical technologies singled out 10 years ago for generous government support. This makes using Chinese parts financially irresistible for many manufacturers, particularly those that produce high volumes of drones. 'They are bringing out drones at prices that European manufacturers are not capable of matching,' says Kay Wackwitz, of Drone Industry Insights. Of all the patents related to drones that were filed last year, 79pc were registered by Chinese firms, according to analysis by law firm Mathys & Squire. 'It's an indicator of the level of innovation going on in the sector in China, and a warning sign,' says Andrew White, an intellectual property specialist at Mathys & Squire. China's dominance is most pronounced at the cheaper, high-volume end of the market. But when it comes to low-volume, high-end drones such as those used by the military, many Western governments have already taken steps to ensure Chinese drones or parts are excluded. For example, the StormShroud drones recently purchased by the Royal Air Force from Portuguese aerospace manufacturer Tekever, which has a factory in Wales, use no Chinese parts. In fact, the company has rigorously checked its supply chain to ensure there is no exposure to China at all. Credit: X/@RoyalAirForce 'It's really important that companies in the West, for research purposes, test stuff from all over the world, including China, to make sure they stay at the cutting edge,' explains Ricardo Mendes, Tekever's chief executive. 'But that's completely separate from the actual systems that are going into the field, where you need to have a very careful supply chain in place. 'You need to know who your suppliers are, how they manage their own suppliers, everything.' This is a necessity for Tekever because of the highly sensitive nature of its work. But the cost advantage the company could theoretically get from using cheap Chinese parts is also lower, Mendes says. If you are building a small number of highly advanced drones for hundreds of thousands or millions of pounds each, saving £20 on a small component makes little difference. But if you are building thousands of them, that extra cost adds up quickly. One executive at a Western drone maker also points out that some components are clearly riskier than others. Using a Chinese-made battery or engine does not carry the same risks as using a flight controller or radio system, for example. 'If there's no active component that is processing information, there's no way intelligence could be gathered,' the executive adds. But Beijing's leverage over a large number of commercial drone manufacturers is still prompting serious concerns. In 2023, MI5 warned against using drones made in countries with 'coercive data sharing practices', widely seen as a reference to China. But the devices are still used for a range of sensitive activities anyway. For example, Wiltshire Police says on its website that it uses a fleet of 18 drones made by DJI for searches, aerial photography and monitoring high-risk police operations. At the same time, Chinese firms can sometimes take ruthless measures to protect their market positions, says Ian Hudson, a drone enthusiast behind the UAVHive website. Attempts to challenge Chinese manufacturers at the lower end of the market by companies such as Skydio have largely failed, partly because the likes of DJI can afford to drop their prices dramatically. DJI's cheapest drone on Amazon sells for just £169 and comes equipped with a 4K camera. Skydio pulled out of the consumer market in 2023. But chief executive Bry has vowed that Beijing's coercive behaviours will fail in the long run. 'We will come out of this stronger than ever, with the most secure supply chain in the industry,' he says. 'We were targeted because we are the largest drone company outside of China, and because we serve critical customers that advance our national security, but no Western drone manufacturer is safe. 'As we develop the supply of batteries outside of China, we will share our work with our Western peers to help the world move on from this dangerous dependency.' Broaden your horizons with award-winning British journalism. Try The Telegraph free for 1 month with unlimited access to our award-winning website, exclusive app, money-saving offers and more.
