Office of the Under Secretary of Defense

for Acquisition and Sustainment

Office of the Deputy Assistant Secretary of Defense

for Industrial Policy

UNCLASSIFIED

UCSS

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Contents

I. Executive Summary.......................................................................................................... 1

II. Introduction....................................................................................................................... 7

III. Methodology .................................................................................................................. 11

IV. An Overview of America’s Manufacturing and Defense Industrial Base............... 15

The Domestic Manufacturing and Defense Industrial Base.............................................................. 16

The Global Manufacturing and Defense Industrial Base .................................................................. 16

V. Five Macro Forces Driving Risk into America’s Industrial Base ................................. 19

1. Sequestration and Uncertainty of U.S. Government Spending................................................. 20

2. Decline of U.S. Manufacturing Capabilities and Capacity..........................................................24

3. Deleterious U.S. Government Business and Procurement Practices .........................................32

4. Industrial Policies of Competitor Nations ...................................................................................34

5. Diminishing U.S. STEM and Trade Skills....................................................................................42

VI. Ten Risk Archetypes Threatening America’s Manufacturing and Defense Industrial 

Base.................................................................................................................................. 45

1. Sole Source ....................................................................................................................................46

2. Single Source .................................................................................................................................47

3. Fragile Supplier .............................................................................................................................47

4. Fragile Market.............................................................................................................................. 48

5. Capacity Constrained Supply Market ......................................................................................... 48

6. Foreign Dependency .....................................................................................................................49

7. Diminishing Manufacturing Sources and Material Shortages ...................................................49

8. Gaps in U.S.-based Human Capital..............................................................................................50

9. Erosion of U.S.-Based Infrastructure...........................................................................................50

10. Product Security............................................................................................................................ 51

VII. A Blueprint for Action ..................................................................................................... 53

Current Efforts .....................................................................................................................................53

Future Efforts and Recommendations ...............................................................................................54

Appendix One: Executive Order 13806................................................................................... 59

Appendix Two: Sector Summaries............................................................................................ 63

Traditional Defense Sectors ................................................................................................................64

Cross-Cutting Sectors ..........................................................................................................................87

Appendix Three: Contributing U.S. Government Agencies................................................ 105
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Appendix Four: U.S. Government Sources............................................................................ 111

Appendix Five: Industry Listening Sessions............................................................................. 119

Appendix Six: Agreements with Foreign Governments....................................................... 121

Photo Credits............................................................................................................................. 125

Endnotes.................................................................................................................................... 129
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I. Executive Summary

Requirement

On July 21, 2017, President Donald J. Trump signed Executive Order (EO) 13806 on Assessing 

and Strengthening the Manufacturing and Defense Industrial Base and Supply Chain Resiliency 

of the United States. The EO directs the Secretary of Defense to conduct a whole-of-government 

effort to assess risk, identify impacts, and propose recommendations in support of a healthy 

manufacturing and defense industrial base – a critical aspect of economic and national security.

1

 

The EO 13806 effort was initiated by the White House Office of Trade & Manufacturing Policy 

led by the Department of Defense’s Office of Industrial Policy in coordination with the 

Departments of Commerce, Labor, Energy, and Homeland Security, and in consultation with the 

Department of the Interior, the Department of Health and Human Services, the Director of the 

Office of Management and Budget, the Director of National Intelligence, the Assistant to the 

President for National Security Affairs, the Assistant to the President for Economic Policy, and 

the Assistant to the President for Trade & Manufacturing Policy. 

America’s manufacturing and defense industrial base (“the industrial base”) supports economic 

prosperity and global competitiveness, and arms the military with capabilities to defend the 
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nation. Currently, the industrial base faces an unprecedented set of challenges: sequestration 

and uncertainty of government spending; the decline of critical markets and suppliers;

unintended consequences of U.S. Government acquisition behavior; aggressive industrial

policies of competitor nations; and the loss of vital skills in the domestic workforce. Combined, 

these challenges – or macro forces – erode the capabilities of the manufacturing and defense

industrial base and threaten the Department of Defense’s (DoD) ability to be ready for the “fight 

tonight,” and to retool for great power competition. The following report explains the macro 

forces impacting the industrial base, identifies primary categories of risk, illustrates impacts 

within sectors, and provides recommendations for mitigation. 

Methodology 

The EO 13806 assessment evaluated risk based on current and planned operating priorities as of 

late 2017/early 2018. An Interagency Task Force, led by DoD, created sixteen working groups 

with over 300 subject matter experts from across the federal government. Nine working groups 

focused on traditional sectors; seven working groups assessed enabling, cross-cutting 

capabilities (Figure 1).

Figure 1: List of Traditional and Cross-Cutting Sectors

These macro forces collectively represent the root causes of ten risk archetypes distributed 

throughout the industrial base. The working groups identified discrete impacts within their 

sectors, many of which fall under more than one risk archetype, as illustrated in Figure 2. 
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Figure 2: Macro Forces Map to Risk Archetypes

Findings

The risk framework used for the EO 13806 effort evolved from the working groups’ assessments 

of their sectors. The assessment identified: 

 Five macro forces shaping industrial base-wide trends and causing a deterioration in 

U.S. capabilities;

 Ten risk archetypes resulting from the macro forces, each of which contribute to 

insecurity in DoD’s supply chain;

 Over 280 impacts across sectors, acutely affecting the vitality and resiliency of the

industrial base.*

Major findings include:

 Macro forces have led to impacts primarily in the sub-tiers of the defense supply chain;

 A surprising level of foreign dependence on competitor nations exists;

 Workforce challenges face employers across all sectors; and

 Many sectors continue to move critical capabilities offshore in pursuit of competitive 

pricing and access to foreign markets.

 

* A classified spreadsheet provides a comprehensive list of impacts across risk archetypes for fifteen sectors; 

due to its proliferation across sectors, the software engineering working group assessed impacts across all 

sectors.
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Recommendations 

The DoD-led Interagency Task Force recognizes ongoing efforts to address the challenges

identified in the EO 13806 assessment, including:

 Increased near-term DoD budget stability with the passage of the Bipartisan Budget Act 

of 2018, providing stable funding through Fiscal Year (FY) 2019

 Modernization of the Committee on Foreign Investment in the U.S. and investigations 

under Section 301 of the Trade Act of 1974 into Chinese intellectual property theft, to 

better combat Chinese industrial policies targeting American intellectual property

 Updates to the Conventional Arms Transfer policy and unmanned aerial systems export 

policy to increase U.S. industrial base competitiveness and strengthen international 

alliances 

 Reorganization of the former Office of the Under Secretary of Defense for Acquisition, 

Technology and Logistics, the work of the “Section 809 panel,” and development of the 

adaptive acquisition framework all aim to streamline and improve defense acquisition 

processes 

 Restructuring the Defense Acquisition University to create a workforce education and 

training resource to foster increased agility in acquisition personnel

 Response to Section 1071(a) of the National Defense Authorization Act for FY2018 which 

requires establishing a process for enhancing the ability to analyze, assess, and monitor 

vulnerabilities of the industrial base

 Creation of a National Advanced Manufacturing Strategy by the White House Office of

Science and Technology Policy, focused on opportunities in advanced manufacturing 

 Department of Labor’s chairing of a Task Force on Apprenticeship Expansion to identify 

strategies and proposals to promote apprenticeships, particularly in industries where 

they are insufficient

 DoD’s program for Microelectronics Innovation for National Security and Economic 

Competitiveness to increase domestic capabilities and enhance technology adoption

 DoD cross-functional team for maintaining technology advantage

 Implementation of a risk-based methodology for oversight of contractors in the National 

Industrial Security Program, founded on risk management framework principles to 

assess and counter threats to critical technologies and priority assets 

In addition to the ongoing efforts outlined above, the DoD-led Interagency Task Force created a 

set of recommendations aligned to four levers: investment, policy, regulation, and legislation. 

The recommendations are organized by the Secretary, with DoD’s recommendations provided in 

a classified Action Plan. In summary, the recommendations propose:

 Create an industrial policy in support of national security efforts, as outlined in the 

National Defense Strategy, to inform current and future acquisition practices
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 Expanding direct investment in the lower tier of the industrial base through DoD’s

Defense Production Act Title III, Manufacturing Technology, and Industrial Base 

Analysis and Sustainment programs to address critical bottlenecks, support fragile 

suppliers, and mitigate single points-of-failure

 Diversifying away from complete dependency on sources of supply in politically unstable 

countries who may cut off U.S. access; diversification strategies may include 

reengineering, expanded use of the National Defense Stockpile program, or qualification 

of new suppliers

 Working with allies and partners on joint industrial base challenges through the National 

Technology Industrial Base and similar structures

 Modernizing the organic industrial base to ensure its readiness to sustain fleets and meet 

contingency surge requirements

 Accelerating workforce development efforts to grow domestic science, technology, 

engineering, mathematics (STEM), and critical trade skills

 Reducing the personnel security clearance backlog through more efficient processes

 Further enhancing efforts to explore next generation technology for future threats

A challenge this large demands a multifaceted approach. Therefore, the classified Action Plan

also includes direction for DoD to conduct a comprehensive study on the industrial base 

requirements needed to support force modernization efforts, specifically focused on the 

technologies necessary to win the future fight. 
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II. Introduction

“It would, also, be a material aid to manufactures of this nature, as 

well as a mean of public security, if provision should be made for an 

annual purchase of military weapons, of home manufacture, to a 

certain determinate extent, in order to the formation of arsenals; and 

to replace, from time to time, such as should be drawn for use, so as 

always to have in store the quantity of each kind which should be 

deemed a competent supply.”

— Secretary of the Treasury Alexander Hamilton,

Report on the Subject of Manufactures (1791)

To provide for our national security, America’s manufacturing and defense industrial base must 

be secure, robust, resilient, and ready. To ensure taxpayer dollars are frugally and wisely spent, 

the defense industrial base must be cost-effective, cost-efficient, highly productive, and not 

unduly subsidized. In the event of contingencies, the industrial base must possess sufficient 

surge capabilities. Above all, America’s manufacturing and defense industrial base must 

support economic prosperity, be globally competitive, and have the capabilities and capacity to 
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rapidly innovate and arm our military with the lethality and dominance necessary to prevail in 

any conflict. As President Trump stated in the 2017 National Security Strategy: 

“A healthy defense industrial base is a critical element of U.S. power 

and the National Security Innovation Base.† The ability of the military 

to surge in response to an emergency depends on our Nation’s ability to 

produce needed parts and systems, healthy and secure supply chains, 

and a skilled U.S. workforce.”

2

All facets of the manufacturing and defense industrial base are currently under threat, at a time 

when strategic competitors and revisionist powers appear to be growing in strength and 

capability. As stated in the National Defense Strategy:

“The central challenge to U.S. prosperity and security is the 

reemergence of long-term, strategic competition by what the 

National Security Strategy classifies as revisionist powers. It is 

increasingly clear that China and Russia want to shape a world 

consistent with their authoritarian model – gaining veto authority 

over other nations’ economic, diplomatic, and security decisions.”3

At least five macro forces cause the risks now threatening America’s industrial base. From 

FY2012 through FY2017, sequestration led to lower defense spending relative to levels projected 

before sequestration was put in place. Antiquated and counter-productive procurement 

practices induced contracting delays, deterred market entry, discouraged innovation, and 

increased costs to suppliers. Decreases in key production capabilities and declines in 

manufacturing employment, relative to the last time the U.S. faced a great power competition,

left key weaknesses that threaten the nation’s manufacturing capabilities. The industrial 

policies of foreign competitors have diminished American manufacturing’s global 

competitiveness – sometimes as collateral damage of globalization, but also due to specific 

targeting by great powers like China. Finally, emerging gaps in our skilled workforce, both in 

terms of STEM as well as core trade skills (e.g., welding, computer numeric control operation, 

etc.) pose increasing risk to industrial base capabilities.

4

Arising from these macro forces is a set of ten risk archetypes with discrete impacts on 

America’s manufacturing and defense industrial base. These include the rise of single and sole 

source suppliers which create individual points of failure within the industrial base, as well as 

fragile suppliers near bankruptcy and entire industries near domestic extinction. Due to erosion 

that has already occurred, some manufacturing capabilities can only be procured from foreign 

suppliers, many of which are not domiciled in allied and partner nations. The concomitant gaps 

 

† The National Security Strategy defines the National Security Innovation Base as the American network of 

knowledge, capabilities, and people—including academia, National Laboratories, and the private sector—

that turns ideas into innovations, transforms discoveries into successful commercial products and 

companies, and protects and enhances the American way of life.
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in U.S.-based human capital and erosion of domestic infrastructure further exacerbates the 

challenge. Ultimately, these negative impacts have the potential to result in limited capabilities, 

insecurity of supply, lack of R&D, program delays, and an inability to surge in times of crisis. 

In recognition of these emerging threats, risks, and impacts, EO 13806,

5

initiated by the White 

House Office of Trade & Manufacturing Policy and signed by President Trump on July 21, 2017, 

directed the Secretary of Defense to conduct a whole-of-government assessment of America’s 

manufacturing and defense industrial base. The Secretary of Defense was further directed to

provide the President with a set of specific actions to address any identified risks and gaps. This 

report fulfills these directives.

Part III outlines the methodology used in this assessment of the industrial base. Part IV briefly 

describes America’s manufacturing and defense industrial base. Part V describes five macro

forces that collectively represent the root causes of the emerging threats to America’s industrial 

base, driving risk at the market and firm level. Part VI explains each of the ten major risk 

archetypes identified by the DoD-led Interagency Task Force, with examples identified by the 

sector working groups. Part VII provides a blueprint for specific actions to begin mitigating risk

and impacts within America’s manufacturing and defense industrial base. 
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III. Methodology

To meet the goals of EO 13806, the White House Office of Trade and Manufacturing Policy and 

the DoD’s Office of Industrial Policy established an Interagency Task Force and authorized a set 

of working groups.‡ Multiple organizations within DoD as well as the Departments of 

Commerce, Education, Energy, Homeland Security, and Labor contributed resources to the 16

working groups. Each working group, led by a sector specialist, assembled teams of subject 

matter experts – over 300 people in total – who identified manufacturing and industrial base 

risks, outlined sector-specific impacts, and recommended actions for mitigation.

The DoD-led Interagency Task Force identified and assessed nine traditional and seven crosscutting sectors of the manufacturing and defense industrial base, listed in Figure 3. Sectors –

ranging from aircraft and missiles to workforce and materials – were selected based on current 

operational priorities.

6

 Appendix Two provides sector definitions and case studies outlining 

 

‡ DoD’s Office of Industrial Policy (formerly known as Manufacturing and Industrial Policy) provides 

Congress with an Annual Industrial Capabilities report, which supplied a strong basis upon which to 

determine the sectors of focus for the EO 13806 effort. The Annual Industrial Capabilities report identifies 

risks but does not make recommendations, a major distinction between the two efforts. 
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examples of risk and impacts in each sector. To appropriately scope the EO 13806 effort, the 

Interagency Task Force recommended evaluation of next generation technologies as part of a 

follow-on effort. 

Figure 3: List of Traditional and Cross-Cutting (enabling) Sectors

To develop the manufacturing and defense industrial base assessment framework, the DoD-led

Interagency Task Force tasked each working group to determine risks within their sectors based 

on their individual frameworks. After gathering and analyzing the disparate risks across the 

working groups, a pattern of macro forces and risk archetypes emerged, coalescing in a 

comprehensive risk framework (Figure 4) from which to address the health of the industrial 

base.

Figure 4: Manufacturing and Defense Industrial Base Risk Framework
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Figure 5 provides additional detail regarding the risk framework. Columns one and two 

illustrate how macro forces such as budget sequestration or the decline of general U.S. 

manufacturing capabilities and capacity bear down on the manufacturing and defense industrial 

base to generate ten “risk archetypes” (e.g., reliance on a sole source, fragile supplier, foreign 

dependency, product security, etc.). The risk archetypes result in various impacts on the 

manufacturing and defense industrial base, outlined in column three. Finally, column four 

provides the various categories of recommendations to reduce or eliminate risk. 

Figure 5: Detailed Outline of the Risk Framework

The risk framework illustrates the multifaceted mapping endemic in the 21st century 

manufacturing and defense industrial base. A single macro force, such as U.S. Government 

business practices or budget uncertainties, may map to multiple risk archetypes. Conversely, 

multiple macro forces may create a single risk archetype. 

To demonstrate the interwoven aspects of the industrial base, consider the risks facing the 

aircraft sector, which include sub-sectors such as fixed wing, rotorcraft, and unmanned aerial 

systems. Each sub-sector faces challenges, including long product and system development 

timelines, high development and qualification costs, and production limitations. The challenges 

in the aircraft sector are driven by multiple risk archetypes, including single and sole source 

suppliers and gaps in U.S.-based human capital with expertise in critical hardware and software 

design capabilities. Collectively, these impacts could potentially reduce America’s capability to 

produce and field an aircraft fleet with superior capabilities. 

Such complex interactions between multiple risk archetypes are illustrated in Figure 6, which 

provides the count of each risk archetype by the sector working groups, found over the course of 

this assessment.
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Figure 6: Risk Archetype Analysis across the Working Groups

In all, the working groups of the DoD-led Interagency Task Force identified almost 300 impacts 

across the ten risk archetypes in the manufacturing and defense industrial base. A classified 

spreadsheet with risk archetypes and impacts for all sixteen sectors is available.§

The ultimate goal of EO 13806 was to conduct a comprehensive assessment of the industrial 

base and develop a set of specific, actionable recommendations to mitigate or eliminate the

identified impacts. In pursuit of this goal, the working groups relied on data and assessments 

from each of the coordinating agencies; qualitative feedback from industry listening sessions;

support from the Defense Science Board; and modeling and analysis from the Institute for 

Defense Analyses, a federally-funded R&D center contracted by DoD for support of the 

assessment. Appendix Three lists the agencies and offices who supported the assessment; 

Appendix Four provides a full list of government resources referenced; Appendix Five lists the 

industry listening sessions.

