Defense spending is a hot topic at this week’s Singapore Air Show, but it’s not an accurate way to measure military power, Palmer Lackey, founder of defense technology company Anduril Industries, told CNBC’s “Squawk Box Asia” on Wednesday.
This comes after US President Donald Trump expressed interest in January in increasing the US military budget to $1.5 trillion in 2027, saying it would allow Washington to build a “dream army.”
“Too many people measure the success of defense bases in dollars,” Lackey said.
Rather, military power should be measured by output, or the amount countries actually receive from their spending, he said.
This is part of the reason why U.S. defense companies are not incentivized to produce cheaper military products, Lackey added.
Ranked No. 1 on the 2025 “CNBC Disruptor 50” list, Anduril Industries was founded by Luckey in 2017. The company, which makes AI-powered autonomous defense products, is currently valued at $30.5 billion.
Measure production, not dollars
“Unfortunately, the defense industrial equipment that we have is very inefficient,” Lackey said. “I don’t think we get nearly as much income per dollar as many other countries.”
Lackey said China is “getting more planes, more missiles, certainly more ground forces for every dollar it spends. So you could end up in a situation where China spends less than the United States, but its production doubles, triples, even quadruples.”
China’s military budget for 2025 has been set at 1.78 trillion yuan (approximately $249 billion).
According to Chinese state media, China’s shipbuilding capacity is approximately 232 times that of the United States, and the Chinese government holds 66.8% of global orders as of the end of December 2025.
Anduril CEO Palmer Lackey attends the Reagan National Defense Forum held at the Ronald Reagan Presidential Library in Simi Valley, California, USA on December 6, 2025.
Jonathan Alcorn | Reuters
“We need to take action to make sure that everything that currently costs $1.5 trillion can be done for less than $1 trillion,” he said. “I would love to see a defense budget of less than $500 billion if it would get us what we need.”
But U.S. defense spending isn’t set up to make that happen, he said. The current system rewards companies that make products that move slowly, “break often,” and “spend money building the wrong thing.”
“Totally fair”
In early January, President Trump criticized U.S. defense companies for prioritizing capital returns and executive compensation over investment and meeting deadlines.
In a Jan. 9 post on Truth Social, Trump did not name any companies, but said he would not allow defense companies to pay dividends or buy back stock “until these issues are resolved.”
Mr Lackey called the criticism “totally fair”.
“Defense companies are unique in that they earn almost all of their money directly from taxpayers’ wallets,” he said.
“Remember, he didn’t say, ‘Hey, you guys are overbuilding the period.’ He said… You can’t just pay yourself tens of millions of dollars and rake in tons of money for investors like you’re a successful company if you’re going to be billions of dollars over budget and years behind on deadlines,” Lackey said.
He added that major U.S. defense companies cannot be blamed for the supply chain problems that have worsened during the COVID-19 pandemic and continue to plague the industry.
“This is not a one-year mistake; this is a pattern. This has been going on for decades, not months or years.”
He also rejected the idea that President Trump’s criticism could soon apply to Anduril Industries, saying Anduril Industries would “almost certainly” go public in the future.
“We are delivering on schedule,” he said. And it’s “within budget.”