Telegraph
15-05-2025
- Business
- Telegraph
China dominates the drone industry. The West needs to change that fast
At its factory near San Francisco Bay, the American drone maker Skydio produces hundreds of drones a month. Its small, high-tech quadcopters, typically equipped with cameras and capable of a dizzying variety of tasks, are in demand among utility companies, aircraft manufacturers, police, fire departments and the military. Skydio's X10 drone, for example, can be used to detect hairline cracks in a concrete bridge, read a car's licence plate from 800ft away or inspect potential faults in an electricity substation. It can also pilot itself autonomously and stay airborne for up to 40 minutes, travelling at speeds of up to 45mph. The company, which is the biggest drone manufacturer in the US, proudly advertises its machines as 'home-grown aircraft' that reflect 'the best of American innovation, trustworthiness and craftsmanship'. But as recent events demonstrate, that is not quite the full story. Skydio has depended on a stream of critical components from China to produce its drones for years. That dependence was brutally exposed in late 2024, when the Chinese government ordered the company's battery pack suppliers to cut ties with the American firm over business it had done in Taiwan. The move forced Skydio to rely on stockpiles and ration deliveries to its customers, as it scrambled to find alternatives. On Wednesday, a spokesman for the company declined to say whether it had succeeded in doing so. Dependence on China The company's situation is far from unique. Across the West, analysts have warned that drone manufacturers and their customers have become reliant on the Chinese Communist Party's goodwill. Unsurprisingly, that is now prompting calls for a major rethink. Adam Bry, Skydio's founder, described Beijing's move against his company as a 'clarifying moment' for the industry. 'If there was ever any doubt, this action makes clear that the Chinese government will use supply chains as a weapon to advance their interests over ours,' the chief executive wrote in a statement on his company's website. 'This is an attempt to eliminate the leading American drone company and deepen the world's dependence on Chinese drone suppliers. It won't work.' Experts say the security risk of relying on China is twofold. On one hand, Chinese-made drones could collect potentially sensitive data that could be shared with Beijing. On another, companies using Chinese components could have their operations crippled if they suddenly face export restrictions of the kind unleashed on Skydio. Yet breaking the West's dependence on China, which has built up over decades, promises to be a costly affair. According to research by Drone Industry Insights, China controls 90pc of the commercial global drone market. One Chinese firm, DJI, possesses 80pc by itself. The communist country also has a stranglehold on key components, some of which it makes almost exclusively, such as motors and flight controllers, Lithium-ion batteries, sensors, cameras, propellers and frames. They are also produced at rock-bottom prices, making it extremely difficult for Western companies to compete. That partly reflects huge economies of scale reaped by firms such as DJI, which produces drones from a base in Shenzhen, the vast Chinese metropolis with a sprawling hardware industry. But it is also the fruit of Chinese policies designed to ruthlessly corner the market. Under Beijing's 'Made in China 2025' plan, drones were among the critical technologies singled out 10 years ago for generous government support. This makes using Chinese parts financially irresistible for many manufacturers, particularly those that produce high volumes of drones. 'They are bringing out drones at prices that European manufacturers are not capable of matching,' says Kay Wackwitz, of Drone Industry Insights. Of all the patents related to drones that were filed last year, 79pc were registered by Chinese firms, according to analysis by law firm Mathys & Squire. 'It's an indicator of the level of innovation going on in the sector in China, and a warning sign,' says Andrew White, of Mathys & Squire. Manufacturing for the military China's dominance is most pronounced at the cheaper, high-volume end of the market. But when it comes to low-volume, high-end drones such as those used by the military, many Western governments have already taken steps to ensure Chinese drones or parts are excluded. For example, the StormShroud drones recently purchased by the Royal Air Force from Portuguese aerospace manufacturer Tekever, which has a factory in Wales, use no Chinese parts. In fact, the company has rigorously checked its supply chain to ensure there is no exposure to China at all. 'It's really important that companies in the West, for research purposes, test stuff from all over the world, including China, to make sure they stay at the cutting edge,' explains Ricardo Mendes, Tekever's chief executive. 