 

§ Given its proliferation throughout traditional sectors, the software engineering working group assessed 

impacts across sectors; as such, software risks are included in each of the sectors’ inputs to the classified 

spreadsheet, not as its own inputs.
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IV. An Overview of America’s 

Manufacturing and Defense 

Industrial Base

America’s manufacturing and defense industrial base consists of the end-to-end set of 

capabilities, both private and public, that design, produce, and maintain the platforms and 

systems (hardware and software) on which our Warfighter depends. With an extensive, multitiered global supply chain, the industrial base encompasses the extraction and refinement of 

primary materials, the manufacturing of components and parts, and the integration and 

sustainment of defense platforms and systems. It relies on a geographically and economically 

diverse network of private sector companies, R&D organizations, academic institutions, and 

government-owned facilities to develop and produce the technologies enabling U.S. military 

dominance and ensuring national security.
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The Domestic Manufacturing and Defense Industrial Base

For the purposes of this assessment, the domestic industrial base includes two categories of 

producers of goods and services – the private sector and the organic industrial base. The private 

sector (also known as the commercial sector) includes prime system integrators, major subsystem suppliers, component suppliers, and service providers, from small to large companies. 

Across multiple tiers of the supply chain, private sector companies produce defense-specific 

products exclusively for use by DoD and approved foreign buyers, including platforms, weapons 

systems, and components hardened for defense uses. Private sector companies may also 

produce products specially designated as “dual-use,” which have both military and nonmilitary 

applications and may be subject to export control, as well as commercial items without an 

explicit defense use.

7

The organic defense industrial base (also known as the organic base, or the government or 

public sector) includes government-owned, government operated and government-owned,

contractor operated facilities that provide specific goods and services for DoD. The organic base 

is composed of resource providers, acquisition and sustainment planners, and manufacturing 

and maintenance performers at depots, manufacturing arsenals, and ammunition plants. By 

law, some production and maintenance activities must be executed by organic base components.

The Global Manufacturing and Defense Industrial Base

The global elements of America’s manufacturing and defense industrial base include enterprises 

from countries with formal supply relationships with the United States (U.S.) and those without.

The National Defense Authorization Act for FY1993 established the National Technology and 

Industrial Base, codifying the highly integrated defense industrial cooperation between the U.S.

and Canada dating back to the Ogdensburg Declaration of 1940 and subsequent Hyde Park 

Declaration of 1941.8 The National Defense Authorization Act for FY2017 added the United 

Kingdom of Great Britain and Northern Ireland and Australia to the definition of the National 

Technology and Industrial Base.

9 These types of agreements with partners and allies provide 

economies of scale and scope, help facilitate cost-effective defense production, and increase 

Warfighter interoperability.

10

Some U.S. partners and allies outside the National Technology and Industrial Base are uniquely 

vetted and qualified to produce goods and services for DoD via secure defense procurement 

agreements. Bilateral Security of Supply arrangements allow DoD to request priority delivery 

for DoD contracts, subcontracts, or orders from companies in these countries, and allow the 

signatory nations to request priority delivery for their contracts and orders with U.S. firms. 

Security of Supply arrangements are conducted under the overarching Declarations of Principles 

for Enhanced Cooperation in Matters of Defense Equipment and Industry signed with 

participating nations. These arrangements encourage participating nations to acquire defense 
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goods from each other, promote interoperability, and provide assurance of timely delivery 

during peacetime, emergencies, and armed conflict. Security of Supply arrangements are 

currently in place with Australia, Canada, Finland, Italy, Netherlands, Norway, Spain, Sweden, 

and the United Kingdom.

Under Reciprocal Defense Procurement Agreements, countries afford each other certain 

benefits on a reciprocal basis, consistent with their national laws and regulations. Each 

Reciprocal Defense Procurement agreement provides a framework for ongoing communication 

between or among DoD and its respective counterparts regarding market access and 

procurement matters that contribute to effective defense cooperation. Key Reciprocal Defense 

Procurement agreement principles include: fair competition, reduced market barriers, 

transparent processes, and protection of intellectual property. In addition, U.S.-based 

subsidiaries of foreign defense companies are able to leverage the support, intellectual property, 

and design capabilities of their foreign parent companies, as well the U.S.-unique capabilities 

developed under special security agreements or a proxy voting trust. It should be noted that, in 

general, the U.S. maintains a positive trade balance for defense articles and services with 

countries who are signatories to Reciprocal Defense Procurement agreements. 

Through the ongoing globalization of industrial supply chains and commodities markets, a 

number of countries without formal supply agreements support the manufacturing and defense 

industrial base with items such as strategic and critical materials, commercial off-the-shelf 

products, electronics, and some defense components. Countries in this category include 

Kazakhstan, Singapore, Jamaica, and strategic competitors like China.

The picture emerging from this geographically and economically diverse network of providers is 

of an American industrial base with multiple opportunities for growth and innovation, but

increasingly dispersed and at risk from both domestic gaps and global forces.
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V. Five Macro Forces Driving Risk

into America’s Industrial Base

The micro-level sector analyses of the working groups led to identification of five inter-related, 

but conceptually distinct, macro forces (Figure 7). These macro forces collectively represent the 

root causes of the ten risk archetypes and associated impacts on America’s manufacturing and 

defense industrial base. We must address the five causes, and mitigate the risks and threats to

our industrial base, in order to prevent further erosion of America’s military dominance.

Macro Forces Definition

Sequestration and uncertainty 

of U.S. Government spending

Inconsistent appropriations, uncertainty about future budgets, 

macro-level ambiguity in U.S. Government expenditures, and the 

effects of the Budget Control Act create market instability

Decline of U.S. manufacturing 

base capabilities and capacity

Reductions across the U.S. manufacturing and defense industrial 

base affect the viability of suppliers, overall capacity, and 

capabilities available domestically

Deleterious U.S. Government 

business and procurement 

practices

Challenges working with DoD and other U.S. Government customers, 

including contracting regulations, policies, barriers to entry, 

qualification challenges, programmatic changes, and other 

problems, can lead to adverse effects on suppliers
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Macro Forces Definition

Industrial policies of competitor 

nations

Domestic industrial and international trade policies of competitor 

nations, notably the economic aggression of China, directly or 

indirectly degrade the viability, capabilities, and capacity of the U.S. 

National Security Innovation Base

Diminishing U.S. STEM and trade 

skills

Gaps in American human capital, including a lack of STEM talent 

and declining trade skills, diminish domestic capabilities to innovate, 

manufacture, and sustain

Figure 7: Definitions of the Five Macro Forces Driving Risks into America’s Industrial Base

1. Sequestration and Uncertainty of U.S. Government Spending

Markets thrive on predictability, allowing businesses to make informed decisions and invest in 

the future. Defense spending inherently fluctuates with the arming for conflict and subsequent 

drawdown and decrease of program funding. But as illustrated in Figure 8, these swings in 

funding can be very dramatic, particularly in the funding streams for weapon systems 

procurement and research, design, test, and evaluation. 

Figure 8: Defense Investment Spending From 1980 to 2017

A. Impacts of Budget Uncertainties

At the macroeconomic level, defense spending uncertainty makes predicting the overall market 

size difficult, impeding forecasting across every tier in the supply chain. Uncertainty in 

spending inhibits investment in capabilities even where the overall sector market size is 

increasing, impacting defense suppliers and leading to revenue fluctuation, capital investment 
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shortfalls, and suboptimal investment in R&D. Over time, spending instability also creates 

peaks of surge and valleys of drought – a pernicious, ambiguous pattern in which suppliers who 

build for scale production are left with excess capacity when programs end, creating long-term 

market distortion. 

The decade-long reliance on Congressional continuing resolutions11 has exacerbated uncertainty, 

both for DoD and across the supply chain. Combined with the adverse impacts of the Budget 

Control Act,12 these fluctuations challenge the viability of suppliers within the industrial base by 

diminishing their ability to hire and retain a skilled workforce, achieving production efficiencies, 

and in some cases, staying in business. Without correcting or mitigating this U.S. Governmentinflicted damage, DoD will be increasingly challenged to ensure a secure and viable supply chain 

for the platforms critical to sustaining American military dominance.

At the microeconomic level, DoD’s budget within a specific sector does not imply uniform, 

stable, or even predictable funding for suppliers. Such uncertainty creates negative 

ramifications within specific industrial base sectors, even in periods with overall growth in 

spending. For example, when the Navy is unable to provide consistent orders for ships, niche 

suppliers of components such as controllers and actuators for nuclear powered ships cannot 

accurately project workloads, creating inconsistency and increasing risk for production 

capabilities.

Wrought aluminum plate, and specifically cold-rolled plate, is essential for armoring U.S. 

ground combat vehicles, constructing Navy ships, and building military aircraft. Unlike other 

more common forms of rolled aluminum materials, thick cold-rolled aluminum production 

capabilities and capacities are unique. DoD relies on domestic producers as well as capabilities 

available from ally countries in Europe. Due to U.S. Government budget uncertainties, 

unpredictable DoD demand, and other commercial market factors, the defense industrial base 

can face challenges when trying to balance diverse demands for cold-rolled plate production 

capacity while also informing long-term internal capital investment decisions.

Challenges facing the ground systems sector illustrate the relationship between budget 

uncertainty and diminishing workforce skills. Ground systems provide defense-unique products 

for mobility and firepower and are divided into tracked and wheeled vehicles for combat, 

combat support, and combat service support. Under the weight of budget uncertainties, the 

ground systems industrial base conducted incremental adoption of new technologies on legacy 

designs in order to maintain or modify current ground systems. While this approach allowed

the military to defer the long schedules and high costs of new programs, it prevented ground 

systems development and maintenance personnel from experiencing the design to fielding

lifecycle for a new system. This resulted in a generation of technicians, engineers, and scientists 

lacking experience in conceiving, designing, constructing, and integrating technologically 

advanced combat vehicles. 
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B. Production and Cost Inefficiencies

Fluctuations in defense procurement create production and cost inefficiencies. With confirmed 

procurement and investments, suppliers will take on high fixed costs to develop expensive new 

capacity in order to meet programmatic needs. When programs draw down, companies are left 

with highly specialized production capabilities that may go unused for decades. As defensespecific products require extensive qualification testing and procedures, suppliers face a costly 

decision to keep facilities open for potential future production, or to shutter facilities, incurring 

costs and forcing DoD to pay reconstituion costs when the need arises.

The “bullwhip effect” of DoD spending forces inefficiencies across the entire supply chain. As

Figure 9 illustrates, the spike of recapitalization in space programs from 2000-2010, followed by 

a precipitous decline from 2010-2015, left suppliers with excess capacity.

Figure 9: The Bullwhip Effect within the Space Programs

Fluctuations in capacity requirements acutely affect suppliers of maintenance and operations 

support services, to the detriment of readiness. For example, Navy ships have suffered 

maintenance availability delays and deferrals, reducing time underway and diminishing U.S. 

power projection. One study by the Rand Corporation found unpredictability in ship 

maintenance reduced incentives to invest in facilities and human capital, delaying needed 

modernizations and putting future surge maintenance capabilities at risk. Navy maintenance 

providers faced long periods of low workload coupled with short periods of surge, leading to 

cycles of hiring and layoffs that ultimately deterred skilled workers from the sector.

13

A short history of the organic industrial base illustrates risk to overall readiness. The organic 

base, consisting of 17 major organic (government-owned, government operated) depot 

maintenance facilities and three manufacturing arsenals, provides maintenance and 
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manufacturing services to sustain approximately 440,000 vehicles, 780 strategic missiles, 278 

combatant ships14, and almost 14,000 aircraft.

15

 

Since 2001, DoD has operated at a very high tempo with unprecedented system usage in support 

of global deployments, changing previously accepted formulas that compute maintenance 

requirements. Of $587.9 billion total DoD expenditures in FY 2015,

16 $73.4 billion was for 

maintenance – aircraft represented $25 billion, followed by ships at $16.8 billion, and vehicles 

at $7.7 billion.17 Overuse and underfunding in infrastructure and workforce has eroded materiel 

readiness levels and facility conditions, directly impacting DoD’s ability to repair equipment and 

materiel quickly to ensure availability for training and future deployments. 

C. Harming Maintenance, Slowing Modernization

Continuing resolutions and the ongoing threat of sequestration exacerbate problems induced by 

defense spending uncertainty and hamper DoD’s ability to develop a more lethal force. After the 

Budget Control Act of 2011, which introduced sequestration of the defense budget, DoD’s 

procurement budget dropped 26% from its FY 2010 peak.18 This rapid decrease in spending has 

negatively impacted operations, maintenance, and modernization of U.S. forces and directly

impacted the viability of suppliers in the industrial base. 

A recent study by the Center for Strategic and International Studies estimates that from 2001 to 

2015, 17,000 companies ceased to be prime vendors for DoD.

19 Specialty manufacturers critical 

to the production of defense platforms have been especially hard hit and many are unable to 

make the modernization investments necessary to meet product requirements. For example, 

the single domestic source for large thin wall castings for rotary wing gearboxes filed for 

bankruptcy in 2016,

20 putting programs such as the AH-64E Apache, the V-22 Osprey, and the 

CH-53K Heavy Lift Replacement Helicopter at risk.

Unstable appropriations over the past decade created additional uncertainty in DoD’s

procurement plans, leading to unreliable demand signals to industry. Congress enacted over 30 

continuing resolutions since 2009, with an average of 127 days each year under a continuing 

resolution (Figure 10), thus inhibiting long-term planning and postponing multi-year funding 

obligations to new programs.21
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Figure 10: Duration of DoD Operations Subject to Continuing Resolution

D. Reducing Market Entry, Spurring Market Exits

In 2017, DoD found 75 new program starts that could not be executed while it continued to 

operate under a continuing resolution, with multiple tiers of the manufacturing and defense 

industrial base’s supply chain taking the brunt of the impact.22 Companies that do not have 

existing relationships are further deterred from entering into business with the DoD due to the 

level of cost and volatility associated with the engagement, thus impacting the potential of new 

entrants into the market. 

The Government Accountability Office reported a “non-traditional” defense company that 

produces augmented reality products received funding to support engineering and development 

activities by the Army. However, due to budget sequestration, the funding was lost and the 

company is no longer pursuing business in the defense market.23

2. Decline of U.S. Manufacturing Capabilities and Capacity

The roots of America’s defense industrial base are planted in the broader manufacturing 

ecosystem. Not only is the manufacturing sector the backbone of U.S. military technical 

advantage, but also a major contributor to the U.S economy, accounting for 9% of employment, 

12% of GDP, 60% of exports, 55% of patents, and 70% of U.S. R&D.24 The National Security 

Strategy highlights the importance of a vibrant manufacturing sector to comprehensive national 

power, while warning of the dangers inherent in the weakening of America’s manufacturing 

base:
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A healthy defense industrial base is a critical element of U.S. power and 

the National Security Innovation Base. The ability of the military to 

surge in response to an emergency depends on our Nation’s ability to 

produce needed parts and systems, healthy and secure supply chains, 

and a skilled U.S. workforce. The erosion of American manufacturing 

over the last two decades, however, has had a negative impact on these 

capabilities and threatens to undermine the ability of U.S. 

manufacturers to meet national security requirements. Today, we rely 

on single domestic sources for some products and foreign supply chains 

for others, and we face the possibility of not being able to produce 

specialized components for the military at home. As America’s 

manufacturing base has weakened, so too have critical workforce skills 

ranging from industrial welding, to high-technology skills for 

cybersecurity and aerospace. Support for a vibrant domestic 

manufacturing sector, a solid defense industrial base, and resilient 

supply chains is a national priority.25

Between 2000 and 2010, over two-thirds of U.S. manufacturing saw production declines in 

terms of inflation-adjusted output.26 While multi-factor productivity in manufacturing grew on 

an average of 2% per year from 1992-2004, productivity has declined an average of 0.3% per 

year from 2004 through 2016, implying diminishing economies of scale from inputs including 

labor, capital equipment, energy, materials, and purchased services.27 Between 2000 and 2010 

alone, the U.S. lost over 66,000 manufacturing facilities.28 While the U.S. has seen an uptick in 

manufacturing, adding around 380,000 jobs since January 2017,

29 much work remains to be 

done to remedy years of decline in the sector.

From 2000-2018, many defense-relevant sectors have seen increased import penetration with 

rates more than doubling for the industrial controls and machine tools subsectors.30 Since 2010, 

critical manufacturing and defense industrial base areas have seen fluctuations in obligations 

spending, creating variability in vendor counts and in many cases leading to lower domestic 

competition and further deteriorating DoD’s supply chain (Figure 11). The negative effects of 

sequestration and the budget caps shocked the market and accelerated the downward trend in 

vendor counts, resulting in an estimated 20% decline in the number of prime vendors.31
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Figure 11: Falling Vendor Counts in Key Manufacturing and Defense Industrial Base Areas

Although America’s traditional manufacturing base still accounts for an outsized benefit to the 

economy, decreases in key production capabilities, declines in manufacturing employment, and 

slow output growth for many manufacturing sectors have created key vulnerabilities and 

weaknesses that potentially threaten the nation’s defense-related manufacturing capabilities. 

Since 1990, small and medium sized businesses – which make up a majority of U.S. 

manufacturing and employ a large portion of workers in the sector – reported declines in 

revenue growth, despite the largest manufacturing firms posting more than 2% annual growth.32

The next generation of weapons will require advanced software, artificial intelligence, and 

machine learning, but traditional manufacturing processes continues to build the systems, 

platforms, and munitions that deliver kinetic effects. Both aspects of the industrial base are 

needed for long term economic growth and national security. 

