Anduril’s new submarine facility in Baltimore will be an exciting addition to an ossified defense industrial base that needs to accelerate production of Virginia-class attack submarines. But the U.S. government did not need to take an equity stake in a project where it’s the main customer.
Last week, President Donald Trump announced a $6.6 billion deal with the defense technology start-up to build out the 2 million square-foot facility. Anduril will invest $3.7 billion of its own money alongside up to $2.9 billion in Navy contracts. In exchange, Trump said taxpayers “will receive a 40 percent stake in the new shipyard,” which is expected to be operational by 2030.
Virginia-class subs are among the most effective tools for deterring a Chinese invasion of Taiwan. The U.S. has been producing an average of 1.2 a year when the target is 2.33.
Anduril, best known for making autonomous vehicles, plans to break down complex designs into a large number of simpler tasks, reducing the need for highly trained workers. The new facility will start by producing smaller elements, such as torpedo tubes, before aiming to build larger and more critical components. These will be sent to Connecticut and Virginia for final assembly by other government contractors.
“We need to create more production capacity in the United States, and we need to create it the way it can be created from scratch in the year 2026,” Anduril President and Chief Strategy Officer Chris Brose told us. “It is unacceptable to lower the bar or cut corners on safety. But if the outcome can be certified as meeting the safety requirement and the mission requirement, then it doesn’t matter as much how we get to that outcome.”
Having a guaranteed customer cuts out a level of risk that most private ventures face when coming to market. Anduril’s payoff will depend largely on future defense appropriations, but there’s strong bipartisan demand for building subs. That alone gives investors in the capital markets plenty of confidence to invest, which is why Trump’s 40 percent announcement was puzzling.
A government ownership stake in the shipyard did not come up in our conversation with the company ahead of the president’s announcement. Giving the government equity introduces a conflict of interest that risks creating market inefficiencies and barriers to entry for new competitors.
The project is already receiving plenty of local government subsidies to get off the ground. Baltimore County, which will gain over 3,000 jobs at the facility, is planning to match up to 13 percent of the $3.7 billion in private investment.
Just a week before Anduril’s announcement, a competitor, Saronic, broke ground on Port Alpha, a shipyard in Texas that will build autonomous and crewed ships. The company made a private capital investment of more than $3 billion. Refreshingly, there was no government equity stake involved.
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