'But that's completely separate from the actual systems that are going into the field, where you need to have a very careful supply chain in place. 'You need to know who your suppliers are, how they manage their own suppliers, everything.' This is a necessity for Tekever because of the highly sensitive nature of its work. But the cost advantage the company could theoretically get from using cheap Chinese parts is also lower, Mendes says. If you are building a small number of highly advanced drones for hundreds of thousands or millions of pounds each, saving £20 on a small component makes little difference. But if you are building thousands of them, that extra cost adds up quickly. 'No Western drone manufacturer is safe' One executive at a Western drone-maker also points out that some components are clearly riskier than others. Using a Chinese-made battery or engine does not carry the same risks as using a flight controller or radio system, for example. 'If there's no active component that is processing information, there's no way intelligence could be gathered,' the executive adds. But Beijing's leverage over a large number of commercial drone manufacturers is still prompting serious concerns. In 2023, MI5 warned against using drones made in countries with 'coercive data sharing practices', widely seen as a reference to China. But the devices are still used for a range of sensitive activities anyway. For example, Wiltshire Police says on its website that it uses a fleet of 18 drones made by DJI for searches, aerial photography and monitoring high-risk police operations. At the same time, Chinese firms can sometimes take ruthless measures to protect their market positions, says Ian Hudson, a drone enthusiast behind the UAVHive website. Attempts to challenge Chinese manufacturers at the lower end of the market by companies such as Skydio have largely failed, partly because the likes of DJI can afford to drop their prices dramatically. DJI's cheapest drone on Amazon sells for just £169 and comes equipped with a 4K camera. Skydio pulled out of the consumer market in 2023. But chief executive Bry has vowed that Beijing's coercive behaviours will fail in the long run. 'We will come out of this stronger than ever, with the most secure supply chain in the industry,' he says. 'We were targeted because we are the largest drone company outside of China, and because we serve critical customers that advance our national security, but no Western drone manufacturer is safe. 'As we develop the supply of batteries outside of China, we will share our work with our Western peers to help the world move on from this dangerous dependency.'
Bloomberg
09-05-2025
- Business
- Bloomberg
Silicon Valley Is Coming for the Pentagon's $1 Trillion Budget Silicon Valley Is Coming for the Pentagon's $1 Trillion Budget
Intel fordecisionmakingPalantirAndurilSaronicSaildroneShield AIHermeusEpirusSkydioReusablefighterjet thatblows updronesSecurehardwaredeviceWearablesAutonomousdroneHypersonic planeSystem thatzaps dronesBattlefielddataBattlefielddataCelltowerfeedsSatellitefeedsTitan Titan is packed with computer servers running software that gobbles up reams of information about troops, tanks and artillery in the field, integrates the data and links with satellite feeds from as far as Washington to keep tabs on the growing numbers of unmanned weapons crisscrossing the front lines. This intel is quickly distilled into usable bites, using AI to provide real-time assessments that streamline decision-making in increasingly complex combat by lead contractor Palantir Technologies Inc., the Tactical Intelligence Targeting Access Node, as the system is called in full, heralds nothing less than a revolution in how future wars are fought, and crucially: who will supply the gear to the modern soldier. The model of warfare put forward by Silicon Valley and increasingly embraced in Washington would recalibrate how assets are deployed on the battlefield. Instead of dozens or even hundreds of soldiers supporting one $100 million system, one soldier using AI software could command dozens of cheap, autonomous weapons, whether they're airborne, in space, on land or in the just a series of clicks, soldiers will be capable of dispatching autonomous weapons, surveillance drones and other advanced equipment. This approach aims to deter enemy aggression by presenting an overwhelming force, and reducing risk by putting a protective shield around soldiers and expensive systems like fighter jets and battleships. Other key players in America's high-tech defense push include Anduril Industries Inc., which is building combat drones and other autonomous weapons systems; Saronic Technologies Inc., a startup developing unmanned surface vessels; San Diego-based Shield AI, which is developing self-driving technology for aircraft and has