The decline in the U.S. manufacturing industry, relative to prior periods of great power, creates 

a variety of risks for America’s manufacturing and defense industrial base and, by extension, for 

DoD’s ability to support national defense. Risks range from greater reliance on single sources, 

sole sources, and foreign providers to workforce gaps, product insecurity, and loss of innovation. 

A. Gaps in America’s Manufacturing Workforce

With the weakening of the U.S. manufacturing sector, the American manufacturing workforce 

has suffered, with employment peaking in 1979 and job losses accelerating significantly in the 

2000s.33 As shown in Figure 12, the share of employment attributed to manufacturing has fallen 
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dramatically, from over 30% in the 1950s to less than 10% in 2017. From 1979 to 2017, the U.S. 

lost 7.1 million manufacturing jobs, 36% of the industry’s workforce,34 with more than 5 million

manufacturing jobs lost since 2000 alone.35 Job losses have been most pronounced in vital 

sectors subject to import competition, including primary metals, electronics, chemicals, and 

machinery.36 Manufacturing and defense industrial base companies’ inability to hire or retain 

U.S. workers with the necessary skill sets has led to significant gaps in skilled labor.

Figure 12: A Sharp Relative Decline in Manufacturing Employment in the U.S. Economy

A lack of skilled manufacturing workers and a decreasing number of jobs is destabilizing

workforce readiness and leading to skill atrophy. As illustrated in Figure 13, such instability and 

atrophy further increase the gap between job openings and hires and accentuate the effects of a 

shrinking workforce, making worker placement more challenging even when labor is needed.
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Figure 13: A Rising Gap between Job Openings and Hires

B. Decoupling of Design and Manufacturing

As U.S. companies lost their domestic supplier ecosystems, design decoupled from

manufacturing and many firms shifted focus from designing and building products to designing 

and selling products. With increased offshoring of manufacturing, many companies have 

excised their process engineering capabilities, further reducing technical innovation and 

deterring future investment in next generation manufacturing.37 Together, these effects 

jeopardize the ability of America’s manufacturing base to supply innovative products and skilled 

workers to the industrial base, threatening capabilities needed for national security.

C. The Loss of Production of Strategic and Critical Materials 

As part of the increasingly global manufacturing and defense industrial base, imports of 

strategic and critical materials, such as rare earths, have increased, causing a trade-off between

supply dependency and lower costs. Rare earths are critical elements used across many of the 

major weapons systems the U.S. relies on for national security, including lasers, radar, sonar, 

night vision systems, missile guidance, jet engines, and even alloys for armored vehicles.

38 A 

2016 study by the Department of Commerce’s Bureau of Industry and Security reported that 

66% of respondents, the majority of whom are vendors to DoD, indicated they imported rare 

earth or related materials. 
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Figure 14: 2016 Rare Earth Element Imports

China’s domination of the rare earth element market (Figure 14) illustrates the potentially 

dangerous interaction between Chinese economic aggression39,40 guided by its strategic 

industrial policies and vulnerabilities and gaps in America’s manufacturing and defense 

industrial base. China has strategically flooded the global market with rare earths at subsidized

prices, driven out competitors, and deterred new market entrants. When China needs to flex its 

soft power muscles by embargoing rare earths, it does not hesitate, as Japan learned in a 2010

maritime dispute.41 

D. Increased Risk of Counterfeits and Infiltration

A global industrial base means increased supply chain risk associated with foreign provision, 

including counterfeits, lack of traceability, and insufficient quality controls throughout supply 

tiers. The Department of Commerce’s Bureau of Industry and Security surfaced several 

vulnerabilities in the electronics supply chain, including counterfeits (Figure 15), a lack of 

traceability, and insufficient quality controls throughout supply tiers. Imports of electronics 

lack the level of scrutiny placed on U.S. manufacturers, driving lower yields and higher rates of 

failures in downstream production, and raising the risk of “Trojan” chips and viruses infiltrating

U.S. defense systems.

42
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Figure 15: Counterfeit Electronics Dominated by China

E. Diminishing Technical Innovation Ecosystem

Decreased emphasis on domestic manufacturing threatens technical innovation and thereby 

America’s ability to capture emerging technologies. A reduced domestic manufacturing 

footprint reduces incentives and the ability of companies to invest in new capabilities and 
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process improvements, further deteriorating industrial base capabilities critical to maintaining a 

global advantage.

Many technology-intensive multinational corporations have established R&D facilities in 

countries like India and China 43 for access to cheap, high skilled labor. As part of its industrial 

policy aggression, China has forced many American companies to offshore their R&D in 

exchange for access to the Chinese market. 

As technical innovation moves abroad, changing rules around intellectual property development 

will impede U.S. access to the latest manufacturing technologies and decrease overall 

competitiveness. At risk is America’s loss of leadership in industries of the future such as 

artificial intelligence, quantum computing, and robotics. Over the remainder of this century,

these emerging industries will help redefine the battlefield.44

F. Reduced Competition 

The shipbuilding sector illustrates how a decline in U.S. manufacturing, coupled with budget 

sequestration, impacts the industrial base. Shipbuilding includes construction and maintenance 

of Navy aircraft carriers, submarines, surface ships, and their associated weapons and command 

and control systems; today, the U.S. shipbuilding industrial base consists primarily of seven 

shipyards owned by four companies and their suppliers. 

Shipyards – fixed facilities with dry-docks and fabrication equipment – support ship 

construction, repair, conversion and alteration, and the production of refabricated ship sections 

and other specialized services. The industry also includes manufacturing and other facilities 

beyond the shipyard, which provide parts and services for shipbuilding activities. 

Industries involved in the manufacturing of shipbuilding components were among the hardest 

hit by the global shift in the industrial base over the last 20 years. Of the top ten highest 

grossing industries in Navy shipbuilding, six are in the manufacturing sector. Since 2000, these 

industries experienced a combined decline of over 20,500 establishments in the U.S.

Contraction of the shipbuilding sector limits competition among U.S. suppliers of Navy 

components. In many cases, competition has altogether vanished, forcing the Navy to rely on 

single and sole source suppliers for critical components. These companies struggle to survive

and lack the resources needed to invest in innovative technology. Expanding the number of 

companies involved in Navy shipbuilding is important to maintaining a healthy industrial base

that can fulfill the 355 ship fleet and support the Navy’s long range shipbuilding plan.

Machine tools are power-driven machines used to shape or form parts made of metal, plastic, or 

composites to support both production and prototyping operations. Critical to creating modern 

defense and non-defense products, machine tools impact the entire supply chain and multiple 

sectors. The U.S. once led the world in the innovation and capacity of its high-end machine 

tools sector, but U.S. standing has dropped significantly since 2000. Key changes in machine 

tool consumption affected global patterns of production. Until the mid-2000s, China accounted 
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for no more than 15% of global machine tool consumption. By 2011, China's machine tool 

consumption accounted for 40% of the global total.45 As its need for machine tools increased, 

China leveraged its low cost of capital and labor to build domestic machine tool factories and 

required foreign companies to execute joint ventures to access the Chinese market. The 

combined effects of the 2008 recession and a general trend of industry consolidation further 

reduced the number of machine tool manufacturers. In 2015, China's global machine tool 

production skyrocketed to $24.7B,

46 accounting for 28% of global production,47 while the U.S.

accounted for only $4.6B, after China, Japan, Germany, Italy, and South Korea. 

These challenges to the overall manufacturing sector reduce the capability and capacity of U.S. 

defense production, with potential long term ramifications on the industrial base, national 

security, and the U.S. economy.

3. Deleterious U.S. Government Business and Procurement Practices

DoD business practices play a critical role in shaping the manufacturing and defense industrial 

base and can have an outsized effect on supplier behavior and viability. 

Many of the current policies and practices of the U.S. Government, and DoD in particular, strain

the industrial base and reduce incentives to supply to DoD,48 resulting in an inability to meet 

national security demands, increasing foreign vulnerabilities, and a DoD challenged to meet its 

goals in an era of expanding strategic competition.49 

A. Procurement Complexity and Lengthy Contract Timelines

In the late 1970s, DoD had 79 offices issuing procurement regulations totaling over 30,000

pages.50 Currently, the Office of the Under Secretary of Defense for Acquisition and 

Sustainment is the single office issuing all Defense Federal Acquisition Regulation Supplement

guidance. Consolidation of acquisition authority in one office, coupled with ongoing efforts 

supporting regulation reform such as the “Section 809 panel,” demonstrate increased vigor by 

DoD to streamline acquisition policy and processes. The “Section 809 panel,” created in the 

National Defense Authorization Act for FY2016, recently submitted the first of three volumes of 

its report outlining how DoD can further streamline acquisition processes.51

The Government Accountability Office notes that commercial companies are generally unaware 

of the best channels to propose business solutions to DoD. Overarching challenges noted by 

non-traditional companies seeking to conduct business with DoD include the complexity of the 

acquisition process, an unstable budget environment, lengthy contracting timelines, and 

inexperienced DoD contracting officials.52 While some of the challenges may actually exist, 

opportunities abound to overcome misunderstandings about doing business with DoD, through 

education and communication between industry and the government. 
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B. Bespoke Accounting Standards and Burdensome Security Clearance 

Processes

In a recent study, the Defense Business Board highlighted the issue of DoD’s Cost Accounting 

System53 and emphasized Federal Acquisition Regulation Part 15 “Contract by Negotiation.”54

Federal Acquisition Regulation Part 15 is only one of many acquisition methods but is often 

inflexible and requires strict adherence to DoD’s Cost Accounting System, which requires 

private sector partners to either replace preexisting accounting systems or develop a parallel 

system in order to comply with federal requirements. Given other accounting requirements 

levied on private sector companies, such as those outlined in the Sarbanes-Oxley Act of 2002, 

requiring a customized accounting system creates the need for additional resources, for which 

many companies cannot make the business case.

A 2017 Government Accountability Office report highlighted the excessive time and cost 

associated with obtaining key certifications necessary for doing business with DoD, including 

meeting IT and software requirements.55 A similarly lengthy process associated with obtaining 

security clearances for facilities and their personnel, most of which is the result of a backlog of 

personnel security investigations processing, often impedes suppliers of both hardware and 

software from exploring DoD as a client. Furthermore, requirements levied on companies under 

foreign ownership, control, or influence can discourage their participation in the National 

Industrial Security Program altogether. Operational and information security standards and 

whistleblower protections are important, but nonetheless impose additional costs that may 

increase barriers to entry.

C. Lengthy Acquisition and Development Timelines

Since the late 1980s, the median cycle time required to develop a major defense acquisition 

program has held steady at approximately eight years.56 During this time, DoD has grown 

increasingly dependent on electronics and the commercial electronics market, which moves at a 

much faster pace of development and production. This slow cycle time is leading to increased 

obsolescence issues. 

For example, given the eight-year cycle time for a major defense acquisition program, the U.S. 

Army Aviation and Missile Research, Development, and Engineering Center estimates that 70% 

of electronics procured by DoD are obsolete prior to system fielding.57 There exists an 

opportunity for finding balance between requirements for system development and keeping 

pace with technology.

D. Requirements-Driven Rather Than Solutions-Oriented Acquisition Process

The prevalent business approach and organizational culture of the U.S. Government favors a

top-down and requirements-driven process, often to the detriment of innovation. While it is 

possible to achieve technological breakthroughs or innovative capabilities through such a 

process, requirements-driven acquisition solicits solutions for specific capabilities rather than 

for outcomes, potentially imposing an opportunity cost on innovation. 
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There appear to be few opportunities for companies to offer services or capabilities that do not 

already fit within the DoD’s stated requirements and scope.58 The tendency to focus on 

requirements versus solutions, compounded by the various barriers to entry, cost of doing 

business, and skewed market incentives can inhibit competition and new entrants. Companies 

successful in the government contracting space are often necessarily structured to comport to 

federal guidelines, rules, and regulations and are typically unlikely to be able or incentivized to 

challenge the requirements-driven process. 

4. Industrial Policies of Competitor Nations

U.S. defense products enjoy a very successful export market with $41.93B in FY2017 sales,

59

further bolstered by the Administration’s efforts to help facilitate this critical part of our 

economy. However, the erosion of parts of our industrial base, is, in part, attributable to the 

industrial policies of major trading partners that have created an unfair and non-reciprocal 

trade environment. Those policies contribute to the U.S. annual trade deficit in goods, the 

largest in the world at more than $796 billion.60 Of this total, almost half of the U.S. trade 

deficit in goods is with China – roughly $375 billion in 2017.61 The European Union accounts 

for another roughly $150 billion.

62

A. A Challenging Economic Playing Field

Many nation states have implemented coherent investment plans and tax policies, such as 

Germany’s Industry 4.0 initiative, forcing U.S. firms to compete against nation states with wellresourced policies to support their domestic industries. In this environment, the lack of a 

coherent U.S. industrial policy puts domestic suppliers at a disadvantage, amplified by the trade 

policies of some U.S. competitors that violate trade norms of reciprocity and open competition. 

The risks now facing the soldier systems sector help illustrate these challenges. Soldier systems 

includes a broad and diverse collection of products necessary to maximize the Warfighter's 

survivability, lethality, sustainability, mobility, combat effectiveness, and field quality of life by 

considering the Warfighter as a system. Between 1995 and 2009, the U.S. textile industry 

suffered historic contraction, and though the sector has improved since then, Asian markets now 

dominate global textiles supply.63 According to a recent Department of Commerce survey, the 

greatest competitive disadvantages in the clothing and textile subsector are related to the 

workforce and raw material cost and/or availability.64 Though U.S. industry has invested 

heavily to compete, increasing labor productivity by 60% since 2000,65 total sales and exports of 

U.S. manufactured clothing and textile products have been stagnant from 2012-2016.66 As wage 

growth has increased the price of labor in China, lower wage countries such as Pakistan and 

Vietnam have seen the most rapid growth in textile exports, reaching 9% growth in 2016.67

While the United States is the fourth largest exporter of textile-related products in the world, 

there remain acute challenges across the more than 8,000 products the domestic textile 

industry supplies to DoD.68 The single qualified domestic source for high-tenacity polyester 
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fiber used in many DoD tent systems dissolved its business due to its inability to compete in an 

increasingly competitive global fibers and textiles market.69 Currently, there is no U.S. 

manufacturing capability for high-tenacity polyester fiber that allows for military specification 

qualification. 

B. China’s Military Expansion and Modernization

While multiple countries pursue policies to bolster their economies at the expense of America’s 

manufacturing sector, none has targeted our industrial base as successfully as China. China is 

engaged in economic competition with the U.S. and our allies70 over key sectors of the global 

economy,

71 and China’s strategies of economic aggression and its complementary military 

modernization efforts are codified in its doctrine of civil-military fusion. By actively promoting 

the fusion of its military and civilian industrial and science and technology sectors, Beijing

strives to reinforce the People’s Republic of China’s capabilities to build the country into an 

economic, technological, and military power while ensuring that overall control of these 

elements of national power remain firmly in the hands of the Communist Party of China.

Since joining the World Trade Organization in 2001, China’s real gross domestic product has 

grown more than 300%, from $2.4 trillion in 2001 to $10.2 trillion 2017.72 During that period, 

U.S. real gross domestic product grew less than 40%, from $12.8 trillion in 2001 to $17.3 trillion 

in 2017 (Figure 16). 

Figure 16: China Rapid Growth since Joining the WTO

China’s economic growth has, in turn, helped finance its rapid military modernization. In 2001, 

China’s annual military budget was less than $20 billion.73 By 2017, it exceeded $150 billion,74

second only to the U.S.
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China’s non-market distortions to the economic playing field must end or the U.S. will risk 

losing the technology overmatch and industrial capabilities that have enabled and empowered

our military dominance – even as China seeks to raise its military capabilities to U.S. levels.

C. China’s Strategies of Economic Aggression 

One of the Chinese Communist Party’s primary industrial initiatives, Made in China 2025,75

targets artificial intelligence, quantum computing, robotics, autonomous and new energy 

vehicles, high performance medical devices, high-tech ship components, and other emerging 

industries critical to national defense.

76 In order to obtain the capabilities needed to support 

these advanced technologies, China relies on both legal and illicit means, including foreign 

direct and venture investments, open source collection, human collectors, espionage, cyber 

operations, and the evasion of U.S. export control restrictions to acquire intellectual property 

and critical technologies. 

For example, China imposes conditional access to its domestic market to lure intellectual 

property, investment, and onshoring of manufacturing, using high tariffs and a complex web of 

non-tariff barriers, including restrictive customs barriers, burdensome licensing requirements, 

discriminatory regulatory standards, and local content requirements in government 

procurement to boost domestic manufacturing and production.77 China also uses forced 

technology transfer78 as a condition of access to the Chinese market.79

In an attempt to dominate critical global markets and manufacturing industries, China leverages 

policy tools such as low interest loans; subsidized utility rates; lax environmental, health, and 

safety standards; and dumping to boost its industry.80 China also uses counterfeiting and 

piracy, illegal export subsidies, and overcapacity to depress world prices and push rivals out of 

the global market. It has implemented these tactics to capture much of the world’s solar and 

steel industries and intends to extend its dominance to other industries such as automobiles and 

robotics.81

As a result of its successful assault on the U.S. solar industry,82,83,84,85 China produces over 70%

of the world’s solar cells.86 As the European Chamber of Commerce has documented, “for a 

generation, China has been the factory of the world,” and by 2015, it already produced 24% of 

the world’s power, 28% of the automobiles, 41% of the world’s ships, over 50% of the 

refrigerators, over 60% of the color TV sets, over 80% of the air conditioners and computers, 

and over 90% of the mobile phones.87

A key finding of this report is that China represents a significant and growing risk to the supply 

of materials and technologies deemed strategic and critical to U.S. national security; a challenge 

shared by key allies such as Germany88 and Australia.

