Navy secretary warns shipyards must ‘act like we’re at war’ as China’s AI-powered fleet races ahead

US Navy

Navy secretary warns shipyards must ‘act like we’re at war’ as China’s AI-powered fleet races ahead

Secretary Phelan says service 'cannot afford to stay comfortable' facing submarine delays and supply-chain failures

Morgan Phillips Fox News

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December 10, 2025 12:30pm EST

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The Navy is warning that the United States must treat shipbuilding and weapons production with the urgency of a country preparing for conflict, with Navy Secretary John Phelan declaring that the sea service "cannot afford to stay comfortable" as it confronts submarine delays, supply-chain failures and a shipyard system he says is stuck in another era.

Phelan delivered the blunt message as he launched the service’s new Rapid Capabilities Office — an organization he says will slash development timelines, hold programs accountable and inject commercial technology into the fleet far faster than the Pentagon’s traditional acquisition system allows.

"We’re shifting from process to performance," Phelan told an audience of defense companies, investors and Navy officials Tuesday in Washington. "Programs are treated like entitlements. That ends now."

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His remarks come as the Navy faces years of criticism from Congress and outside analysts over submarine production delays, chronic maintenance bottlenecks and missed shipbuilding targets — problems service leaders warn now carry real strategic consequences. China, meanwhile, is racing ahead with heavily automated, AI-enabled shipyards that have allowed Beijing to expand its fleet far faster than the U.S.

Phelan urged shipyards and program offices to "act like we’re at war" when it comes to production and readiness.

He argued that the Navy's existing acquisition model, in which major programs spend a decade navigating paperwork before reaching the fleet, is no longer viable.

"Modern weapons systems take ten years or more to design. You’d never accept that in private markets, and neither will we," he said. "Our adversaries are not slowing down. We must evolve faster."

Navy Secretary John Phelan speaks to the media on the USS Somerset on Tuesday, Aug. 26, 2025 in National City, California.

Navy Secretary John Phelan urged shipyards and program offices to "act like we’re at war" when it comes to production and readiness. (Meg McLaughlin / The San Diego Union-Tribune via Getty Images)

His call for a wartime footing comes as Beijing rapidly modernizes its navy and pours AI-driven automation into its shipyards.

Chinese state shipbuilders have spent the past decade building "smart" production lines that use machine learning to optimize welding, cut design cycles and predict bottlenecks in real time — advantages the U.S. industrial base has struggled to match.

The Trump administration has been laser-focused on reversing that trend. China now has more than 230 times the shipbuilding capacity of the United States, according to the Office of Naval Intelligence — a gap officials say underscores how urgently America must overhaul its acquisition system.

Analysts say China’s ability to push new hulls into the water at a pace that dwarfs American production reflects its aggressive use of AI-assisted hull design, robotic welding and digital-twin modeling. With China experimenting with unmanned and autonomous vessels and accelerating its shipyard output, U.S. officials say the Navy can no longer afford slow decision cycles or yearslong contract delays.

After his speech, Phelan met with a small group of reporters alongside Alex Karp, the CEO of Palantir, a software and data company known for its work with U.S. defense and intelligence agencies, to explain one of the most concrete steps the Navy is taking to accelerate production: an AI-powered logistics and manufacturing platform known as Ship OS. The Navy has awarded a $448 million investment to stand up the system and push AI-enabled tools across public and private shipyards.

Ship OS is being deployed first across the submarine industrial base — the most complex and backlogged segment of U.S. shipbuilding — before expanding to carriers and other platforms. But the effort faces the same challenge that has plagued previous Navy modernization attempts: whether shipyards, suppliers and the service itself can adopt new digital tools quickly enough to produce measurable gains.

Palantir CEO Alex Karp said Ship OS unifies the data scattered across planning, maintenance and inventory systems that often don’t speak to one another. (Jemal Countess/Getty Images for Jacob Helberg)

Phelan said some shipyards still rely on processes that "haven’t changed since the 1980s," despite the complexity of modern submarines, which require millions of labor hours and thousands of bespoke parts. Ship OS, he argued, can spot breakdowns months before they halt production lines.

"Rather than hearing about a problem that day that will stop us, we will know 60, 90, 120, 180 days in advance," he said.

Karp said Ship OS unifies the data scattered across planning, maintenance and inventory systems that often don’t speak to one another. Early tests, he said, have cut planning tasks that previously took 160 hours down to minutes and reduced material-review backlogs from weeks to under an hour.

Asked whether the tool could help recover the Navy’s slipping timeline on the Columbia-class ballistic-missile submarine — now more than a year behind — Phelan said the system is already identifying opportunities to claw back time.

"If you want to move from one boat a year to two, the only way to do it is to understand in real time what’s holding you up and what has to be fixed first," he said.

(Handsome Bob/Getty Images )

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Beyond parts and schedules, Karp said the submarine industrial base is constrained by a shortage of highly specialized labor — a challenge software alone cannot solve.

Submarine welding is so technically demanding that "it takes more time to teach a welder how to weld on a nuclear submarine than a doctor," he said.

He argued that tools like Ship OS can help close that gap by capturing the knowledge of the Navy’s most experienced craftsmen and making it usable by less-seasoned workers. The system, Karp said, is already enabling workers "who would otherwise have the ability to do non-complicated welding" to perform tasks that previously required elite specialists.

Former congressman and current Palantir head of defense Mike Gallagher said early pilots revealed how much inefficiency had been baked into daily operations. He pointed to repair yards where even routine decisions about what parts to buy were handled manually with whiteboards and scattered spreadsheets.

"It was entirely manual," Gallagher said. "Now the same process is done in under an hour — and they’re projecting more than 2,500 planning days a year saved."

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The Navy has not yet released data showing how widely those gains can be replicated across the industrial base, and similar past initiatives have struggled once programs scale beyond initial test sites.

The Ship OS initiative also marks a shift in how the Navy intends to hold contractors accountable. Unlike many Pentagon software deals, the effort is structured around measurable results, not billable hours. The Navy says Palantir will receive the full value of the contract only if the system produces documented gains in productivity and output.

"You're forcing us to absorb risk," Karp said to Phelan. "We get paid as we perform."

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Phelan said that approach will become the model for how the service evaluates new systems. "We will tell you quickly what works and what doesn’t," he said. "If technology doesn’t deliver, we will say so fast. And if it does perform, we will scale it just as fast."

"The character of warfare is changing," Phelan said. "We cannot afford to stay comfortable."

Navy secretary warns shipyards must ‘act like we’re at war’ as China’s AI-powered fleet races ahead

Navy secretary warns shipyards must ‘act like we’re at war’ as China’s AI-powered fleet races ahead

Secretary Phelan says service 'cannot afford to stay comfortable' facing submarine delays and supply-chain failures

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