US defence company Lockheed Martin Corp has been selected as the preferred bidder to supply the combat system for Australia's new $50 billion fleet of submarines, the Defence Industry Minister Christopher Pyne will announce on Friday.

Lockheed Martin beat out competition from US rival Raytheon Co, which built the system for the country's existing Collins-class submarines.

Defence Industry Minister Christopher Pyne will announce the deal on Friday. Credit:David Mariuz

French naval contractor DCNS Group was chosen in April to build 12 new submarines in a deal worth $50 billion - one of the world's most lucrative defence contacts. France beat out offers from Germany's ThyssenKrupp Marine and Japan's Mitsubishi Heavy Industries and Kawasaki Heavy Industries.

Japan's bid had been seen as an early frontrunner, helped by a view that the United States wanted to cement security ties between regional allies Japan and Australia to counter China's growing assertiveness in the South China Sea and beyond.