89

 In addition to China dominating many 

material sectors at the upstream source of supply (e.g., mining), it is increasingly dominating 

downstream value-added materials processing and associated manufacturing supply chains,

both in China and increasingly in other countries. Areas of concern to America’s manufacturing 
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and defense industrial base include a growing number of widely used and specialized metals, 

alloys and other materials, including rare earths and permanent magnets.

China is also the sole source or a primary supplier for a number of critical energetic materials 

used in munitions and missiles. In many cases, there is no other source or drop-in replacement 

material and even in cases where that option exists, the time and cost to test and qualify the new 

material can be prohibitive – especially for larger systems (hundreds of millions of dollars each). 

From commodity materials to rare earths,

90 Chinese investment in developing countries in 

exchange for an encumbrance on their natural resources and access to their markets, 

particularly in Africa and Latin America,

91 adds an additional level of consideration for the scope 

of this threat to American economic and national security.

D. China’s Soft Power Projection

Since China joined the World Trade Organization in 2001 and gained greater access to U.S. 

markets, the trade deficit in goods with China has grown from $83 billion to $375 billion in 

2017.92 China has historically used currency manipulation to artificially reduce the value of the 

yuan and increase the competitiveness of its exports.93 To maintain its currency peg, China 

helps finance the chronic U.S. trade deficit through purchases of U.S. Government securities.94

China has then leveraged its surplus-funded capital accounts to pursue aggressive trade and 

infrastructure policies such as the One Belt, One Road Initiative, a mercantile trade system 

promoting China’s political domination of Eurasia and reducing U.S. market access.

Such policies further exacerbate the trade imbalance with the U.S. and have created similar 

imbalances with U.S. allies and partners – as illustrated in Figure 17. 
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Figure 17: China’s Trade Imbalances with the U.S. and Rest of the World

The significant asymmetry between the trade dependence of American allies in the Indo-Pacific 

versus China’s economic dependence on these American allies and partners is further illustrated 

in Figure 18.

95

 In recent years, China has not hesitated to leverage its asymmetric trade 

dominance to project soft power. 

Country

% of Country’s Exports 

Purchased by China

% of China’s Exports 

Purchased by These 

Countries

Australia 33% 2%

Taiwan 26% 2%

South Korea 25% 5%

Japan 18% 6%

Malaysia 13% 2%

Singapore 13% 2%

Philippines 11% <2%

Thailand 11% 2%

Source: World Bank

Figure 18: China’s Rising Economic and Monopsony Power over American Allies

For example, after South Korea announced the placement of the U.S. Terminal High-Altitude 

Aerial Defense (THAAD) system, a key element of U.S. foreign policy and military strategy, 
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China undertook an aggressive economic warfare campaign against Seoul.96 China’s campaigns 

of economic coercion have also been observed against other U.S. allies and partners, including a 

ban on Philippine bananas over territorial disputes in the South China Sea;97 the 

aforementioned restriction of rare earth exports to Japan following the Senkaku Islands dispute 

in 2010;98 persistent economic intimidation against Taiwan;

99 and the recent ceding of a Sri 

Lankan port.100 

China’s trade dominance and its willingness to use trade as a weapon of soft power increases the 

risks America’s manufacturing and defense industrial base faces in relying on a strategic 

competitor for critical goods, services, and commodities. 

E. China’s Research and Development Spending Strategy

Although the bulk of China’s early exports were dependent on low value-added manufacturing, 

Beijing has recognized that it must innovate to obtain long term dominance, as documented in

the 2006 Medium to Long Range Plan for Science and Technology.

101 This and other stateauthored policies explicitly recognize the need to capture advanced commercial technologies 

with military applications, and China has directed both state-owned enterprises and private 

sector investors to advance the military’s access to cutting edge civilian research.

102

 To advance 

this goal, China’s current five year plan calls for increasing research and design spending to 

2.5% of gross domestic product, up from 2.1% in 2011-2015. As Figure 19 illustrates, Chinese

R&D spending is rapidly converging to that of the U.S. and will likely achieve parity sometime in 

the near future.

Figure 19: China’s Rapid Growth in R&D Spending Relative to the Rest of the World
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China’s current plan also focuses on capturing a leading position in advanced foundational dualuse industries such as semiconductors, chip materials, robotics, aviation, and satellites. 

Additionally, China is investing in key foundational technologies—artificial intelligence, 

robotics, autonomous vehicles, augmented and virtual reality, financial technology, and gene 

editing—to enable a wide array of commercial and military applications. To advance its strategic 

goals, Beijing has unveiled several mega-projects (e.g., core electronics, high-end chips, 

quantum communications, next-generation broadband communications) that are likely 

intended to challenge the United States.

103

 

As documented in the United States Trade Representative’s Findings Of The Investigation Into 

China’s Acts, Policies, And Practices Related To Technology Transfer, Intellectual Property, 

And Innovation Under Section 301 Of The Trade Act Of 1974,104 China uses legal, extra-legal, 

and illicit105 industrial policy tools and tactics to force or facilitate the transfer of technologies 

and intellectual property from U.S. and foreign companies to Chinese counterparts and 

competitors.106 State-backed actors are buying and stealing differentiating intellectual property 

on an unprecedented scale, targeting key U.S. technology, infrastructure, and materials and 

exploiting the free-market system to access and acquire key components of the U.S. industrial 

base, leaving defense capabilities vulnerable. 

In 2016, Chinese foreign direct investment in the U.S. was $46 billion, or triple the previous 

year and a ten-fold increase from 2011, demonstrating their all-of-nation long-term growth 

strategy in support of both economic and military power. China’s cumulative foreign direct 

investment in the U.S. since 2000 now exceeds $100 billion.

107,108 Figure 20 illustrates how 

China is targeting key technology sectors with its state-supported foreign direct investment.
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Figure 20: China Targets U.S. Technology with Its Outbound Foreign Direct Investment

China’s capture of foreign technologies and intellectual property,109 particularly the systematic 

theft of U.S. weapons systems110 and the illicit and forced transfer of dual-use technology, has 

eroded the military balance between the U.S. and China.111 Such transfers aid China’s efforts to 

gain a qualitative technological advantage over the U.S. across key domains, including naval, air, 

space, and cyber.112 

China’s aggressive industrial policies have already eliminated some capabilities with critical 

defense functions, including solar cells for military use, flat-panel aircraft displays, and the 

processing of rare earth elements.113 China’s actions seriously threaten other capabilities, 

including machine tools; the production and processing of advanced materials like biomaterials, 

ceramics, and composites; and the production of printed circuit boards and semiconductors.

114
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As part of China’s One Belt, One Road doctrine to project Chinese soft and hard power,115 China 

has sought the acquisition of critical U.S. infrastructure, including railroads,116 ports,117 and 

telecommunications.118

China’s economic strategies, combined with the adverse impacts of other nations’ industrial 

policies, pose significant threats to the U.S. industrial base and thereby pose a growing risk to 

U.S. national security. 

F. Strategic Materials and Printed Circuit Boards

Unlawful and otherwise unfair foreign trade practices (mostly by China) are injuring U.S. 

strategic and critical material manufacturers. Predatory practices – including state-sponsored 

dumping, public subsidies, and intellectual property theft – are destroying commercial product 

lines and markets of domestic DoD suppliers. The loss of commercial business can lead to the 

loss of domestic production capabilities essential to U.S. defense and essential civilian needs. 

Impacted materials are widely used across multiple DoD systems and all major defense sectors 

(land, sea, air, and space systems).

In multiple cases, the sole remaining domestic producer of materials critical to DoD are on the 

verge of shutting down their U.S. factory and importing lower cost materials from the same 

foreign producer country who is forcing them out of domestic production. 

Without relief from unlawful and otherwise unfair trade practices, the U.S. will face a growing 

risk of increasing DoD reliance on foreign sources of vital materials. 

The case of printed circuit boards likewise highlights the growing risks to the industrial base. 

The printed circuit board sub-sector provides the substrate and interconnects for the various 

integrated circuits and components that make up an electronic system. Today, 90% of 

worldwide printed circuit board production is in Asia, over half of which occurring in China; and 

the U.S. printed circuit board sub-sector is aging, constricting, and failing to maintain the state 

of the art for rigid and rigid-flex printed circuit board production capability. 

With the migration of advanced board manufacturing offshore, DoD risks losing visibility into 

the manufacturing provenance of its products as many domestic manufacturers have offshore 

manufacturing facilities or relationships. In addition to the potential dissemination of design 

information, many of the offshore facilities do not meet or comply with DoD quality 

requirements. 

5. Diminishing U.S. STEM and Trade Skills

Increasing globalization of the supply chain and a diminishing domestic manufacturing sector 

are combining to create human capital gaps and erosion of American capabilities. STEM

knowledge and core trade skills are necessary to ensure the holistic and synergistic health of the 
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defense ecosystem. Skill gaps in both areas entail inherent risk, from a decline in production 

capacity to decreased innovation.

From 2006 to 2016, STEM occupations experienced large job growth – 52% of occupations grew 

in their total number of employees – while 74% of manufacturing occupations lost jobs.119 

Despite STEM occupations typically having greater educational requirements and hence 

drawing from a smaller labor pool, the top 10 occupations in those fields added more workers in 

absolute terms over the 2006-2016 time period than the top 10 manufacturing occupations, as 

ranked by absolute job growth (Figure 21).

Figure 21: STEM-Oriented Versus Core Manufacturing-Oriented Occupations

A. Demographic Challenge 

While the population of manufacturing workers is aging at the rate of baby boomers across 

industry, the most concerning aspect of the manufacturing workers demographics is the 

decrease in workers in the 35-44 age range (Figure 22). In the prime of their careers and poised 

to internalize knowledge transfer from older workers, the loss of mid-career workers to other 

sectors poses a direct threat to the long-term viability of manufacturing. The risk that 

knowledge will fail to be transferred to new entrants into the labor market is rising, particularly 

in skilled production occupations, which account for over 50% of manufacturing workers.120 
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Figure 22: The Demographics of Manufacturing Employment

B. Growing Cultural Bias and Strategic Rivals

Some of the most challenging aspects in the manufacturing sector are recruitment and 

retention. In a recent manufacturing skills gap study conducted by the Manufacturing Institute 

and Deloitte, only one third of respondents indicated they would encourage their children to 

pursue a career in manufacturing. Gen Y (ages 19-33 years) respondents ranked manufacturing 

as their least preferred career destination.

121

 Yet once a candidate is hired, the struggle

continues. 79% of executives surveyed stated it is moderate to extremely challenging to find

candidates to pass screening and/or the probationary period,

122 leaving them with employees 

unable to perform the work for which they were hired. 

While the total number of bachelor’s degrees in the U.S. has increased steadily in the last two 

decades, the number of STEM degrees conferred in the U.S. still pales compared to China.123 In 

addition, the U.S. has seen an increase in students on temporary visas, many of whom would be 

unable to gain the security clearances needed to work in the defense ecosystem.124

Growth in advanced science and engineering degrees shows the U.S. graduating the largest 

number of doctorate recipients of any individual country, but 37% were earned by temporary 

visa holders125 with as many 25% of STEM graduates in the U.S. being Chinese nationals.126 

As the U.S. continues to attempt progress in STEM, ongoing Chinese support and influence 

continues to demonstrate strength in building a workforce of the future, while American 

universities are major enablers of China’s economic and military rise. 
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VI. Ten Risk Archetypes Threatening 

America’s Manufacturing and 

Defense Industrial Base

Figure 23 catalogues the ten risk archetypes, at the firm and market level, emerging from the EO 

13806 assessment. While each of the risk archetypes may be viewed in isolation, sub-sets of 

risks tend to cluster and threaten American’s manufacturing and defense industrial base. 

The risk archetypes lead to a variety of negative impacts on America’s industrial base, including 

reduced investment in both new capital and R&D; concomitant reductions in the rates of 

modernization and technological innovation; a loss of suppliers and potential bottlenecks across 

the many tiers of the supply chain; and lower quality and higher prices resulting from reduced 

competition. 

At the production level, negative impacts also include cost inefficiencies, deferred maintenance, 

reduced reliability, and increased vulnerability to counterfeit components. Across the supply 

chain, these negative impacts can manifest as significant gaps in the industrial base, from singlepoints-of-failure and threatened capabilities to non-extinct and extinct capabilities. Ultimately, 

these negative impacts have the potential to result in diminished readiness, decreased lethality, 

insecurity of supply, program delays, and an inability to surge.
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Risk Archetype Definition

Sole source Only one supplier is able to provide the required capability

Single source Only one supplier is qualified to provide the required capability

Fragile supplier A specific supplier is financially challenged / distressed

Fragile market Structurally poor industry economics; potentially approaching 

domestic extinction

Capacity constrained supply 

market

Capacity is unavailable in required quantities or time due to 

competing market demands

Foreign dependency Domestic industry does not produce the product, or does not 

produce it in sufficient quantities

Diminishing manufacturing sources 

& material shortages (DMSMS)

Product or material obsolescence resulting from decline in relevant 

suppliers

Gap in U.S.-based human capital Industry is unable to hire or retain U.S. workers with the necessary skill 

sets

Erosion of U.S.-based infrastructure Loss of specialized capital equipment needed to integrate, 

manufacture, or maintain capability

Product security Lack of cyber and physical protection results in eroding integrity, 

confidence, and competitive advantage

Figure 23: Ten Risk Archetypes Threatening America’s Manufacturing and Defense Industrial Base

The impacts identified by the working groups often fell into multiple risk archetypes – a 

financially distressed foundry may be both a sole source and single source, as well as illustrate a 

fragile market. In this section, we summarize illustrative examples from the working groups in 

each of the risk archetypes. Additional descriptions of the impacts can be found in the sector 

summaries (Appendix Two) and a full list of the nearly 300 impacts for all sixteen sectors is 

available in a classified appendix.

1. Sole Source

A sole source risk exists when only one supplier is able to provide the required capability. Sole 

source risk can occur at the prime level – such as one supplier capable of building nuclear 

aircraft carriers – but more often sole source manifests in the sub-tier of a sector.

Reduced competition, lack of innovation, and potential single points of failure in the production 

of chaff countermeasures underscore risks associated with a sole source. Chaff is composed of 

millions of tiny aluminum or zinc coated fibers stored on-board an aircraft in tubes. When an 

aircraft is threatened by radar tracking missiles, chaff ejected into the turbulent wake of air 

behind the plane creates confusion for the missile’s radar system. Defense unique requirements 

and decreasing DoD demand drove out other suppliers, leaving one company as the only source 

for chaff. 

Similarly, DoD acquisition policy modifications to meet demand and surge requirements from 

overseas operations have led to capacity issues within our organic arsenals. Due to policy 
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requirements, all large caliber gun barrels, howitzer barrels, and mortar tubes must be 

manufactured at a specific organic arsenal. Currently, there is only one production line that 

produces all these items, leading to a lack of capacity to meet current and near-term production 

demands.

2. Single Source

When only one supplier is qualified to provide a required capability, single source risk exists. 

The key distinction between sole source and single source is that for a single source, multiple 

potential vendors may exist, but only one source is qualified to produce materials for the U.S. 

Government. 

Industries involved in the manufacturing of shipbuilding components were among the hardest 

hit by the global shift in the industrial base over the last 20 years. Of the top ten highest 

grossing industries in Navy shipbuilding, six are in the manufacturing sector. Since 2000, these 

industries experienced a combined decline of over 20,500 domestic establishments.

**

Contraction of the shipbuilding industrial base has limited competition among U.S. suppliers of 

Navy components and, in many cases, competition has altogether vanished, forcing the Navy to 

rely on single and sole source suppliers for critical components. 

There currently exists only one domestic source of ammonium perchlorate – a chemical widely 

used in DoD propulsion systems. Foreign sources exists, but maintaining a domestic capability 

is critical to national security. 

3. Fragile Supplier

A fragile supplier is an individual firm that is financially challenged or distressed. 

Within the rotary wing industrial base, one company illustrates the interaction of single source 

risk and fragile supplier. The firm occupies a supply chain tier in the large and complex alloy 

castings segment of the aircraft sector, and is a source for upper, intermediate, and sump 

housing required for the manufacturing of a heavy lift platform for the Marines. In 2016, the 

company filed for bankruptcy, citing a decline in the military and commercial helicopter 

market.127 Without a qualified source for these castings, the program will face delays, impeding 

the DoD’s ability to field heavy lift support for Marine Corps expeditionary forces.

With the large movement of textile manufacturing to cheaper foreign markets, and fewer 

domestic companies producing textiles, soldier systems such as tents and uniforms face greater 

risk. Currently, only a few domestic sources can provide the specific material requirements for 

defense-specific textiles, especially for various types of highly engineered textile fibers (e.g.,

 

** The six industries are machinery; transportation equipment manufacturing; fabricated metal products; 

computer and electronic products; electrical equipment, appliance, and components.
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high-tenacity polyester, nylon 6,6, etc.). During the course of the EO 13806 assessment, the 

single supplier for high-tenacity polyester fiber used in DoD tent systems dissolved its business. 

It was no longer able to compete in an increasingly competitive global fibers and textiles market, 

and now the U.S. lacks a manufacturing capability for high-tenacity polyester fiber that allows

for military specification qualification. 

4. Fragile Market

A fragile market occurs when domestic markets have structurally challenging economics and 

face a potential move toward foreign dependency. Fragile suppliers exist at the firm level, 

whereas fragile markets exist across an industry or sector.

Domestic printed circuit board manufacturing struggles to compete in the global marketplace. 