been flying F-16s autonomously since 2022 (Bloomberg Beta has invested); and Los Angeles-based Epirus, which makes high-powered microwaves that can zap incoming enemy drones and swarms from the sky and disable boat motors. By Lizette Chapman Julia Janicki Tom Fevrier Allyson Versprille May 8, 2025 The Titan is notable in other ways. It came in on time and within budget, according to Palantir, a rarity in US defense procurement. And while the $178 million contract accounts for just a tiny sliver of an annual Defense Department allotment targeted at $1 trillion in the coming cycle, it represents an important inflection point in a long but uneven collaboration between Silicon Valley and the Pentagon. The award, over a competing bid from RTX Corp., marked the first time a software company took the lead role on a battlefield system, making Palantir the first such prime contractor to emerge since General Dynamics Corp. more than 70 years ago. Founded in 2003, Palantir has been providing intelligence software to the military for years. But the proposal for the Titan turned conventional wisdom on its head by putting software at the core of the system and wrapping the hardware around it, instead of the other way around. The company then partnered with Northrop Grumman Corp., L3Harris Technologies Inc., fellow Silicon Valley upstart Anduril and others to help produce the vehicle. With the Pentagon pouring increasing resources into startups, tech founders and the venture capitalists backing them — many with strong ties to the administration of President Donald Trump — are on a mission to disrupt the defense industry dominated by a small number of so-called prime contractors. 'It's not that we need to get rid of the primes — that's idiot's thinking,' said Steven Blank, a Stanford University professor who has long advocated for greater collaboration between Silicon Valley and the Defense Department. 'We still need them, but we need a whole new generation of AI-based and new technologies too.' For more than a decade, Palantir's co-founder and chief executive officer, Alex Karp, has led an impassioned push for Silicon Valley to take on a bigger role in US defense contracting. Karp has embraced an unrestrained narrative, arguing that tech firms have a moral obligation to contribute to defense so Western democracies can prevail over their adversaries. And he's blended his business savvy and intellectual gravitas (Karp holds a Ph.D. in philosophy from Frankfurt University in Germany) with Silicon-Valley hipsterdom: His carefully disheveled attire and mad-scientist locks have helped win him a cult following among a younger, predominantly male audience keen to see their heroes shake up the status quo — be it in politics or indeed a real-world battlefield. Karp argues that the AI-infused software capabilities being developed in the US can provide an insurmountable edge by harnessing the world's best technology for the country's defense. So-called intelligence nodes made by Palantir, for example, can be deployed near the front lines, shortening the time from identifying a target and engaging with it, and extending the range of weapons made by other firms. He and like-minded founders want to shake up a military-industrial complex they see as rigid and no longer able to innovate — a viewpoint also driving decisions made by Elon Musk's Department of Government Efficiency. In Karp's view, America is ill-equipped to keep up with changes to warfare like the cheap, lethal drones that dominate the battle front in Ukraine. Roiling the status quo isn't a concern. It's exactly the point: open competition can expose what isn't working, while shuffling the power structure and making tech founders and their investors fabulously rich in the process. 'We love disruption,' Karp, who's become a billionaire, said in February. 'There'll be ups and downs — there's a revolution. Some people get their heads cut off.' That survival-of-the-fittest ethos fits right into the way Palmer Luckey has approached his latest business, Anduril. After selling virtual-reality startup Oculus to Facebook, Luckey, 32, went on to co-found Anduril, which specializes in autonomous warfare. He wants nothing less than to create a challenger to Lockheed Martin Corp., the world's largest defense contractor. In February, the company reached a deal with Microsoft Corp. to partly take over an up-to $20 billion Army contract to make augmented-vision goggles for soldiers. Luckey, who sports a flowing mullet, warns that China — already flexing its muscles in the South China Sea — is rapidly moving toward superior technologies, from hypersonic and self-guided missiles to drone swarms that can augment or someday replace manned fighter jets. 