Earlier this month, President Donald Trump and Defense Secretary Pete Hegseth visited Sparrows Point, Maryland, to announce a significant investment aimed at revitalizing the United States submarine industrial base. Defense technology firm Anduril plans to invest $3.7 billion to establish a new shipyard, Arsenal-2, at the former Bethlehem Steel site near Baltimore. The U.S. Navy has also awarded Anduril a contract potentially worth $2.9 billion to support this initiative.
Arsenal-2 is expected to play a critical role in addressing longstanding challenges in U.S. submarine production. Since 2011, the Navy has ordered approximately two attack submarines annually, but recent output has averaged only about 1.2 per year. The Navy’s current chief of naval operations, Admiral Daryl Caudle, informed Congress in May that reaching the target of two submarines per year will likely occur by 2032, nearly four years later than previously projected in 2023. The fleet’s production pressures are compounded by maintenance backlogs, with one-third of submarines undergoing or awaiting service, and commitments under the AUKUS defense partnership to supply three submarines to Australia.
The production delays chiefly stem from the complexity of submarine construction and the fragility of the supply chain. Critical components such as submarine propulsors rely on only a few specialized suppliers able to cast and forge large parts. The steel plating needed for hulls comes from a limited number of mills capable of producing the required plate sizes. Advanced sonar arrays incorporate thousands of ceramic transducers manufactured to exacting standards by few companies worldwide. Additionally, a forthcoming Pentagon policy prohibiting defense contractors from sourcing rare-earth magnets from China poses further supply challenges. Even submarine acoustic tiles that reduce sonar detection require adhesives with precise formulations, meaning any modifications necessitate extensive retesting.
Traditionally, submarine assembly has been concentrated at two shipbuilders: General Dynamics Electric Boat in Connecticut and Huntington Ingalls’s Newport News Shipbuilding in Virginia. The new Anduril facility aims to expand production capacity beyond these established yards. However, experts emphasize that the success of Arsenal-2 depends on strengthening the entire supply chain, which includes roughly 70 percent of smaller suppliers without direct competitors.
Industry observers and policymakers have outlined three key criteria to evaluate the Anduril project’s impact. First, Arsenal-2 should increase supplier capacity rather than merely competing for the same limited resources. This requires multiyear purchase commitments and support to help smaller suppliers invest in new equipment and facilities. Second, the project must grow the overall skilled labor force rather than pulling experienced workers from existing shipyards or suppliers. Anduril plans to recruit from other industries, such as aerospace and automotive sectors, as well as educational institutions in the region. Third, components produced by Arsenal-2 must contribute to shortening submarine build times through better alignment with final assembly schedules at Electric Boat and Newport News.
In 2024, the Government Accountability Office reported that the Navy lacked consistent methods to measure whether its investments were effectively increasing output. Anduril’s contract structure, which emphasizes pay-for-results based on demonstrated production metrics, presents an opportunity for greater accountability. Lawmakers are encouraged to track component acceptance rates and assess whether overall submarine production timelines improve.
While Arsenal-2 will not instantly resolve all capacity issues upon commencing operations around 2030, its contribution will be judged by whether it enables submarines to be delivered sooner from Connecticut and Virginia shipyards. Historical parallels are drawn to the Bethlehem Steel Fairfield yard’s role during World War II in scaling Liberty ship production through a nationwide network of suppliers. For Arsenal-2 to achieve similar success in boosting U.S. submarine output, fostering the growth and resilience of smaller component manufacturers across the supply chain will be essential.