Since 2000, the U.S. has seen a 70% decline in its share of global production. Today, Asia 

produces 90% of worldwide printed circuit boards, and half that production occurs in China. As 

a result, only one of the top 20 worldwide printed circuit board manufacturers is U.S.-based. 

With the migration of advanced printed circuit board manufacturing offshore, DoD risks losing 

visibility into the manufacturing provenance of its electronics. 

Also in the electronics sector, and ubiquitous in platforms and systems across the industrial 

base, strategic radiation-hardened microelectronics have no commercial applications. These 

components must be able to withstand short bursts of intense radiation and high temperatures 

in order to satisfy mission requirements. Being commercially unviable creates continual risk for 

this critical capability due to changing business conditions or technological obsolescence. 

5. Capacity Constrained Supply Market

Capacity constrained supply markets arise where necessary capacity is unavailable in required 

quantities or time due to competing commercial market demands or insufficient defense specific 

capacity. 

ASZM-TEDA1 impregnated carbon, a defense-unique material provided by a single qualified 

source, is subject to a single-point-of-failure and demonstrates a capacity constrained supply 

markets. A lack of competition with other potential sources precludes assurances for best 

quality and price. While ASZM-TEDA1 is used in 72 DoD chemical, biological, and nuclear 

filtration systems, the current sourcing arrangements cannot keep pace with demand. 

The high operational tempo of the Navy in recent years, along with a lack of steady funding for 

maintenance and modernization, has resulted in a backlog of repair work across the nuclear and 

non-nuclear fleet. Coupled with increases in new ship construction, many suppliers are 

experiencing a shortfall in their capacity to perform work and manufacture products. The 

increased demand creates pressure on already-aging production equipment and could 

necessitate additional hiring in highly specialized fields, where it is often difficult to find suitable 
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candidates. Technical requirements for new ships, a large volume of mid-life availabilities, and 

a general lack of investment by industry in new dry-dock capacity will create a significant 

constraint for completing Navy ship maintenance. The combination of limited suppliers and an 

increase in workload could increase cost and potentially create schedule slips, impacting our 

Warfighting capability. 

6. Foreign Dependency

Foreign dependency risk arises when domestic industry does not produce the item, or does not 

produce it in sufficient quantities. Not all foreign dependency is equal – the cases here illustrate 

dependency on both competitors and allies.

China is the single or sole supplier for a number of specialty chemicals used in munitions and 

missiles. In many cases, there is no other source or drop-in replacement material and even in 

cases where that option exists, the time and cost to test and qualify the new material can be 

prohibitive – especially for larger systems (hundreds of millions of dollars each). 

Single foreign sources of unique and proprietary carbon fibers from Japan and Europe represent 

considerable DoD supply chain vulnerabilities. A sudden and catastrophic loss of supply would 

disrupt DoD missile, satellite, space launch, and other defense manufacturing programs. In 

many cases, there are no substitutes readily available. Replacing a carbon fiber factory is very 

expensive and time consuming. Of similar concern is the uncertainty of qualifying replacement 

suppliers and significant resource requirements. 

U.S. military “night vision” systems are enabled by an image intensifier tube, a vacuum sealed 

tube that amplifies a low light-level scene to observable levels. The U.S. is reliant on a German

supplier for the image intensifier tube core glass, a DoD-unique product with low demand

compared to commercial glass production. While the German supplier manufactures the core 

glass in batches every few years to replenish a U.S. buffer stock, we still lack a domestic supplier, 

creating vulnerability in the night vision supply chain. 

7. Diminishing Manufacturing Sources and Material Shortages

Diminishing manufacturing sources and material shortages risk is associated with obsolescence 

that may result from the decline in relevant suppliers. 

In 2017, a semiconductor chip foundry used in a voltage control switch (used in all DoD missiles 

systems) was purchased by another foundry. A 5th tier supplier, the voltage control switch 

company notified its next tier customer of the foundry closing and received an end-of-life buy 

order for what was considered enough supply to allow time to qualify a replacement voltage 

control switch. DoD was not informed of the issue or consulted on the end-of-life quantity until 

the opportunity to stockpile had passed, at which point it became evident that the end-of-life 

buy, intended to last 3-5 years, would only last 6 months, putting U.S. missile systems at risk. 
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Trusted foundries, obsolescence, diminishing manufacturing sources and material shortages, 

and counterfeit issues are common to the broad defense electronics sector and prevalent for 

current and future radar systems, as well as systems in sustainment. One logistics center within 

the organic base identified over 4,000 diminishing manufacturing sources and material 

shortages items for just the radars maintained at that particular base. In addition to 

sustainment issues, the military is highly dependent upon the commercial sector for technology 

maturation, but the commercial sector is driven by revenue and high volume technology 

demands so development of technology for military use is not always feasible.

8. Gaps in U.S.-based Human Capital

When industry or the government is unable to hire or retain U.S. workers with the skills sets, or 

capabilities, needed to support the industrial base, gaps in U.S.-based human capital arise.

In December 2017, a survey of 662 manufacturing companies conducted by the National 

Association of Manufacturers found the inability to attract and retain a quality workforce the top 

business challenge, cited by 72.9% of respondents. To address this workforce challenge, 66% of 

respondents said they are increasing the workload of their existing employees. 34.4% stated

their company had been unable to take on new business and had lost revenue opportunities 

because of the inability to attract and retain workers.128 Given the number of manufacturers 

who exist in the supply chain of the industrial base, these numbers are significant.

The industrial base consistently competes with commercial industry for STEM talent, and the

education pipeline is not providing the necessary resources to fully meet current or future

demands in the commercial sector and defense ecosystem, such as software design engineers 

and biophysicists. In addition, the trade skills gap affects a wide range of occupations (e.g., 

industrial machinery mechanics and welders) which could have potentially significant impacts 

on production of critical defense-related materials, vehicles, and machinery, as well as other 

goods and services necessary to supply our nation's armed forces.

9. Erosion of U.S.-Based Infrastructure

The loss of specialized capital equipment needed to integrate, manufacture, or maintain a 

capability creates erosion of U.S.-based infrastructure. 

A largely niche market, the chemical, biological, radiological, and nuclear sector relies heavily on 

DoD procurements for sustainability. One of the organic bases that provides chemical, 

biological, radiological, and nuclear technology lacks a sustainable workload, degrading 

readiness by creating a capabilities response lag time, increasing labor rates, and threatening 

critical manufacturing capabilities. Gaps in this sector can result in limited or non-existent 

domestic supply of critical protection for the Warfighter against specific threats. 
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Organic base depots are working capital funded activities and are required to reinvest and 

recapitalize equipment and facilities through their rate structure. While DoD’s budget replaces 

and refurbishes plant equipment, and statute and policy direct follow-through on 

recapitalization, infrastructure investments have not been adequate often due to sensitivity to 

rate increases. Without significant future investment, the organic base will remain challenged 

by outdated equipment, tooling, and machinery. The erosion of organic infrastructure continues 

to impact turnaround time and repair costs of newly fielded weapon systems, reducing 

inventory, decreasing operational readiness, and impacting future deployment schedules.

10. Product Security

A lack of cyber and/or physical protection creates risk in product security, resulting in an 

erosion of integrity, confidence, and competitive advantage.

For example, one Chinese manufacturer accounts for 70% of the commercial unmanned aerial 

system market, including a dominance in the small unmanned aerial system subsector. 

Recently, due to concerns around security of the software associated with the platform, the U.S. 

Army issued a memo to cease use of applications created by the manufacturer.

129

The defense manufacturing supply chain flows goods and critical supporting information 

through multiple organizations of varying size and sophistication to transform raw materials 

into components, subassemblies, and ultimately finished products and systems that meet DoD 

performance specifications and requirements. These supply chain operations rely on an infinite 

number of touch points where digital and physical information flows through multiple networks 

– both within and across many manufacturers’ systems. In today’s digitized world, every one of 

these supply chain touch points represents a potential product security risk.

According to private sector reports, in 2014 manufacturers received the greatest volume of 

targeted cyber-attacks of all industries globally,130 primarily for espionage purposes,131 although 

an increasing number of sophisticated cyber-espionage campaigns attempted to alter the 

automation of physical processes on manufacturing lines. The Department of Homeland 

Security reported in 2015 that the critical manufacturing sector reported the highest number of 

attacks on industrial control systems of any critical infrastructure sector, nearly twice the 2014 

level. Since then, numerous threats have emerged with the potential to cause major disruption 

in manufacturing operations. 
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VII.A Blueprint for Action

President Trump’s historic EO 13806 provided DoD and its interagency partners a unique 

opportunity to assess the manufacturing and defense industrial base – one of the most critical 

assets to our national security. The work conducted by the over 300 members of the DoD-led

Interagency Task Force lays the groundwork for important actions, mitigations, and ongoing 

monitoring that will result in America’s ability to continue supporting a secure, robust, resilient, 

and ready industrial base.

Current Efforts

The DoD-led Interagency Task Force recognizes and supports ongoing efforts to address the 

challenges identified in the EO 13806 assessment, including:

 Increased near-term DoD budget stability with the passage of the Bipartisan Budget Act 

of 2018, providing stable funding through FY2019

 Modernization of the Committee on Foreign Investment in the U.S. and investigations 

under Section 301 of the Trade Act of 1974 into Chinese intellectual property theft, to 

better combat Chinese industrial policies targeting American intellectual property

 Updates to the Conventional Arms Transfer policy and unmanned aerial systems export 

policy to increase U.S. industrial base competitiveness and strengthen international 

alliances 
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 Reorganization of the former Office of the Under Secretary of Defense for Acquisition, 

Technology and Logistics, the work of the “Section 809 panel,” and development of the 

adaptive acquisition framework all aim to streamline and improve defense acquisition 

processes 

 Restructuring the Defense Acquisition University to create workforce education and 

training resources that will foster increased agility in acquisition personnel

 Response to Section 1071(a) of the National Defense Authorization Act for FY2018 which 

requires establishing a process for enhancing the ability to analyze, assess, and monitor 

vulnerabilities of the industrial base

 Creation of a National Advanced Manufacturing Strategy by the White House Office of

Science and Technology Policy, focused on opportunities in advanced manufacturing 

 Department of Labor’s chairing of a Task Force on Apprenticeship Expansion to identify 

strategies and proposals to promote apprenticeships, particularly in industries where 

they are insufficient

 DoD’s program for Microelectronics Innovation for National Security and Economic 

Competitiveness to increase domestic capabilities and enhance technology adoption

 DoD’s cross-functional team for maintaining technology advantage

 Implementation of a risk-based methodology for oversight of contractors in the National 

Industrial Security Program, founded on risk management framework principles to 

assess and counter threats to critical technologies and priority assets 

Future Efforts and Recommendations

The Secretary of Defense strongly recommends the President sign an Executive Order directing

DoD, and the Secretaries listed below, to promptly implement the proposed recommendations

based on the EO 13806 assessment, submitted herein. Of the nearly 300 risks identified by the 

working groups across 16 sectors, the recommendations provided below and in the classified 

Action Plan address risks determined to currently be of critical importance, and propose 

actionable and reasonable mitigations. Each of the Secretaries will provide a status on

implementation within 180 days of execution of the Executive Order.

Secretary of Defense

DoD recommendations are provided below and in a classified Action Plan. The 

recommendations include:

 Create an industrial policy in support of national security efforts, as outlined in the 

National Defense Strategy, to inform current and future acquisition practices

 Expand direct investment in the lower tier of the industrial base through DoD’s Defense 

Production Act Title III, Manufacturing Technology, and Industrial Base Analysis and 

Sustainment programs to address critical bottlenecks, support fragile suppliers, and 

mitigate single points-of-failure
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 Diversify away from complete dependency on sources of supply in politically unstable 

countries who may cut off U.S. access; diversification strategies may include 

reengineering, expanded use of the National Defense Stockpile program, or qualification 

of new suppliers

 Work with allies and partners on joint industrial base challenges through the National 

Technology Industrial Base and similar structures

 Modernize the organic industrial base to ensure its readiness to sustain fleets and meet 

contingency surge requirements

 Accelerate workforce development efforts to grow domestic STEM and critical trade 

skills

 Reduce the personnel security clearance backlog through more efficient processes

 Further enhance efforts exploring next generation technology for future threats

Secretary of Energy

 Submit legislative proposal for FY2020 to establish an Industrial Base Analysis and 

Sustainment program to address manufacturing and industrial base risk within the 

energy and nuclear sectors.

Secretary of Labor

 Work with the Departments of Defense, Education, and Commerce to determine critical 

manufacturing and defense industrial base occupations and their corresponding 

definitions in the 2018 Standard Occupational Classification System. Using historical 

data from the Bureau of Labor Statistics and demand data gathered from industry,

determine specific occupations to target for current and future pipeline growth (e.g. 

systems engineers, computer numerically controlled tool operators, welders) and:

o Assess potential incentives to recruit and retain workers to enter and/or stay in the 

industrial base, such as tuition reimbursement. 

o Create or foster comprehensive training and education programs in coordination 

with federal, state, academic, and local sponsors.

 Work with states to reduce occupational licensing barriers preventing qualified workers 

from quickly and efficiently meeting needs in other regions, thereby aiding geographic 

movement of individuals possessing critical skills to areas in need of human capital for 

production and maintenance (e.g. shipyards, depots, and production plants).
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APPENDICES
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Appendix One: Executive Order 

13806 

ASSESSING AND STRENGTHENING THE MANUFACTURING AND DEFENSE 

INDUSTRIAL BASE AND SUPPLY CHAIN RESILIENCY OF THE UNITED STATES

By the authority vested in me as President by the Constitution and the laws of the United States of 

America, it is hereby ordered as follows:

Section 1. Policy. A healthy manufacturing and defense industrial base and resilient supply chains 

are essential to the economic strength and national security of the United States. The ability of the 

United States to maintain readiness, and to surge in response to an emergency, directly relates to 

the capacity, capabilities, and resiliency of our manufacturing and defense industrial base and 

supply chains. Modern supply chains, however, are often long and the ability of the United States 

to manufacture or obtain goods critical to national security could be hampered by an inability to

obtain various essential components, which themselves may not be directly related to national 

security. Thus, the United States must maintain a manufacturing and defense industrial base and 

supply chains capable of manufacturing or supplying those items.

The loss of more than 60,000 American factories, key companies, and almost 5 million 

manufacturing jobs since 2000 threatens to undermine the capacity and capabilities of United 

States manufacturers to meet national defense requirements and raises concerns about the health 
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of the manufacturing and defense industrial base. The loss of additional companies, factories, or 

elements of supply chains could impair domestic capacity to create, maintain, protect, expand, or 

restore capabilities essential for national security.

As the manufacturing capacity and defense industrial base of the United States have been 

weakened by the loss of factories and manufacturing jobs, so too have workforce skills important 

to national defense. This creates a need for strategic and swift action in creating education and 

workforce development programs and policies that support job growth in manufacturing and the 

defense industrial base.

Strategic support for a vibrant domestic manufacturing sector, a vibrant defense industrial base, 

and resilient supply chains is therefore a significant national priority. A comprehensive evaluation 

of the defense industrial base and supply chains, with input from multiple executive departments 

and agencies (agencies), will provide a necessary assessment of our current strengths and 

weaknesses.

Sec. 2. Assessment of the Manufacturing Capacity, Defense Industrial Base, and Supply Chain 

Resiliency of the United States. Within 270 days of the date of this order, the Secretary of 

Defense, in coordination with the Secretaries of Commerce, Labor, Energy, and Homeland 

Security, and in consultation with the Secretaries of the Interior and Health and Human Services, 

the Director of the Office of Management and Budget, the Director of National Intelligence, the 

Assistant to the President for National Security Affairs, the Assistant to the President for Economic 

Policy, the Director of the Office of Trade and Manufacturing Policy, and the heads of such other 

agencies as the Secretary of Defense deems appropriate, shall provide to the President an 

unclassified report, with a classified annex as needed, that builds on current assessment and 

evaluation activities, and:

(a) identifies the military and civilian materiel, raw materials, and other goods that are essential

to national security;

(b) identifies the manufacturing capabilities essential to producing the goods identified pursuant

to subsection (a) of this section, including emerging capabilities;

(c) identifies the defense, intelligence, homeland, economic, natural, geopolitical, or other

contingencies that may disrupt, strain, compromise, or eliminate the supply chains of goods

identified pursuant to subsection (a) of this section (including as a result of the elimination of, or

failure to develop domestically, the capabilities identified pursuant to subsection (b) of this

section) and that are sufficiently likely to arise so as to require reasonable preparation for their

occurrence;

(d) assesses the resiliency and capacity of the manufacturing and defense industrial base and

supply chains of the United States to support national security needs upon the occurrence of the

contingencies identified pursuant to subsection (c) of this section, including an assessment of:

(i) the manufacturing capacity of the United States and the physical plant capacity of the defense

industrial base, including their ability to modernize to meet future needs;

(ii) gaps in national-security-related domestic manufacturing capabilities, including nonexistent, extinct, threatened, and single-point-of-failure capabilities;

(iii) supply chains with single points of failure or limited resiliency, especially at suppliers thirdtier and lower;
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(iv) energy consumption and opportunities to increase resiliency through better energy

management;

(v) current domestic education and manufacturing workforce skills;

(vi) exclusive or dominant supply of the goods (or components thereof) identified pursuant to

subsection (a) of this section by or through nations that are or are likely to become

unfriendly or unstable; and

(vii) the availability of substitutes for or alternative sources for the goods identified pursuant to

subsection (a) of this section;

(e) identifies the causes of any aspect of the defense industrial base or national- security-related

supply chains assessed as deficient pursuant to subsection (d) of this section; and

(f) recommends such legislative, regulatory, and policy changes and other actions by the

President or the heads of agencies as they deem appropriate based upon a reasoned assessment that

the benefits outweigh the costs (broadly defined to include any economic, strategic, and national

security benefits or costs) over the short, medium, and long run to:

(i) avoid, or prepare for, any contingencies identified pursuant to subsection (c) of this section;

(ii) ameliorate any aspect of the defense industrial base or national-security- related supply

chains assessed as deficient pursuant to subsection (d) of this section; and

(iii) strengthen the United States manufacturing capacity and defense industrial base and

increase the resiliency of supply chains critical to national security.

