The US defense market is entering a period of heightened technological intensity. GlobalData forecasts the US defense budget at $1.05tn in 2026, rising to $1.71tn by 2031, with acquisition and research, development, test and evaluation accounting for 43.1% of the 2026 budget. By 2031, the combined allocation for acquisitions and R&D is projected to reach $956.1bn.
GlobalData identifies drones, long-range strike, AI, hypersonics, advanced materials and space-based systems as key drivers of US defense spending, alongside major programmes including the F-35, B-21 Raider, Virginia-class submarines and military space-based sensors. The largest forecast market segments for 2026 to 2031 include military fixed-wing aircraft, missiles and missile defense, simulation and training, submarines and military satellites.
For foreign small and medium-sized enterprises, this creates opportunities but also practical challenges. The US defense market favors domestic supply, and the Buy American framework can make direct entry difficult. Most opportunities for foreign suppliers may lie in supply chain participation, joint ventures and components that are not readily available domestically. The production problem is particularly acute in high-rate manufacturing, where missiles, drones and other expendable systems rely on complex supply chains involving semiconductors and rare earth elements.
How Austin’s defense ecosystem brings the supply chain together
The Austin region brings aerospace, defense, high-tech manufacturing, and semiconductors into a single operating environment, enabling companies to locate near talent, suppliers, research capacity, and advanced production assets.
According to Opportunity Austin, the regional economic partnership fostering innovation, investment, workforce development, and livability, the region now has more than 120 defense companies, 14,000 aerospace employees and 140,000 STEM jobs. Its aerospace and defense cluster is also supported by the US Army Transformation & Training Command (T2COM), headquartered in Austin, which was established in 2018 to drive technological innovation and warfighting capability. That institutional presence provides the region with a direct link to the US Army’s modernization agenda, while the wider ecosystem gives companies access to a commercial technology culture and defense-relevant engineering talent.
Established and emerging companies are already reinforcing that position. BAE Systems opened a $150m Austin facility focused on commercial, defense and space electronics, with work spanning autonomy, cyber, sensor development, radio frequency and electro-optical/infrared countermeasure systems. CesiumAstro, meanwhile, announced a $500m expansion of its Bee Cave headquarters in 2026 to scale US manufacturing for AI-enabled, software-defined space and defense systems, adding nearly 270,000 square feet of advanced manufacturing space and targeting more than 1,000 Austin-area employees by 2030.
Austin’s semiconductor base is arguably its most strategically important asset, with more than 180 semiconductor-related companies in the region, including more than 100 companies manufacturing semiconductors and related components, and over 60,000 employees in semiconductor-related industries. The region’s chip ecosystem spans design centers, manufacturers and chip makers, including Samsung, NXP, Applied Materials, Tokyo Electron and Infineon.
Semiconductors are integral to the systems that increasingly define military advantage, such as stealth aircraft, advanced drones, radar, secure communications, satellite payloads, missile systems, and battlefield computing. As export controls tighten and global supply chains remain exposed to geopolitical risk, domestic chip capacity becomes both an economic security priority and a national security asset. Texas recognized this through the Texas Semiconductor Innovation Fund, created under the Texas CHIPS Act, with total appropriations of about $948m, including an additional $250m in 2025.
Building the next phase of America’s defense economy
For companies seeking a route into the US defense sector, Austin offers proximity to defense modernization, a deep technology workforce, a mature semiconductor supply chain, and advanced manufacturing capacity.
As the US shifts spending towards platforms that depend on software, sensors, electronics and secure domestic production, Austin’s role is becoming more central. The region is helping to solve one of the sector’s hardest questions: how to turn next-generation technology into a scalable, trusted, and domestically anchored capability.
Opportunity Austin can help investors identify sites, partners, incentives and workforce pathways. To find out more, download the whitepaper below.
