Earlier this year, the United States Navy outlined a bold proposal to grow its battle fleet -- to increase its size by 59%, in fact, to about 470 warships, including both crewed and uncrewed vessels. Big as that sounds, however, we now know the Navy is thinking even bigger.
As USNI News reported late last month, the U.S. Navy has floated an even more ambitious proposal to grow the fleet to 523 ships, of which 373 would be crewed vessels, and 150 uncrewed -- robot warships. If Congress agrees to fund the expansion, the Navy could grow 77% in size over the next 20 years.
And a whole lot of U.S. defense contractors will make a whole lot of money.
Image source: US Navy.
Military math
Here's how the math works.
In his 2020 book To Provide and Maintain a Navy, retired Navy captain Henry Hendrix, formerly Director of the Naval History and Heritage Command, observed that the U.S. battle force comprised 295 crewed vessels, and no unmanned ships at all. He went on to argue that to meet its global commitments, the Navy will need to nearly double in size by 2040, growing to at least 456 ships, of which nearly 10% could be unmanned.
Perhaps in response to this suggestion, the Navy has now come up with a plan to build slightly fewer crewed warships than Hendrix suggested -- but vastly more unmanned vessels to support them. Specifically, by 2045 Chief of Naval Operations Adm. Mike Gilday wants the Navy to be able to field a battle fleet of:
- 12 nuclear-powered aircraft carriers.
- 12 nuclear-powered, nuclear ballistic missile submarines.
- A mix of 66 nuclear-powered attack submarines and guided (non-nuclear) missile submarines.
- 96 missile-armed destroyers.
- 56 missile-armed frigates.
- 31 large amphibious warships (carrying helicopters and vertical take-off warplanes).
- 18 light amphibious warships (carrying primarily Marines).
- 82 auxiliary and logistics supply ships.
- And 150 large unmanned surface and unmanned underwater vessels.
Add them up and you get 523 ships. That's a lot of ships.
And yet, while this new Navigation Plan for the Navy -- or "NAVPLAN" -- is ambitious, it's also "realistic in terms of where we are right now [and] in terms of capacity and capabilities," argues Gilday, because the Navy will need a couple of decades to both build this "hybrid" manned-unmanned fleet, and teach sailors to integrate unmanned and crewed vessels so that they work together smoothly.
In the meantime, the NAVPLAN provides an opportunity to America's defense contractors.
What it means for investors
The most obvious opportunities presented by the NAVPLAN are for America's biggest military shipbuilders, General Dynamics (GD 1.48%) and Huntington Ingalls (HII 0.36%). Both companies are experienced builders of both surface and submarine warships, at least of the crewed variety. Less clear is which shipbuilders will benefit from the vast expansion of the Navy's fleet of unmanned warships, which currently number just a handful of experimental vessels, but -- if the NAVPLAN is followed as currently laid out -- will comprise the bulk of new warship additions over the next 20-odd years.
In this regard, it's worth noting that just last month, the Pentagon handed out a half dozen contracts, worth approximately $62 million in total, to multiple defense contractors to conduct "continued studies" -- and perhaps later construction -- of large unmanned surface vessels (LUSV) for the Navy.
According to Gilday, the Navy anticipates that this new class of unmanned warship will serve as a "missile carrier" supplementing the firepower of crewed warships. Established, publicly traded defense contractors including Huntington Ingalls, Lockheed Martin (LMT 1.24%) and Austal USA are all vying to land the work. Also winning contracts were Gibbs & Cox, now a subsidiary of Leidos (LDOS 0.74%); Marinette Marine, both a subsidiary of Italy's Fincantieri and a frequent Lockheed partner; and Bollinger Shipyards, which according to data from S&P Global Market Intelligence is currently the only truly private company on the list.
It's noteworthy that neither defense giant General Dynamics, nor L3Harris (LHX 0.02%) -- one of the bigger builders of the Navy's first series of experimental unmanned warships -- won one of these "large unmanned surface" study contracts. I admit to being more than a little surprised by that. But the logical conclusion is that, at this point, the Navy really has no idea whom it's going to pick to build up to 150 unmanned warships for it over the next 20 years.
The field really does look wide open for the time being, and it's anybody's guess who's going to win the billions of dollars worth of contracts that could soon be up for grabs.
