Japan is shifting its Cold War-era defense strategy and is now focusing more on the geopolitical tensions in the region. The country needs to replace its aging F-4 Phantoms that have been in service for almost 30 years now. Moreover, with 18 of its F-2 aircrafts destroyed in the March earthquake and tsunami, Japan looks really keen to acquire new fighters. The country is expecting bids this month from various players.
What's the deal?
Japan, which was always eyeing Lockheed's F-22, has decided to settle for the maker's fifth-generation F-35 Joint Strike Fighter because of the U.S. ban on F-22 exports. Lockheed counts on its superior stealth technology, which allows aircraft to spy and combat jointly.
However, the landscape is dotted with competitors. Lockheed is facing stiff competition from its peers, Boeing
And now for something completely different
However, there is a small twist in the story. The development phase of the F-35 has been extended to 2016. And that's a long time to wait for Japan, considering North Korea's aggressive posturing and the fast changing-geopolitical dynamics in Japan's part of the world. This could be an advantage for Boeing. Also, If Japan opts for F-18s, then there's an added advantage of employing the services of Northrop Grumman
However, I still believe Lockheed has a better hand. With its focus on superior spying, I doubt that Japan will settle for fourth-generation fighters. Clearly, the F-35 is worth the wait.
Foolish bottom line
Though only time will tell who gets to grab the $4 billion deal, Lockheed's expertise in stealth technology and its long association with Japan improve its chances manifold. Coming at a time when the company lost an $11 billion contract from India and the defense industry is witnessing steeper budget cuts, investors would welcome such a deal -- if it happens.
Add Lockheed to My Watchlist.