It seems that the cost of fabbing your own gps chip would be peanuts compared to the cost of even one missile. Given the raw GPS data its pretty trivial to do all location processing in software.
Due to my current job, I've had to become familiar with my country's export restrictions on some tech. I've since thought it would be great fun to start a string of projects with the goal of meeting those requirements that make them export-restricted. If nothing else, I know they are (at least mildly) challenging goals, and concrete specs to meet so that I know I've accomplished the goals.
You wouldn't need to fab your own chip. Plenty of FPGAs would work. In fact, you could make do with a decent speed ADC and a bit of software.