Sec. 3. General Provisions. (a) Nothing in this order shall be construed to impair or otherwise 

affect:

(i) the authority granted by law to an executive department or agency, or the head thereof; or

(ii) the functions of the Director of the Office of Management and Budget relating to

budgetary, administrative, or legislative proposals.

(b) This order shall be implemented consistent with applicable law and subject to the availability

of appropriations.

(c) This order is not intended to, and does not, create any right or benefit, substantive or

procedural, enforceable at law or in equity by any party against the United States, its departments,

agencies, or entities, its officers, employees, or agents, or any other person.

DONALD J. TRUMP

THE WHITE HOUSE, 

July 21, 2017.
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Appendix Two: Sector Summaries

Each of the working groups provided a summary of their respective sector in the following 

pages, including explanations of impacts the risk archetypes have on their sector’s ability to 

support national security. The sector summaries focus on prime suppliers; information 

regarding risk below the prime tier is available for some sectors in the classified annex.
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Traditional Defense Sectors

Aircraft Sector

Aircraft includes fixed wing, rotorcraft, and unmanned aerial systems required for air-to-air and 

air-to-ground military operations and transport. Fixed wing aircraft include fighters, bombers, 

cargo, transportation, and any manned aircraft that use a set of stationary wings to generate lift 

and fly. DoD rotorcraft operate in harsh battlefield environments, requiring robust, advanced 

capabilities and systems. Unmanned aerial systems include the necessary components, 

equipment, network, and personnel to control an unmanned aircraft; in some cases, unmanned 

aerial systems also include a launching element.

While large airframes and subsystems rely heavily on commercial technologies, processes, and 

products, defense-unique design and manufacturing skills are needed to meet the requirements 

of military weapon systems, produce next-generation aircraft, and maintain technological 

advantage. Six companies provide the majority of aircraft platforms and possess the full range 

of capabilities to bring a new weapon system from the research, design, and development phases 

into full production. 

The rotorcraft industry consists of two major segments: defense and commercial. The mission

and capability requirements between the two segments are substantially different. While 

military rotary wing funding peaked in 2011 and has since declined by over 40%, it is projected 

to increase again due to programs including Future Vertical Lift. The funding levels for the last 

decade have been historically high due to the high operational tempo and utilization in theater.

Diverse and complex, the unmanned aerial systems industry ranges from bird-size (classified as 

Group I) to 100+ foot wingspans (Group V) and includes both unmanned and manned-withautonomy. The industry supporting unmanned aerial system production is wide-ranging and in 

a state of rapid transition, as civil end-users overtake military-specific users, with a significant 

shift in market development and production of small to medium-sized platforms (Groups I-III)
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from U.S. sources to those based in China. As current conflicts wind down, there will be a 

reduction in planned military buys and more focus on evolving systems that can survive in an 

Anti-Access Areal Denial or defended airspace. 

All three aircraft sub-sectors face challenges, including long product/system development 

timelines, high development and qualification costs, and production limitations. During the 

1990s, a dramatic decline in aircraft procurement led to consolidation of prime suppliers in the 

sector. Consolidation continues today and has expanded into the sub-tiers of the supply chain, 

creating additional risks for single or sole source vendors. In addition, the sector is experiencing 

a shortage of workers with critical hardware and software design capabilities due to large 

retirement populations, limited platform knowledge transfer opportunities, and skyrocketing 

demand for software engineers outstripping supply in multiple product line sectors. 

Case Studies: Aircraft Sector Impacts on National Security

Gaps in the aircraft sector directly reduce domestic capability to produce and field a fleet 

capable of providing superior offensive and defensive capabilities against adversaries. The 

case studies included below illustrate how trends in workforce, industry consolidation, and 

individual company risk impact the quality and quantity of U.S. military aircraft. 

Aircraft Design and Engineering Human Capital 

Defense-unique design skills are required to spur innovation and enable revolutionary 

platform development. Current modernization programs help sustain important capabilities 

but do not provide enough opportunities to maintain skills to dominate major design and next 

generation development work. With the approaching end of several advanced development 

programs, an absence of new requirements in the next five to seven years, and increasing 

numbers of retirees with critical experience, the industrial base workforce faces a shortage of 

critical design capabilities. Maintaining innovation becomes nearly impossible while facing 

the constant threat of skilled aerospace, mechanical, electrical, and software engineers leaving 

the workforce and not passing along critical knowledge of next-generation technologies and 

fifth/sixth generation enabling capabilities to new employees. Another endemic workforce 

weakness experienced across much of the aircraft sector is the original equipment 

manufacturers’ inability to maintain innovation and design skill development due to a lack of 

consistent R&D funds. 

Each subsector faces distinct challenges. In the fixed wing sector, keeping design teams active 

for next generation tactical air support fighters may become an issue because industry will not 

see a new program starts until the F-X and F/A-XX programs begin to take shape. 

Compounding this issue, most current tactical air support design engineering teams have 

employees at or near retirement age. Industry is working closely with the Defense Advanced 

Research Projects Agency on the Penetrating Counter Air and Next Generation Air 
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Dominance programs, efforts that will set the stage for next generation fighter aircraft 

capabilities and survivability and provide current teams with new design work, through which 

older employees can transfer unique skills and knowledge to the next generation. 

Impacts of Limited Innovation 

Without design competition, DoD will see limited innovation, increased cost, and additional 

time added to new starts. Production capacity could also become a concern as legacy 

programs end (F-15, F-16, & F-18) and production lines close. The facilities where these lines 

are located will likely be refitted for other purposes and space will be occupied with new 

workload or closed. If this occurs, it will have a limiting effect on industry's ability to surge 

production in the future. In rotorcraft, twelve legacy platforms are currently in production or 

sustainment and three are in engineering, manufacturing, and development. There have been 

no clean sheet program starts through production since 1983. As decisions on the Future 

Vertical Lift program are delayed, industry design teams and other industrial capabilities 

could be at risk. In unmanned aerial systems, only the MQ-25 is in engineering, 

manufacturing, and development, with limited public new design on the horizon. As time 

goes on, design teams could be in jeopardy, with domestic producers of smaller class 

unmanned aerial systems experiencing a shrinking market share.

Large, Complex Alloy Castings

There are currently four suppliers with the capability to manufacture large, complex, single 

pour aluminum and magnesium sand castings. These suppliers face perpetual financial risk 

and experience bankruptcy threats and mergers mirroring the cyclicality of DoD acquisition. 

The single qualified source for the upper, intermediate, and sump housing for a heavy lift 

platform for the Marines has experienced quality issues and recently went through

bankruptcy proceedings. Without a qualified source for these castings, the program will face 

delays, impeding the U.S. ability to field heavy lift support to Marine Corps expeditionary 

forces.
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Chemical, Biological, Radiological, and Nuclear Sector

Chemical, biological, radiological, and nuclear encompasses capabilities through science, 

engineering, testing, and logistics to create products that provide protection from threats and 

attacks. 

The DoD Chemical and Biological Defense Program’s mission is to enable the Warfighter and 

first responders to deter, prevent, protect, mitigate, respond, and recover from chemical, 

biological, radiological, and nuclear threats and effects as part of a layered, integrated defense. 

To support this mission, the Chemical and Biological Defense Program industrial base sustains 

the capabilities needed to support the three strategic readiness goals: 1) equip the force to 

successfully conduct military operations to prevent, protect, and respond to chemical, biological, 

radiological, and nuclear threats and effects; 2) develop new capabilities to counter emerging 

chemical, biological, radiological, and nuclear threats; and 3) maintain industrial capabilities in 

the form of workforce, infrastructure, testing, R&D, and manufacturing to achieve current and 

future National Security Strategy requirements.

The sector is composed of commercial and organic industry of all sizes to meet the Chemical and 

Biological Defense Program mission. It is also a niche market heavily dependent upon DoD 

procurements for sustainability and defined by the engineering, testing, logistics, and 

production capabilities to meet the following technical areas: medical countermeasures to 

address chemical, biological, radiological, and nuclear and emerging infectious diseases and 

threats through vaccines and antidote treatments; protection for the Warfighter through 

respirators, masks, decontamination kits, etc.; contamination avoidance through development 

and use of sensors, monitors, and detectors; guardian systems to provide support for first 

responders; and information systems that consist of integrated early warning, hazard prediction 

models, consequence management, and decision support tools. The 2017 National Security 

Strategy indicates the importance of the sector as it provides critical capabilities to counter 
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hostile states and terrorist groups increasingly trying to acquire nuclear, chemical, radiological, 

and biological weapons. 

Case Studies: CBRN Sector Impacts on National Security 

The case studies below illustrate how a capacity-constrained supply market, structurally poor 

industry economics, and the erosion of U.S.-based infrastructure create gaps in the sector that 

may lead to limited or non-existent domestic supply of capabilities to protect the Warfighter 

against current and future threats. 

ASZM-TEDA1 

ASZM-TEDA1 impregnated carbon is a defense-unique material provided by a single qualified 

source, subject to a single-point-of-failure. A lack of competition with other potential sources 

precludes assurances for best quality and price. While ASZM-TEDA1 is used in 72 DoD 

chemical, biological, and nuclear filtration systems, the current sourcing arrangements cannot 

keep pace with demand. DoD is using Defense Production Act Title III authorities to establish 

an additional source of this critical material. 

Organic Base Arsenal

Inconsistent workload and future projections degrade the ability to sustain current 

capabilities and to develop capabilities for future requirements at an organic arsenal in 

support of Joint Forces readiness requirements. The difficulty in providing a sustainable 

workload to this organic production base negatively impacts the ability to retain and develop 

human capital, increases overhead costs, and limits the ability to surge or respond quickly to 

Chemical and Biological Defense Program requirements. In addition, the sustainment of the 

production facility in providing low volume legacy components and end items is vital. 
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Ground Systems Sector

Ground systems provide defense unique products for mobility and firepower, and are divided 

into tracked and wheeled vehicles for combat, combat support, and combat service support. 

The ground systems sector is defined by a small set of prime suppliers engaged solely in 

production for both tracked and wheeled vehicles. There are two main suppliers for tracked 

tactical vehicles – one supplier specializing in steel fighting vehicles and another specializing

mostly in aluminum armored vehicles. Wheeled combat service support vehicles are considered 

a defense-unique product, but the industrial base supporting this subsector is highly dependent 

on commercial automotive technology and production capabilities. Two domestic suppliers

dominate tactical wheeled vehicle manufacture, but there are multiple qualified vendors for the 

repair, refurbishment, and modifications business.

There are only a few active programs within various development phases for legacy systems in 

the tracked vehicles subsector, including armored multi-purpose vehicles; amphibious assault 

vehicles; M1A1/ M1A2 vehicles; M109 vehicles; and armored tank retriever variants. The 

ground systems sector followed a strategy of incremental adoption of new technologies on legacy 

designs to maintain or modify current ground systems, allowing the military to defer the long 

schedules and high costs of new programs. However, this resulted in a generation of engineers 

and scientists that lack experience in conceiving, designing, and constructing new, 

technologically advanced combat vehicles. 

Many current wheeled tactical vehicle fleets are in the middle of their lifecycles, which are 

generally planned for 20 years with a rebuild at the ten year mark, but this can vary with 

utilization. The existing vehicle fleets are healthy, as increased production has lowered the 

average age of the platforms, and Overseas Contingency Operations maintenance funding 

allowed for rebuilds and modifications to be applied at the same time. Advances in technology 
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and engineering innovation led to improvements in existing equipment, prolonging vehicle 

service life and increasing the capability of legacy vehicles. 

Opportunities for new work, modernization, and recapitalization are important to keep prime 

suppliers competitive. The Army is preparing two programs that will provide much needed 

work to exercise design skills in the wheeled vehicle industrial base: 1) development of a 

replacement medium tactical vehicle; and 2) the Mobile Protected Firepower to design and field 

a more lethal armored fighting vehicle. 

Fragility exists in the sector for systems with long lifecycles and equipment not used in ongoing 

combat operations or training. As a result, a lack of steady orders for vehicles leads prime 

vendors and their suppliers to reduce excess capacity in labor and facilities, leaving the ground 

systems sector at risk of not meeting service and combatant command requirements for 

modern, new, and additional equipment that can dominate the battlefield. Industrial facilities 

are not readily available to produce, the workforce is limited, and competition for common 

supply chain products and other materials would require prioritization across the ground 

vehicle supply chain as well as across services.

Case Studies: Ground Vehicle Sector Impacts on National Security

The following case studies illustrate how gaps in the ground vehicle sector directly reduce 

capabilities to maintain a forward military presence needed to deter and defeat any adversary,

and adapt to new strategies and techniques of battle.

Wrought Aluminum Plate Production Capacity 

Wrought aluminum plate, and specifically cold-rolled plate, is essential for armoring U.S. 

ground combat vehicles, constructing Navy ships, and building military aircraft. Unlike other 

more common forms of rolled aluminum materials, thick cold-rolled aluminum production 

capabilities and capacities are unique. DoD relies on domestic producers as well as 

capabilities available from ally countries in Europe. Due to U.S. Government budget 

uncertainties, unpredictable DoD demand, and other commercial market factors, the defense 

industrial base can face challenges when trying to balance diverse demands for cold-rolled 

plate production capacity while also informing long-term internal capital investment 

decisions. Other challenges facing the domestic industrial base include the effects of foreign 

competition. Under certain circumstances, the defense industrial base could potentially face 

production bottlenecks during a future surge in DoD requirements. 

Manufacture of Gun Barrels, Howitzer Barrels, and Mortar Tubes 

Legislation and DoD industrial policy requires DoD to manufacture all large caliber gun 

barrels, howitzer barrels, and mortar tubes at one organic DoD arsenal. There is only one 

production line at the arsenal for all of these items, and policy modifications to meet demand 
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and surge from overseas have led to a lack of capacity to meet current production 

requirements.

Capacity Shortfall for Future Armored Brigade Combat Team Goals

Over 80% of Army and Marine Corps combat vehicle production consolidated to one 

manufacturer at one assembly facility. Almost none of these vehicles have ever been 

completely manufactured at this facility. None have been manufactured simultaneously and 

the facilities capacity to support simultaneous manufacture is currently under examination. 

Munitions and Missiles Sector

Munitions include ‘dumb’ bombs, ammunition, mortars, and tank rounds, etc., and missiles 

include ‘smart’ bombs, tactical (air-to-air, air-to-ground, surface-to-air, cruise) missiles, missile 

defense, and strategic missiles. The sector is primarily defense-unique and is subject to wartime 

needs – procurement ramps up during wartime and reduces when conflict ends. The market is 

defined by this conflict-reliant pattern, creating significant management and viability challenges 

for suppliers and their sub-tiers.

The missile sector has undergone significant consolidation in the past several decades. Two of 

the five prime contractors account for roughly 97% of DoD’s missile procurement funding. As of 

the writing of this report, one of the prime contractors is attempting to acquire another prime. 

There are currently only two domestic suppliers for solid rocket motors used in the majority of 

DoD missile systems, with a single foreign supplier making up the balance.

Over the past two decades, DoD has fielded no completely new tactical missile designs. New 

programs have been upgrades to existing systems, but there have been no solid rocket motor 

improvements. The sector is also suffering a post-drawdown decline in procurement, resulting 

in loss of critical design and production skills. However, two new tactical missile programs are 
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entering development and, if they continue, will provide needed work to exercise the tactical 

missile industrial base design skills – the Advanced Anti-Radiation Guided Missile Extended 

Range and Long Range Precision Fires. There is also one new strategic missile program, 

Ground Based Strategic Deterrent, the LGM-30G Minute Man III Inter-Continental Ballistic 

Missile replacement. Numerous demonstration and validation programs have been funded over 

the past several years by the Ground Based Strategic Deterrent program, providing some design 

work to industry, particularly to the large solid rocket motor industrial base.

The ammunition and munitions base is critical to the life cycle management of more than 650 

programs, over 1,200 end items, and over 1,300 components. Efficiencies in contracting and 

cost effectiveness have been gained with the Army as the Single Manager for Conventional 

Ammunition for all Services, including procurement from both organic and private sector 

suppliers. Private sector suppliers, the majority of which are domestic, are of crucial importance 

to conventional munitions production – which does not include missiles. Historically, 70-75% 

of procurement funding for munitions has been directed toward the private sector. 

Case Studies: Munitions and Missiles Sector Impacts on National Security

Gaps in munitions and missiles directly reduce the U.S. capability to deliver kinetic effects 

against adversaries. The case studies below illustrate how risks have hampered U.S. mission 

goals in recent years, as well as the impact to immediate and long term U.S. wartime 

capabilities.

Silicon Power Switch 

In 2017, the issue with the most impact was the obsolescence of a voltage controlled switch 

from a sub-tier supplier. The switch is used in electronic safe and arm devices, electronic 

ignition devices, and flight termination systems for all DoD missiles. The semiconductor chip 

foundry used in the voltage control switch was purchased by another foundry. A 5th tier 

supplier, the voltage control switch company notified their next tier customer of the foundry 

closing and received an end-of-life buy order for what was considered enough supply to allow 

time to qualify a replacement voltage control switch. DoD was not informed of the issue or 

consulted on the end-of-life quantity until two years after the event occurred. At that point, it 

became evident that the end-of-life buy, which was supposed to last 3-5 years, would only last 

6 months. This left insufficient time to develop, test, integrate, and qualify the new switch 

before the old switches were depleted. Until new switches are qualified, affected DoD missile 

systems are at risk.

