When the US Air Force signed the 12-14th batch agreement of F-35 in 2019, it is expected that by the 13-14th batch agreement, the unit price can be reduced to less than US$80 million, and the 14th batch actually reaches US$78 million. The US Air Force is the military ordering representative of the F-35 program. The F-35 of the Navy and Marine Corps also entrusts the Air Force to negotiate and order. Foreign orders are also ordered from Lockheed by the US Air Force to achieve the maximum batch economic effect. But the unit price of $80 million is only referring to the Air Force's F-35A, the Navy's F-35C and the Marine's F-35B, and the unit price is better and the batch size is smaller.
However, now Lockheed publicly promotes that the unit price of $80 million is no longer possible. There are three reasons: inflation, epidemic, and order batch decline. It should be pointed out that the unit price of US$80 million is priced in the unchanged US dollar in 2019, and inflation adjustment has been included.
But high inflation is no longer a problem of adjustment. The entire supply chain is rising, and labor is also rising. The epidemic is still causing chaos, and we will not let you down. Although the peak has passed, the abnormal mortality rate is much higher than in previous years.
Black wavy line is the seasonally adjusted pneumonia, influenza , new crown (PIC for short) mortality rates reach the trigger line for the national pandemic. Red is the actual mortality rate of PIC, yellow is influenza death, and blue and gray is the new crown death. Obviously, now that the vaccine rate and infection rate have greatly increased compared with before the epidemic, the PIC mortality rate is still higher than normal, which means that more people are ill and absent from work due to PIC, which inevitably affects production. Lockheed's previous production target was to produce 169 aircraft annually, falling to 152 aircraft in 2021 and expected to increase to 156 aircraft in 2023, which is still lower than expected.
However, the decline in military order batches is also a big problem.
When the 12th to 14th batch was signed in 2019, 478 aircraft were ordered at once (including orders from the United States and allied countries). In July 2022, there were only 375 aircraft in the 15th to 17th batches of draft , a decrease of 103 aircraft, a reduction of more than 20%. The U.S. Air Force originally planned to order 60 aircraft throughout the 2020s, but only 48 aircraft were ordered in fiscal 2022 and further reduced to 33 aircraft in fiscal 2023.
Whether the F-35 is a cheating US or a cheating father, in the next ten years, this is the only fighter that the US Air Force can order in large quantities. Boeing's F-15X plan has been cut in half. Unless there is another turnaround, subsequent orders will be terminated soon. The F-35's basic flight performance does not have much room for improvement. The three-passage engine may improve range, acceleration, and bomb load, but the speed and maneuverability are limited by the aerodynamic design and it is no longer possible to improve significantly.
But the electronic system and weapon system are still improving. The current production standards are actually just reaching the initial benchmark, and the third version of the software only reaches the benchmark level specified at the start of the plan twenty years ago. 3I is the initial standard and 3F is the final standard. This is the current production type. The fourth edition has added technological progress and new requirements over the past 20 years. This is the first time that the F-35 software-based fighter has achieved new combat effectiveness through soft upgrades at the engineering level. Software upgrades may not solve the problem of insufficient hard performance of the F-35, but if you do not upgrade, you may not even have enough soft performance.
The problem is that software upgrades require the cooperation of hardware upgrades. In the early days, the F-35 could not even upgrade 3I and 3F, and could only retreat to the second line for training. The current production model also needs hardware upgrades to refresh to the 4I and 4F standards. The US Air Force is outdated if it doesn’t want to leave the factory. It will have to wait until the 4I and 4F are offline before ordering batches are increased. The 15th batch is expected to begin. Even so, the US Air Force only intends to increase the annual order quantity to 47 aircraft in fiscal 2026 and 2027. The hardware and software of the 4I and 4F standard had to "raise prices normally", so the days when the unit price of the F-35 is less than US$80 million will probably be gone. The 15th-17th batch agreement for
is just a draft sign now, and the final pricing has not been announced yet. It will not be settled until both Lockheed and the US Air Force have approved it. It is generally expected that this is not just more than $80 million. How much higher is, it will take the final agreement to see the final agreement.Inflation is in the range of 8-9%, plus the new hardware and software that reduces batches by 20% and 4I and 4F, it is very conscientious to increase the price by 20% compared with the 12th to 14th batches. It should not be surprising if the price increase is 30%.
F-35 is a weather vane for US arms construction in many ways. On the one hand, this still represents the technological frontier in many aspects; on the other hand, since the project was launched, the strategic situation in the United States has undergone earth-shaking changes, and the positioning of equipment is insufficient to estimate the future threat environment. Upgrading after leaving the factory is not an option, but a must.
But the economic order of "the United States prints money and China works" has also begun to derail. The US dollar was the gold standard , but later it turned into the oil standard. When China's foreign trade was settled in a large amount of US dollars, Chinese manufacturing was endorsing the US dollar, and the US dollar was getting the best. But the days of the gold standard have long passed, and the oil standard is not very inspiring. After the COVID-19 pandemic, OPEC+ has released the United States several times. The non-dollarization of Russian oil and gas settlements and the internationalization of the RMB are all squeezing the space for the US dollar to make money.
inflation is a more powerful gold-swalking beast. Military pay must increase with inflation, and a large amount of daily operating expenses also increase with inflation, but military expenditures cannot increase with inflation. The United States can no longer afford 8-9% of military expenditures, and the result will inevitably be a squeeze on new purchases and upgrades. However, the reduced procurement quantity in turn pushes up unit prices and further limits procurement batches. This was originally a vicious cycle that the F-35 plan hoped to break, but in the end it jumped back. F-35A unit price may rise back to 100 million, which is an example .
price increase is also bad news for allies. Originally, the F-35 was not cheap, because the initial price was too high and various technical problems, it could not be sold for a long time. Now it has finally dropped to be competitive with F-16V and F-18E, but the price is about to rise again.
Allies that have already started ordering are also very worried. They are basically 3I and 3F standards. Whether they can upgrade to 4I and 4F is a question. You can always upgrade at any cost, but not everyone has the ability to do so at this price. Even if you can upgrade now, it may not be possible to skip the current upgrade and directly upgrade to 5I and 5F. Sometimes you need to upgrade to 4I and 4F first to upgrade to 5I and 5F. You still have to pay tribute to all the money you want to save back then. The British AH-64D "Apache" is the problem. I want to save money and skip the upgrade. As a result, after a few years, not only can I upgrade it, but I don't even have spare parts.
This problem is even greater for highly software-based F-35. Israel is not afraid. Not only does it have the protection of the United States, but its own technical strength is also very strong. However, countries such as South Korea and Japan that ordered F-35 early will not be able to handle the upgrade and may be slaughtered in the future.
But the biggest result of the F-35 was the murder of the Western fighter industry, and the allies had no choice. The price-raising F-35 further emptied the military spending of allies, which is not a bad thing for the non-beautified world.