'We don't have time for business as usual,' Luckey told Bloomberg Television in January, after announcing Anduril's decision to build a $1 billion factory in Ohio to make weapons including aerial and maritime drones that use its AI-powered Lattice software. The platform was selected by the US Space Force last year for surveillance networks, and Andruil has also been working with OpenAI to bolster defense systems protecting soldiers from drone attacks. Donald Trump's return to the White House has given fresh momentum to the Defense Department's push to adopt new weaponry and broaden its supplier list, supported in no small part by Musk's DOGE, which is upending how the government is run. Musk himself publicly questioned the need for piloted fighter jets last year, calling such systems 'obsolete in the age of drones.' For the first time ever, the DoD no longer owns all the technology necessary to win a war. For the first time ever, the DoD no longer owns all the technology necessary to win a war. Stanford Professor Steven Blank Members of Trump's administration have promised to cast aside bureaucratic hurdles to change, giving upstarts an unprecedented chance to migrate from the periphery of defense contracting to its core. 'We shouldn't be fearful of productive new technologies, in fact we should seek to dominate them,' Vice President JD Vance — who as a venture capitalist invested in Anduril — told hundreds of tech founders at the American Dynamism conference hosted by venture firm Andreessen Horowitz in March. 'That is certainly what this administration wants to accomplish.' Defense Secretary Pete Hegseth has said he'll redirect 8% of nonlethal Defense Department spending, or about $50 billion, to new areas that include innovative weaponry and Trump's Golden Dome missile defense shield. Deputy Defense Secretary Stephen Feinberg, the billionaire co-founder of Cerberus Capital Management, has vowed to go line-by-line through procurement programs, with an eye to speeding the shift toward a 'software-centric' approach to weapons acquisitions. While controversies have raised doubts about Hegseth's longevity in his post, the administration's ambitions dovetail with growing support within Washington's military and defense-planning circles for finding better ways to innovate. The effort began in earnest in 2015, when Defense Secretary Ashton Carter made a pilgrimage to Silicon Valley to foster greater collaboration with technology firms. He started the Defense Innovation Unit, the military's flagship program to speed the adoption of advanced technology, which led to other military programs to address the branches' critical, unmet technology needs. Both Republicans and Democrats have voiced support for such changes. 'To draw entrepreneurship and technology back into defense, we must start buying advanced systems from the best talent that exists today,' Senate Armed Services Committee Chairman Roger Wicker wrote in December as he proposed an overhaul of the Pentagon's entire system for buying weapons. Military leaders have also promised to cut out bureaucratic layers standing in the way of new entrants: The Army, for example, has done away with lists of specific bid requirements for new systems, instead providing a brief outline of the capabilities it needs, according to General James Rainey, who heads the Army Futures Command. In early March, Air Force Chief of Staff David Allvin announced that two 'loyal wingman' combat drones, one being developed by Anduril and the other by defense contractor General Atomics, would be given fighter designations, a symbolic move that's 'telling the world we are leaning into a new chapter of aerial warfare,' he said at a defense gathering in Colorado. 'It means collaborative combat aircraft. It means human-machine teaming. We're developing those capabilities thinking mission first.' Anduril is one of the key defense startups aiming to do just that, manufacturing a lengthening list of weapons, wearables, surveillance systems and other hardware all tied together by Lattice. Anduril and General Atomics beat out Northrop, Boeing Co. and Lockheed Martin for the drone contracts, which were issued under former President Joe Biden in 2024. Collaborative combat aircraft, or CCAs, are designed to fly alongside the Next Generation Air Dominance fighters that won't be built for years, but also existing ones like Lockheed's F-35. In contested skies, they would provide a protective buffer around the manned fighter, augmenting its reach with lower-cost drones that won't have troops aboard put at risk. Prototypes are expected to be ready to fly this summer, Allvin said in March. (Later that month, Boeing was awarded the contract to build the next stealth fighter jet, dubbed the F-47, easing trad-defense concerns the president would turn away from manned warplanes altogether.) Pentagon officials didn't respond to repeated requests for specifics on its evolving plans. Anduril, meanwhile, is preparing to raise at least $2.5 billion to fund its ambitions, in a deal that would double its valuation to more than $30 billion since it last raised capital in August. Venture Capitalists Are Pouring Money Into Defense Startups Broad change is afoot within the Defense Department. In April, Trump signed an executive order aimed at increasing the use of commercially available products, speeding procurement and bolstering the defense industrial base — a move that, along with one targeting maritime investments, is seen as benefiting startups. At the same time, the Pentagon plans to cull between 50,000 and 60,000 civilian workers, primarily to shift more money toward war readiness. While creating budget space, the loss of experienced personnel is likely to add to the formidable challenge of transforming the Pentagon over a short period of time. Skeptics wonder how well the new stuff actually works, compared with battle-proven kit that's been deployed and improved for years. Skydio, for example, had to go back to the drawing board after its attack drones, built for the Army and shipped to Ukraine by the thousands, proved vulnerable to Russian anti-drone radio jamming. There are also concerns about software companies' ability to manage weapons production at scale, the ability to build a home-grown supply chain free of Chinese components, and how the new players will coexist with legacy primes. Still, it's imperative to reform the military's acquisition and budget processes to gain access to new technologies, or risk falling further behind China, said Bill Greenwalt, a senior fellow at the American Enterprise Institute who focuses on defense issues. 'Speed is now of the essence,' he said. To keep pace with other countries, 'we have to take on some risk.' Traditional defense contractors aren't willing to just cede ground to nimble upstarts. In fact, they've paid close attention, looking to harness the new entrants' advances — and the money flows — and avoid being ambushed. More than $7.1 billion in venture capital has been raised by defense-related US startups since the start of 2023, according to PitchBook, more than the prior nine years combined. VCs Placing Bigger Bets on More Defense Tech Startups Number of deals and total venture-capital funding to US-based defense tech startups Meanwhile, public investors have bestowed on Palantir a market cap greater than the most valuable prime, RTX. Rather than stonewalling to defend their turf, traditional military suppliers have often formed partnerships with tech companies to integrate the technology into their products, sometimes acquiring startups to blend old and new capabilities. 'The primes have recognized that they have to treat this moment as an opportunity,' said Katherine Boyle, a partner at Andreessen Horowitz who co-leads its American Dynamism practice. 'It's a massive R&D subsidy coming through venture capital.' Given a preference for 'co-opetition' among both Silicon Valley and traditional defense firms – where they partner on one project and compete on another – the two camps have been striking a range of deals. Palantir, through its 'Operation Warp Speed' program, is selling its software to traditional companies like L3Harris and startups including Saildrone (wind-powered uncrewed vessels that collect and process data), Anduril and Saronic, as well as publicly held Red Cat Holdings Inc. (airborne armed and reconnaissance drones), so they can improve their manufacturing processes. 'The reindustrialization of America is happening in our software,' Palantir's Karp said in an interview this week after reporting quarterly results. Lockheed Martin has active contracts with about one-third of the 130 or so startups it's backed across space, propulsion, AI, quantum technology (which can be used in navigation, detection, logistics and encryption), hypersonic systems and other areas. It acquired its first portfolio company, Terran Orbitel, for its space business last year. 'The nation needs to buy the best capability, whether it comes from a Lockheed or another prime or from a startup company,' said Chris Moran, who leads startup investing for Lockheed Martin Ventures. The goal is to augment its capabilities in fast-moving areas where Lockheed may not be focused, 'but certainly recognize that we need.' Defense Tech Firms Gain Traction But Still Dwarfed by Established Contractors US Department of Defense spending with the largest legacy defense contractors and defense tech firms in 2024 Collaboration between Silicon Valley and the Defense Department dates back at least to World War II, when US and British bombers were equipped with sensing equipment to detect and disrupt German radar installations. Those ties began to fray as the Cold War gave way to the Internet age. While US tech founders turned toward commercial opportunities, the defense sector condensed and lost vitality. The more than 50 major defense contractors that existed in 1993 has narrowed to just a handful today — Lockheed, RTX (formerly Raytheon), Northrop, Boeing, General Dynamics and L3Harris. One byproduct of consolidation has been a dearth of innovation and gaps in the US arsenal, according to Stanford professor Blank. 