Advanced Medium Range Air-to-Air Missiles (AMRAAM) 

After years of production, the supplier of the solid rocket motor for the Advanced Medium 

Range Air-to-Air missile encountered technical production issues. Subject matter experts 

from the government and industry were unable to determine the cause, leading to a 
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temporary work stop and potential loss for a critical solid rocket motor supplier. To keep the 

Advanced Medium Range Air-to-Air missile production line moving, the prime contractor for 

the missile pursued an alternative source for the solid rocket motor, and selected a Norwegian 

company to produce a new solid rocket for the missile. 

Explosives Demand at Holston Army Ammunition Plant (HSAAP) 

A government-owned, contractor operated facility is the only domestic source for most DoD 

explosives, and it can only produce 9 million pounds of a key DoD explosive per year. In early 

FY 2016, demand for this explosive for bomb fills abruptly increased to levels not seen in 

decades and the facility did not have sufficient capacity to meet demand. Foreign sources 

were not able to materially mitigate the capacity shortfall. A study determined that the 

facility’s capacity would continue to be stressed for the foreseeable future, so a mitigation plan 

to increase capacity is being implemented at a cost of $500 million and with an estimated 

completion date of 2023.

Nuclear Matter Warheads Sector

The U.S. nuclear deterrent is a lynchpin in our defense planning and that of our allies and 

adversaries. Nuclear weapons are designed and produced to meet an “Always/Never” standard:

1. They must always work when authorized by proper authority, and

2. They must never work in any situation or environment (normal, abnormal, or 

adversarial) without authorization by proper authority.

Supply chain availability and integrity is crucial to achieving the “Always/Never” standard, but 

an increasing set of risks threaten the integrity of the enterprise. A summary is provided below, 

while a classified version of this report provides further details.
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Major Risks: Nuclear Matter Warheads Sector

Skilled, Clearable Workforce

The U.S. faces a diminishing supply of clearable labor with the advanced education and 

training necessary for designing, producing, and stewarding nuclear weapons. The primary 

source of that labor, U.S. colleges and universities, generate insufficient U.S. citizen graduates 

in the STEM areas relevant to the nuclear enterprise. The U.S. also lacks labor with important 

trade skills, including welders. Additional challenges due to clearance requirements greatly 

reduce the available pool of labor.

Microelectronics/Electronic Components

Nuclear warheads depend on trusted sources of microelectronics and electronics. Because the 

supply chain is globalized and complex, it is challenging to ensure that finished assemblies, 

subsystems, and systems exclusively leverage trusted, discrete components due to 

diminishing U.S.-based microelectronic and electronic manufacturing capability.

Critical Materials

Various sole source materials, addressed through the Nuclear Posture Review, are unavailable 

through trusted sources in sufficient quantities to ensure a robust and independent nuclear 

capability throughout the weapons lifecycle. The problem is exacerbated by policies and 

requirements that either limit or place restrictions on procurement options, e.g., life of 

program buys.

Software Systems/Applications

Lack of trusted sources of software design tools, data management systems, manufacturing 

execution, and facility controls introduce risk to the nuclear weapons engineering 

environment. This problem is exacerbated by poor cybersecurity practices by many key 

software vendors.

Analytical and Test Equipment

Given current nuclear weapons test restrictions, specialized analytical and test equipment is 

essential to ensure the “Always/Never” standard of nuclear weapon performance. 

Components, subsystems, and systems must be tested to unique qualification standards, but 

the supplier base for certain test equipment is increasingly globalized and not trusted, leading 

to uncertainty in testing.
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Radar and Electronic Warfare Sector

Military radars and electronic warfare systems play a significant role in meeting our national 

security objectives. Radar is essential to detecting the presence, direction, distance, and speed 

of targets such as aircraft, ships, and weapons, and for controlling flight and weaponry. 

Detection is achieved by transmitting electromagnetic waves that are then reflected off objects

and return back to the receiver. Required to operate in the harshest environments in order to 

support combat operations, military radar system requirements are often more stringent than 

those imposed on commercial systems. Radar systems have many applications and can even be 

used to detect slight changes to surfaces over time – allowing such capability as detection of 

footprints of shallow depth. Recent technological advances have enabled the rise of the 

Synthetic Aperture Radar, which leverages signal data processing to integrate radar returns over 

time as a radar system moves, and is used for search and rescue, target 

search/acquisition/identification/tracking, and weapons engagement. Synthetic Aperture 

Radar capabilities have become a game changer for state of the art and next generation radar 

systems and platforms.

Electronic warfare systems continue to become a more integral element of military weapon 

systems. Electronic warfare refers to military action involving the use of electromagnetic energy 

and directed energy to control the electromagnetic spectrum or to attack the enemy. The 

purpose is to deny the opponent the advantage of, and ensure friendly unimpeded access to, the 

electromagnetic spectrum; it includes capabilities for electronic attack, electronic support, and 

electronic protection. The systems are dependent upon technologies similar to those found in 

radar systems, including receivers and transmitters, and include countermeasure technologies 

such as chaff and flares that can target humans, communications, radar, or other assets. 

DoD has roughly 100 radar systems in development, production, or sustainment with a similar 

portfolio of electronic warfare systems. These systems perform functions in four operational 

domains; land, air, space and sea and provide critical mission capabilities. There are a total of 
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23 firms that produce or have produced radars for DoD. Three domestic suppliers dominate the 

domestic radar market and four domestic suppliers dominate electronic warfare systems. 

Case Studies: Radar and Electronic Warfare Sector Impacts on National 

Security

Gaps in the radar and electronic warfare sector directly reduce American capability to detect, 

find, fix, acquire, track, and attack threat systems in the face of an ever increasingly complex 

digitally driven environment. The case studies illustrate areas on which the U.S. needs to 

avoid becoming out matched in a current or next generation warfare scenario, where we 

would rely on radar and electronic warfare systems as key enablers to ensure survivability and 

dominance in a multi-domain battle space.

Radar and Electronic Warfare Software Developers & Engineering Shortages

Of greatest concern in this sector is prime contractors’ ability to attract and retain the 

necessary software developers and engineers to develop and sustain radar and electronic 

warfare systems. Traditional radar and electronic warfare systems are minimally automated, 

requiring an operator to manually configure the system to operate in static modes. As the 

operational environment continues to grow in complexity with regards to the types and 

number of targets, and as commercial and military spectrum usage increases, our systems are 

forced to be cognitive, agile, automated, and multi-purposed. As the commercial sector and 

adversaries field similar capabilities, U.S. forces encounter systems that can “hide in the 

noise” and frequency hop to avoid detection and characterization. 

To attack, defend, and counter against an increasingly complex and networked threat 

scenario, we must have a robust, capable, and agile workforce to update and modernize our 

military systems in critical technologies such as radio frequency solid state, power, high speed 

data interconnects and networks, software, and algorithms. Decreasing numbers in domestic 

software systems engineers, developers, and design engineers force defense suppliers to 

compete for talent with each other and with non-defense industries. Recruitment, training, 

and retention become key employer capabilities to ensure companies have the manpower to 

conduct R&D, design, modernization, and system upgrades within tactically relevant 

timelines. Without the appropriate depth of skilled engineers, America’s leading edge in 

hardware architectures and software/firmware coding will continue to erode.

Electronic, Microelectronic, and Material Issues

Trusted foundries, obsolescence, diminishing manufacturing sources and material shortages, 

and counterfeit issues are common to the broad defense electronics sector. These issues are 

prevalent for current and future radar and electronic warfare systems as well as systems in 

sustainment. One logistics center within the organic base identified over 4,000 diminishing 

manufacturing sources and material shortages items for just the radars maintained at that 
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particular base. In addition to sustainment issues, the military is highly dependent upon the 

commercial sector for technology maturation, but the commercial sector is driven by revenue 

and high volume technology demands. In the microwave tube industry, DoD has only two 

primary microwave tube sources because of the commercial sector’s migration to solid state 

technologies, creating a fragile market. Additionally, technology performance requirements 

being driven by the general public do not always lead to the development of technology that is 

feasible for military use. Given the fluidity of the commercial sector, the U.S.’s ability to lead 

advancements and retain long-term support infrastructure to support defense-specific 

electronics and microelectronics technologies areas will continued to be stressed.

Chaff and Flare Issues

Of concern is the limited number of U.S. based sources for chaff and flare countermeasures –

both integral for defensive capabilities. Chaff is composed of millions of tiny aluminum or 

zinc coated fibers stored on-board the aircraft in tubes. When an aircraft is threatened by 

radar tracking missiles, chaff ejected into the turbulent wake of air behind the plane creates 

confusion for the missile’s radar system. Defense unique requirements and decreasing DoD 

demand drove out other suppliers, leaving a single qualified source for chaff.

Flares distract heat-seeking missiles by ejecting hot magnesium pellets from tubes to ignite in 

the wake behind an aircraft. They burn at temperatures above 2,000 degrees Fahrenheit, 

hotter than the jet engine nozzles or exhaust, and exhibit large amounts of infrared light. 

Over the past decade, capacity in the flare industry has declined and DoD demand has 

dropped, leaving two domestic suppliers with little incentive to invest in infrastructure. 

Recently, the two domestic suppliers both experienced explosive accidents at their production 

sites and the subsequent shutdowns limited DoD program offices’ ability to acquire products 

on time. Both companies have experienced quality and delivery problems since the accidents. 

As program offices look to improve quality and cost, they are beginning to look offshore at 

more modern facilities, where there are fewer quality and safety concerns. 

Reduced Competition and Innovation 

The military faces risk of reduced competition and innovation for fighter aircraft tactical 

active electronically scanned array radar systems. While there are other suppliers who have 

the capability to develop and produce these systems, there are only two domestic suppliers 

who have the unique engineering and design requirements and capabilities for size, weight, 

operational environment, and power associated with a tactical fighter aircraft. While similar 

active electronic scanned array systems are being produced for other applications, once the 

F/A-18 production ends (roughly 2024), only a single qualified source of the systems will 

remain. 
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Shipbuilding Sector

Shipbuilding includes the industrial base required to construct and maintain Navy aircraft 

carriers, submarines, surface ships, and their associated weapons and command and control 

systems. 

The shipbuilding sector consists primarily of seven shipyards owned by four companies and 

their suppliers. Shipyards are fixed facilities with dry-docks and fabrication equipment that 

support ship construction, repair, conversion and alteration, and the production of refabricated 

ship sections and other specialized services. The sector also includes manufacturing and other 

facilities beyond the shipyard, which provide parts and services for shipbuilding activities. The

industrial base supporting shipbuilding is segmented by ship type: aircraft carriers, submarines, 

surface combatants, amphibious warfare, combat logistics force, and command and support 

vehicles.

Over the last 60 years, Navy procurement profiles have shown sharp peaks in shipbuilding 

followed by significant breaks or valleys in production, severely degrading the ability of 

shipyards to conduct long-term planning and respond to near-term changes in requirements. 

This created a boom and bust within the industry, degrading the industrial base and resulting in 

longer construction times and increased costs. The steady, sustainable baseline shipbuilding 

profiles in the Annual Long-Range Plan for Construction of Naval Vessels for FY 2019 will 

establish industrial efficiency and agility, and protect workforce skills, in order for the U.S. 

shipbuilding industrial base to remain cost effective and meet the demands of the 355 ship Navy 

required for national defense.
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Case Studies: Shipbuilding Sector Impacts on National Security

The shipbuilding industrial base is a national asset and absolutely vital to America’s ability to 

build and sustain the Naval fleet. The Navy is focused on improving the health of the 

industrial base to meet its requirement of a 355 ship fleet with a long range plan anchored by 

industrial stability. The analysis performed in response to EO 13806 identified five 

underlying risks: dependency on single/sole source suppliers, capacity shortfalls, lack of 

competition, lack of workforce skills, and unstable demand.

Dependency on Single/Sole Source Suppliers

Industries involved in the manufacturing of shipbuilding components were among the 

hardest hit by the global shift in the industrial base over the last 20 years. Of the top ten 

highest grossing industries in Navy shipbuilding, six are in the manufacturing sector. Since 

2000, these industries experienced a combined decline of over 20,500 establishments†† in the 

U.S. Contraction of the industrial base has limited competition among U.S. suppliers of Navy 

components and in many cases, competition has altogether vanished, forcing the Navy to rely 

on single and sole source suppliers for critical components. Expanding the number of 

companies involved in Navy shipbuilding is important to maintaining a healthy industrial 

base. 

A sole source issue currently impacts the manufacturing and refurbishment of shafts for 

surface ships and submarines. The limited capacity of the equipment at the sole forge doing 

this work for the Navy hampers the forge’s ability to meet demand. Further, it is difficult to 

recruit and retain qualified personnel to operate the equipment because technical schools 

have stopped training on the equipment, given its age. If the forge is not modernized, the

facility may exit the market, causing disruptions to multiple Navy programs.

Capacity Shortfall

The high operational tempo of the Navy in recent years, along with a lack of steady funding for 

maintenance and modernization, has resulted in a backlog of repair work across the fleet. 

Coupled with increases in new ship construction, many suppliers are experiencing a shortfall 

in their capacity to perform work and manufacture products. This increased demand is 

applying stress to already-aging production equipment and could necessitate additional hiring 

in highly specialized fields, where it is difficult to find suitable candidates. The combination 

of limited suppliers and an increase in workload could increase cost and potentially create 

schedule slips, impacting American warfighting capability. 

One risk in particular relates to Navy surface ship dry-docking requirements for maintenance 

and modernization work. New ship technical requirements, a large volume of mid-life 

availabilities, and a general lack of investment by industry in new dry-dock capacity will 

create a significant constraint for completing ship maintenance, requiring the Navy to adopt 

strategies that could potentially increase cost and schedule risk.
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Lack of Competition

The primary cause decreasing competition in shipbuilding is the small comparative size of the 

U.S. commercial shipbuilding industry compared to the foreign shipbuilding industry, 

coupled with the Navy’s unique military requirements. Products and services that lack 

competition are at a higher risk of being offered by a single or sole source supplier. Examples 

of lack of competition can be seen in many products critical to shipbuilding such as high 

voltage cable, propulsor raw material, valves, and fittings.

Lack of Workforce Skills

The skills needed to fabricate components for and build Navy ships, submarines, and their 

components are unique and specialized. As the shipbuilding industry has long been 

challenged by an eroding skill base, today’s workforce will be challenged to meet the increased 

demand in the Annual Long-Range Plan for Construction of Naval Vessels for FY 2019. 

Additionally, the Department of Labor predicts that between 2018 and 2026, there will be a 

6%–17% decrease in U.S. jobs in occupations critical to Navy shipbuilding, such as metal 

layout (ship-fitting), welding, and casting. As the amount of available jobs overall in the U.S. 

decreases, the number of workers entering into these fields will also decrease. Left 

unaddressed, a lack of skilled workers will significantly impact the shipbuilding industry’s 

ability to meet the Navy’s long term demand.

Unstable Demand

Due to uncertainties about future budgets and shipbuilding plans, the supplier base is limited

in their ability to plan for future work, which limits production efficiencies, inhibits

investment in facility improvements and workforce development, and reduces the level of 

independent R&D investment. Perhaps most significant, decreases and instability in demand 

can result in workforce reductions and production lines being shut down. When this happens, 

it is difficult to bring those skills back when they are needed, as it takes a significant amount 

of time to train a workforce to acquire the skills unique to the shipbuilding industry, and 

specialized production lines are often costly to reopen. Unstable demand drives cost, 

schedule delays, and quality issues throughout the industrial base, especially if not proactively 

managed.

 

†† An establishment is a single facility regardless of ownership. For example Company “X” could own and operate five 

foundries in different states within the U.S.; this would count as five establishments.
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Soldier Systems Sector

Soldier systems include products necessary to maximize the Warfighter's survivability, lethality, 

sustainability, mobility, combat effectiveness, and field quality of life by considering the 

Warfighter as a system. This sector includes the weapons, body armor, clothing, footwear, 

radios, sensors, power supply, shelters, food, and other Service-member support items essential 

to executing the many distinct U.S. military missions – from snipers to tankers to airmen to 

divers.

The soldier systems sector is composed of twelve subsectors; most have significant commercial 

overlap. The subsectors are vast – a recent Department of Commerce survey, exclusively 

studying the domestic clothing, textiles, and footwear industries, reported that 499 companies 

operate 764 domestic textile and/or apparel manufacturing sites and 44 companies operate 65 

U.S. footwear manufacturing facilities. 

The commercial market provides stabilizing peacetime revenue for existing defense contractors

as well as opportunities for new players to modify commercial gear and enter the defense 

market. While access to the commercial market improves industrial base robustness, it also 

means the commercial market may drive demand and that DoD is not always the primary 

customer. When military and commercial requirements differ sufficiently, commercial market 

dominance can directly impact lead time, surge capacity, and the sustainment or development of 

industrial capabilities. Often, DoD is left to adapt to commercial market driven changes and 

only when unacceptable levels of industrial base risks arise, DoD may intervene in order to 

sustain critical industrial capabilities. 

The soldier systems sector is emerging from a long-term war sustainment effort where the focus 

has largely been on fulfilling immediate needs. The challenge of meeting dynamic wartime

demands consumed most of the available bandwidth and left little room for forward-looking 

investment and strategic planning. Many programs have met or are approaching their 

acquisition objectives, which triggers a natural peacetime cycle of decreased defense demand 
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leading to consolidation, reduction in capacity, loss of capability, reduced capital investment, 

and a transition toward commercial markets. Peacetime industrial readiness losses are largely 

anticipated, and have historically been recovered or replaced by alternatives once the U.S. enters

another large scale military engagement. 

