Short read: Palmer Luckey and Anduril want to shake up armsmaking

Indian companies catering to the increasing indigenisation of defence spending by the Indian government have seen their stock prices soar over the past couple of years. A different trend is emerging in America which could likely spread to the rest of the world. The American defence industry largely controlled by a handful of behemoths is now being threatened to be disrupted by startups. Here’s a story about one such startup Anduril founded by 31 year old Palmer Luckey who first made his fortune selling his virtual reality start up to Facebook. Luckey reckons the war in Ukraine has a lot to do with this disruption:

“One is the importance of drones that can navigate and strike autonomously, even in the face of heavy jamming of their signals and obscurants like metal-filled smoke clouds. Many existing drones have struggled with this, says Mr Luckey, because they lack “multi-modal” sensors, such as optical and infrared cameras, to substitute for gps, and do not have enough built-in computing power to use the latest object-recognition algorithms.

Second is the observation that software is eating the battlefield. Imagine that Russia begins using a new type of jammer. Mr Luckey says that the data can be sent back immediately to generate countermeasures, which are then remotely installed on weapons at the front line without having to change any hardware. A recent study by the Royal United Services Institute, a think-tank in London, noted that drones in Ukraine needed to have their software, sensors and radios updated every six to 12 weeks to remain viable. Anduril, claims Mr Luckey, is “literally pushing new updates…every single night”.

His third lesson from Ukraine is that weapons must be built in vast quantities—and therefore cheaply. He laments that Russia produces shells and missiles far more cheaply than America does: “The us is now on the wrong side of an issue that we were on the right side of during the cold war.” Anduril makes much of the fact that its production processes are modelled not on big aerospace firms, but automotive ones. Its head of manufacturing is a veteran of Toyota and Tesla, two carmakers. Its submarine drones are made using welded metal plates rather than a pressure vessel “because that can be made in something that looks a lot like a General Motors plant rather than a Lockheed Martin aircraft-assembly facility or a naval shipyard”.

If you want to read our other published material, please visit https://marcellus.in/blog/

Note: the above material is neither investment research, nor financial advice. Marcellus does not seek payment for or business from this publication in any shape or form. Marcellus Investment Managers is regulated by the Securities and Exchange Board of India as a provider of Portfolio Management Services. Marcellus Investment Managers is also regulated in the United States as an Investment Advisor.

Copyright © 2022 Marcellus Investment Managers Pvt Ltd, All rights reserved.