Why It Matters
A record-setting Pentagon budget request and hard lessons from recent conflicts are reshaping how the United States buys weapons — and triggering an intensifying competition among states for the factories, jobs, and economic investment that come with it.
The shift is moving defense manufacturing away from entrenched legacy contractors and toward a new class of agile startups, with states like New Mexico, Arizona, and Tennessee vying for a piece of the industrial buildout.
What Happened
The Pentagon is overhauling how it develops and procures weapons systems, prioritizing rapid development, production at scale, and faster delivery to the battlefield. The change follows conflicts in Ukraine and the Middle East that exposed the limits of existing stockpiles and the difficulty of replenishing munitions quickly enough to sustain high-intensity warfare.
One company at the center of this transformation is Castelion, a three-year-old hypersonic missile startup headquartered in Torrance, California. Founded by three veterans of SpaceX, the company is applying the commercial aerospace firm’s engineering and manufacturing philosophy to weapons development — an approach one industry analyst described as the “SpaceX-ification of the Pentagon.”
Castelion broke ground in January on a 1,000-acre manufacturing campus in Sandoval County, New Mexico, roughly 30 miles north of Albuquerque. The company selected New Mexico over Arizona and Tennessee, drawn in part by the state’s established defense workforce and proximity to Sandia and Los Alamos National Laboratories.
By the Numbers
The scale of the investment underlines how seriously the defense industry is treating the manufacturing gap:
- $1.5 trillion — the Trump administration’s Pentagon budget request, described as unprecedented in size
- $550 million — private capital raised by Castelion to date
- $220 million — estimated cost of the New Mexico manufacturing campus
- 500 missiles per year — the minimum annual delivery Castelion is contracted to produce, with the potential for thousands more
- 300 jobs — high-paying positions expected at the New Mexico facility, which is projected to generate $650 million in regional economic impact over the next decade
Castelion’s first weapons system, called Blackbeard, is being developed under firm-fixed-price contracts — a structure that shifts financial risk from the government to the contractor, a departure from the cost-plus arrangements that have long defined major defense procurement.
The SpaceX Alumni Behind the Push
Castelion’s leadership team brings deep roots in commercial aerospace and finance. CEO Bryon Hargis previously led SpaceX’s national security product development. COO Sean Pitt served as SpaceX’s director of commercial sales and earlier worked as an aide to former U.S. Senator Dick Durbin. CFO Andrew Kreitz came to Castelion from a background in investment banking at Goldman Sachs and senior finance roles at SpaceX.
Pitt has said the company is applying standard commercial manufacturing strategies to a sector that has not seen such methods in decades. The goal is to bring missile production costs down to hundreds of thousands of dollars per unit — a fraction of what many current systems cost.
Zoom Out
The competition for defense manufacturing investment reflects a broader national trend. As the Federal Reserve monitors inflation pressures and the administration pushes domestic industrial expansion, the defense sector is emerging as one of the most active arenas for capital deployment and job creation.
State economic development offices are increasingly treating defense startup recruitment the way they once pursued automotive plants or semiconductor fabs — offering land, infrastructure, and workforce incentives to attract facilities that bring both high-wage employment and long-term federal contract revenue.
The emergence of venture-backed defense startups operating under commercial manufacturing models mirrors patterns seen in the commercial space launch industry, where SpaceX’s cost-reduction approach disrupted incumbents and forced a structural rethink of the entire sector.
What’s Next
Castelion’s New Mexico campus is expected to ramp toward its contracted production minimums as construction progresses. The broader Pentagon procurement shift is likely to accelerate competition among states and generate additional site searches from other defense-focused startups seeking to fill gaps in the U.S. munitions industrial base. With a range of defense-related legal and policy questions working through the courts and Congress, the regulatory and funding environment for weapons manufacturing is expected to remain an active area of federal policymaking.