'For the first time ever, the DoD no longer owns all the technology necessary to win a war,' he said. Musk's SpaceX helped paved the way for the current crop of tech-defense startups that are resurrecting ties with the Pentagon. It famously sued the Air Force in 2014 for the right to bid on satellite-launch contracts; in 2016, Palantir filed a similar lawsuit against the Army. Their gate-crashing raised confidence among VCs of the profit potential in defense. The DoD's innovation unit expanded to Boston and Austin in 2016, and has continued adding hubs to increase outreach to founders in robotics, AI, autonomy and other critical areas. One major question mark on the road to dominating the next era of warfare is the Pentagon itself, long criticized for bloated budgets and a complex, slow-moving acquisition system that scares off all but a few experienced contractors. Even when it is willing to widen its circle of suppliers, the DoD struggles with a lack of coordination and duplicate efforts that waste resources. A Feb. 27 report from the Government Accountability Office said the DIU, for example, had failed to establish and measure its progress toward clear goals. 'I expect this to be an area where the DOGE will really dig over the next couple years,' said Betsy Cooper, director of the Aspen Policy Academy. 'Whether they break some of the systems that have kept the primes in place for so long is something we'll have to watch.' One way to become more agile, according to American Enterprise Institute's Greenwalt, is to move away from big, single-source contracts that last years to awarding several companies smaller amounts and allowing them to compete. That way, the Defense Department will have more flexibility to kill a program early if the technology doesn't pan out. 'The biggest risk is embarking on something too big before you've demonstrated operational capability,' he said. We shouldn't be fearful of productive new technologies, in fact we should seek to dominate them. We shouldn't be fearful of productive new technologies, in fact we should seek to dominate them. Vice President JD Vance Another wild card lies with the founders and investors behind the growing army of defense startups, many holding deep ties to Trump's world. Beyond Musk, there's Palantir co-founder Peter Thiel — also a major investor in Anduril and SpaceX. He has long supported the president and backed Vance's earlier Senate run in Ohio after employing him as a venture capitalist. Palantir co-founder Joe Lonsdale worked with Musk on the America's PAC that helped Trump win in 2024. He also is an investor in Anduril, Epirus and Saronic. Marc Andreessen rallied others in Silicon Valley to support Trump; his VC firm has invested in Shield AI, Skydio, Saronic and other upstarts. Their clout isn't unprecedented. During WWII, major industrialists like Henry Ford — initially a pacifist — played important roles in the national debate, said Michael O'Hanlon, director of research for foreign policy at the Brookings Institution. He worries, though, that some of today's founders 'aren't aligned with the rest of us' and have tight relationships with President Trump. 'By aligning with a controversial president, that could have undue influence and dominate foreign policy with their control of the market.' To get a glimpse of the dynamic, consider Ukraine. Spacex's Starlink satellite network has been pivotal in keeping the smaller country in the fight against Russia. But the reliance on an individual like Musk has proven to have its drawbacks: His boast that Ukraine's front lines would collapse if he pulled access to Starlink sent European allies into a panic, underscoring the importance of steady relationships with reliable partners when working with such balance-shifting weaponry. This has given pause to some lawmakers like Senator Elizabeth Warren, a Democrat who also sits on the Armed Services Committee. While she is eager for reform, she's worried that giving someone like Musk such mammoth influence over the Defense Department's purse strings will lead to just a different form of taxpayer abuse. 'For decades, defense contractors have ripped off our military while producing equipment that costs too much and arrives too late,' Warren told Bloomberg. 'It's absurd to think that Elon Musk, a billionaire contractor himself, should police big defense companies when he is part of the problem.' Related tickers: PLTR:US (Palantir Technologies Inc.) LMT:US (Lockeed Martin Corp.) NOC:US (Northrop Grumman Corp.) BA:US (Boeing Co.) RTX:US (RTX Corp.) LHX:US (L3Harris Technologies Inc.) GD:US (General Dynamics Corp.) Edited by Anthony PalazzoMichael Ovaska Photo editing by Karolina Sekula With assistance from Courtney McBride