As the war effort winds down, DoD and industry are pursuing some modernization efforts. 

Future soldier systems objectives include lightening the soldiers’ load, capitalizing on lessons 

learned after years of fighting, developing modular/flexible/agile materiel solutions, and taking 

advantage of advancements in sensor technology and materials engineering. A skilled workforce 

and modernized industry is required to achieve advanced designs and develop novel industrial 

capabilities.

Case Studies: Soldier Systems Sector Impacts on National Security

Industrial capability gaps in the soldier systems sector directly reduce U.S. assurance that the 

Warfighter is adequately prepared to successfully execute defense missions in any operating 

environment. The case studies illustrate where industrial base risk has accumulated in ways 

that may exceed industrial base elasticity and the risk of permanent capability loss is enough 

to potentially warrant government action. 

Erosion of U.S. Textiles Industry 

Between 1995 and 2009, the U.S. textile industry suffered a historic contraction and Asian 

markets now dominate global textiles supply. According to a recent Department of Commerce

survey, the greatest competitive disadvantages in the domestic clothing and textile subsector 

are related to workforce and raw material cost and availability. Since 2009, the domestic

textiles industry has shown signs of recovery, but recent data indicate a potential stall: total 

sales and exports of U.S. manufactured clothing and textile products have been stagnant from 

2012-2016. As an example of recent domestic erosion, the single qualified domestic source 

for high-tenacity polyester fiber used in many DoD tent systems dissolved their business due 

to inability to compete in an increasingly competitive global market. Currently, there is no 

U.S. manufacturing capability for high-tenacity polyester fiber at specific deniers (e.g., that 

allow for military specification qualification) and significant impact to multiple tent and fabric 

systems is anticipated. If risk in the clothing and textiles subsector is unacceptable, the 

industry recovery momentum must be sustained and the U.S. must undertake decisive efforts 

to modernize and revitalize the domestic fiber and textiles industry, including the workforce.

Erosion of U.S. Rechargeable and Non-Rechargeable Battery Industry

Characterized by irregular demand proportional to operational tempo, the military battery 

industrial base is diminishing. Military-unique requirements can depart from commercial 

demands in size, quality, safety, power density, weight, and environmental ruggedness. Lack 

of stable production orders has resulted in lost capability and capacity, increased surge lead 
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times, workforce erosion, and inhibited investments by remaining suppliers. Surge-capacitylimiting constraints occur at several points along the value chain, from raw material to final 

battery assembly. Additionally, foreign dependencies on essential raw minerals (e.g., lithium)

may potentially impact the rechargeable and non-rechargeable battery supply chain.

Most battery configurations are produced by single sources of supply. Production of BA-5590 

(i.e., preeminent non-rechargeable military battery) is currently single-sourced to a foreignowned supplier in France, with one domestic production facility. Decline in demand for 

military-unique non-rechargeable batteries has resulted in capability and capacity loss and 

the supplier can no longer support any significant surge in demands. Even when there were 

two manufacturers, their combined output struggled to meet surge demands for Operation 

Iraqi Freedom and Operation Enduring Freedom.

Asian markets dominate the rechargeable battery industry. Domestic rechargeable battery 

producers cannot compete in production volume and labor availability and cost. Most 

domestic lithium ion cell packagers rely on foreign commercial lithium ion cell suppliers from 

countries such as South Korea, China, and Taiwan. Cell availability for military battery 

packaging is a risk across the board for rechargeable batteries as commercial cell 

manufacturers, often foreign-owned, are unwilling to divert production from their 

commercial customers to U.S. military battery manufacturers.

Foreign Reliance for Essential Night Vision Components

U.S. military “night vision” systems are enabled by an image intensifier tube, a vacuum sealed 

tube that amplifies a low light-level scene to observable levels. Although probability of 

interruption has proven low (surge demand during Operation Iraqi Freedom and Operation 

Enduring Freedom was met) and there is a stockpiling risk management strategy in place, the 

U.S. is reliant on foreign capabilities to supply image intensifier tube core glass from Germany 

and gallium arsenide photocathodes from Japan and Germany. Core glass is DoD-unique and 

demand is very low compared to commercial glass production; the foreign sole source 

manufactures the core glass in batches based on demand, every few years, to replenish a U.S. 

buffer stock. Gallium arsenide allows for a more efficient conversion of light to electrical 

energy at extremely low light-level so by adding gallium arsenide to the photocathode, a 

brighter and sharper image is achieved. Gallium arsenide risk is considered reduced as the 

number of global suppliers has increased over time. 
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Space Sector

The space sector (also known as National Security Space) includes satellites, launch services, 

ground systems, satellite components and subsystems, networks, engineering services, payloads, 

propulsion, and electronics. 

National Security Space increasingly leverages the commercial space industry, both domestic 

and foreign. While commercial space has similar needs to DoD, it does not require the same 

level of robustness, reliability, and security in its products. Many National Security Space

domestic products are commercially non-competitive, due to the leading-edge performance, 

high-level capabilities, and unique DoD requirements. Commercial space relies on satellite 

replacement rather than long-term mission capability and while National Security Space 

systems continue to leverage commercial space products, there are certain performance 

requirements and capabilities that are more demanding or unique and are not supported by the 

growing commercial space ecosystem. DoD and U.S. Government-wide studies and analyses 

have identified at-risk capabilities, fragile suppliers, and stress in the lower tiers of the space 

industrial base. Primary areas of concern, as identified in the Defense Production Act Title III 

Presidential Determination (15 June 2017) include: aerospace structures and fibers, radiationhardened microelectronics, radiation test and qualification facilities, and satellite components 

and assemblies.

The DoD space industrial base remains a niche market with very specialized and capitalintensive capabilities that are not efficiently managed through individual program investments. 

Many systems currently in planning and development rely on dated technology, skills, and 

fragile sources. Individual programs are reluctant to invest in and qualify new technology and 

sources, creating a need to sustain fragile domestic sources and to qualify new technologies and 

sources for next-generation systems, which are essential to address ever-increasing threats in 

the space domain. 
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The Space Industrial Base Working Group‡‡ maintains critical technology lists from member 

agencies which are integrated and prioritized to establish space industrial base risk mitigation 

projects. Prioritized, but unfunded, mitigations for over a dozen of the top issues have been 

developed, along with tracking of over 100 additional lower risk issues. DoD must remain 

vigilant of sources of vulnerability and maintain critical capabilities that are specialized for 

military applications.

Space systems provide an emergent capability and strategic advantage to U.S. forces yet, due to 

DoD business practices, market trends, supply chain globalization, and manufacturing costs, 

future access to space qualified domestic industrial sources, including microelectronics, is 

uncertain. Increasing cyber-threats, non-trusted supply-chains, foreign acquisitions, reliance on 

vulnerable foreign sources, industrial policies of competitor nations (in the form of subsidies, 

domestic preference, etc.), and erratic demand is threatening the loss of essential space 

capabilities and critical skills.

Case Studies: Space Satellite Sector Impacts on National Security

Gaps in the space sector result in a limited or degraded domestic supply of qualified critical 

materials and components to support National Security Space missions. The case studies 

below illustrate how high-performance and high-reliability requirements, long development 

cycles with low and inconsistent demand, and erratic funding further reduce the strategic 

advantage of the U.S. in the space sector. 

Precision Gyroscopes

Precision gyroscopes are a critical component of the attitude determination and stabilization 

and inertial navigation system on spacecraft, launch vehicles, and missiles. Three or more 

individual gyroscope inertial sensors are typically packaged in an internally redundant inertial 

measurement unit. Three different types of gyroscopes (ring laser, hemispherical resonating, 

and fiber optic) are generally employed in space systems, each with varying industrial base 

issues. Hemispherical resonating gyroscopes are an older technology mainly used on nonagile satellites and only one domestic provider remains with limited production capacity (one 

or two units per month). As a result, this low volume item is frequently impacted by 

obsolescence issues and long lead times which can impact unit delivery if failures are found in 

testing. 

The fiber optic gyroscope is the main technology employed in high performance agile 

spacecraft and missile applications. While there are currently three domestic suppliers, fiber 

optic gyroscopes rely on key components – integrated optics chips and laser diodes –

 

‡‡ The Space Industrial Base Working Group includes DoD’s Office of Industrial Policy, Air Force Space and 

Missile Systems Center, Missile Defense Agency, and National Reconnaissance Office; the National 

Aeronautics and Space Administration is also an active participant. 
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experiencing supply issues which threaten the viability of domestic product lines. The subcomponents used in integrated optics chips are increasingly manufactured overseas and laser 

diode suppliers are consolidating and also moving manufacturing offshore.

Space Qualified Infrared Focal Plan Arrays 

The manufacture of space infrared detectors is dependent on a single foreign source for high 

quality substrates, and driven by low volume and long periods between orders, resulting in 

quality and workforce issues. Space infrared detectors rely on both mercury cadmium 

telluride and cadmium zinc telluride substrates. Despite a Defense Production Act Title III 

investment over the past few years used to establish a domestic provider and improve 

manufacturing capability for cadmium zinc telluride substrates, any disruption of more than a 

few months could essentially shut down production of large, strategic quality, mercury 

cadmium telluride infrared focal plane arrays and impact quality and long lead items for 

space satellites. A complimentary Industrial Base Analysis and Sustainment program is 

aiming to sustain the two U.S. foundries through process improvements, as well as 

demonstrate that domestic cadmium zinc telluride substrate-based detectors are equivalent in 

performance to focal plane arrays utilizing off-shore substrates.

The potential loss of domestic read-out integrated circuits sources for space applications due 

to low volume production will force systems to foreign vendors or to limited performance 

technologies that will severely impact on-orbit lifetime. This could also result in loss of 

domestic read-out integrated circuits design expertise, critical to integration into the sensor 

chip assemblies which make up focal plane arrays utilized for missile early warning, missile 

defense, space surveillance, and awareness in space systems. Radiation hardened, digital, 

capacitance trans-impedance amplifier based read-out integrated circuits have no commercial 

applications, resulting in extremely low volume production. The space market for read-out 

integrated circuits is extremely small, representing less than 1% of business for existing 

suppliers.
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Cross-Cutting Sectors

Cybersecurity for Manufacturing Sector

Cybersecurity for manufacturing is a complex and challenging issue with immediate impacts to 

all facets and sectors of the industrial base. It includes information technology and operational 

technology within and across the supply chain.

The defense manufacturing supply chain flows goods and critical information among multiple 

organizations – of varying size and sophistication – to transform raw materials into 

components, subassemblies, and ultimately finished products and systems to meet DoD 

performance specifications and requirements. These supply chain operations rely on an infinite 

number of touch points where information flows through a network – both within and across 

the many manufacturers’ systems that constitute the supply chain. In today’s digital world, 

every one of these supply chain touch points represents a potential vulnerability to the security 

of our nation’s defense production.

According to private sector reports, in 2014, manufacturers received the greatest volume of 

targeted cyber-attacks of all industries globally,132 primarily for espionage purposes.

133

 In 2015, 

the Department of Homeland Security reported the manufacturing sector received the highest 

number of attacks on industrial control systems of any critical infrastructure sector, at nearly 

twice the 2014 level. Sophisticated cyber-espionage campaigns seeking to alter the automation 

of physical processes on manufacturing lines continue to pose a significant threat.

Of the approximately 347,000 manufacturers in the United States, 99% are small and mediumsized manufacturers, yet more than 50% lack basic cyber controls. An assessment by Bureau of 

Industry and Security illustrated the cybersecurity vulnerability of small manufacturers. The 

survey of over 9,000 “classified contract facilities” documented that 6,650 small facilities lagged 
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medium and large firms across a broad range of 20 cybersecurity measures. It also found that 

fewer than half of the small firms had cybersecurity measures in place.134 

Certain defense manufacturing supply chain operations occur in classified and very tightly 

controlled environments, but most information generated, stored, and exchanged is not 

classified. The protection of such unclassified, covered defense information (including 

controlled unclassified information) presents an enormous and complex challenge and 

vulnerability. Most of the manufacturing data of interest to adversaries is essentially controlled 

unclassified information. This includes design information; performance specifications; shop 

floor execution data; factory support information (e.g., financials, system status, and personnel); 

and supply chain operational information (e.g., invoicing, pricing, and contract volume). 

Both the public and private sectors recognize the importance of safeguarding informational and 

operational assets from cyber risks; however, cybersecurity has not become an ingrained norm 

in manufacturing, especially in small and medium-sized manufacturers.

135 Many small and 

medium-sized manufacturers are unaware of federal requirements and may lack the financial 

and technical capabilities required to manage cybersecurity risks.136 Defense Federal 

Acquisition Regulations Supplement clause 252.204-7012 requires defense contractors and 

subcontractors to have implemented the information security protections described in the 

National Institute of Standards Special Publication 800-171 Rev 1, “Protecting Unclassified 

Information in Nonfederal Information Systems and Organizations” by December 31, 2017, but 

initial compliance by sub-tier suppliers has been low. 

Case Studies: Cybersecurity for Manufacturing Impacts on National Security

Gaps in the cybersecurity sector lead to pervasive and persistent vulnerabilities to the 

industrial base, contributing to the erosion of manufacturing and decreasing economic 

competitiveness and national security. The case studies below illustrate how unauthorized 

access to any facet of manufacturing information could create rippling effects and cause

innumerable negative economic and national security situations.

Inadequate Approaches to Cybersecurity Risk and Inadequate Cybersecurity 

Defense

Cybersecurity risks impact all facets of manufacturing supply chain operations, from product 

and process data flowing within and across factories, to supply chain operations and logistics, 

to the reliability of tools and equipment used within manufacturing enterprises. Multiple 

approaches exist to manage cybersecurity risks within the industrial base, but not all 

approaches are appropriate or even adequate to meet the national security need to protect

covered defense information and controlled unclassified information. Three key issues – lack 

of uniform security implementation; inconsistent implementation of adequate security by 

defense suppliers; and reliance on self-attestation – expose manufacturing to cybersecurity 

risks. Interactions with over 1,000 small manufacturers by the Department of Commerce
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Manufacturing Extension Partnership National Network in 2017 revealed a significant lack of 

awareness of the Defense Federal Acquisition Regulations Supplement cybersecurity 

requirement, and a deficiency of financial and technical resources to manage cyber security 

risks. In addition, many sub-tier suppliers are unaware they are in the DoD supply chain and 

others who are aware are subject to conflicting interpretations of the requirement by agencies 

and upper tier customers.

Inadequate Cybersecurity Defense for the Defense Manufacturing Supply Chain 

Manufacturing is the most heavily attacked sector in the economy after finance, so the

industrial base is subject to continuous, coordinated cyber-attack campaigns by nation states. 

As new types of cyber threats and vulnerabilities targeting manufacturing supply chainspecific information and operational systems emerge, the U.S. cannot rely on small and 

medium-sized manufactures to protect against attacks from nation states. Unfortunately, 

most cybersecurity research and development is focused on information systems, without 

specific emphasis on the unique needs and operational aspects of the manufacturing sector. If 

unaddressed, the industrial base faces a higher likelihood of serious and exploitable 

vulnerabilities, as well as a substantial reduction in the number of suppliers compliant with 

requirements and thereby eligible to provide products and services to DoD. Further, 

commercial firms considering entrance into the defense market will be deterred. This 

combination of risks will impact both the resiliency of existing suppliers and the integrity of 

the supply chain.

Electronics Sector

Greater than $1.5T, the electronics sector manufactures products for a wide variety of end user 

markets, including consumer electronics, computers, automotive, industrial equipment, medical 

equipment, telecommunications, aerospace, and defense. Electronic systems and components 
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are ubiquitous throughout all DoD weapons systems, but global military production represents 

only 6% of a market dominated by commercial devices.137 While significant compared to overall 

worldwide military spending, total U.S. military spending on electronic systems in 2017 is 

insignificant compared to the overall aerospace and defense marketplace, as well as the 

commercial market, giving DoD limited leverage over the direction of the industry. 

In electronics, staying competitive requires a significant investment in R&D, new production 

facilities, and new equipment. The U.S. semiconductor industry spends 18.5% of sales on R&D,

more than any other U.S. industry, with the exception of pharmaceuticals and biotechnology,138

and the sector is driving industry consolidations and offshoring. At the prime contractor level, 

approximately 50% of contract expenditures related to computer and electronic product 

manufacturing went to the top five suppliers, including three major defense contractors.139

Below the prime contractor level, electronics is a global industry, with a supply chain spanning

multiple countries and regions, creating a high degree of interdependence among suppliers and

profound implications for DoD. 

Printed circuit boards provide the substrate and interconnects for the various integrated circuits 

and components that make up an electronic system. Like the overall electronics market, the 

global printed circuit board market has experienced explosive growth – from $30 billion in 

2000 to $60 billion in 2015.140 However, this growth has mainly been driven by China, which 

now captures 50% of the global market share, while the U.S. share has reduced from 25% in 

1998 to less than 5% in 2015.141 

Microelectronic integrated circuits are the most technologically advanced level of the electronics 

supply chain. Since 1996, the global market for semiconductors has increased from $132 billion 

to $339 billion in 2016, with the Asia Pacific market outside of Japan accounting for the vast 

majority of this growth. The market quintupled in size from approximately $39 billion in 1996 

to $208 billion in 2016, including a $107.6 billion market in China alone (approximately 9 % 

increase over 2014). Asia, where much of electronics production takes place, is by far the largest 

customer base for U.S. semiconductor companies, accounting for approximately 65% of all U.S. 

sales, with sales to China accounting for slightly more than 50%. U.S. companies continued to 

hold a majority of the Chinese semiconductor market in 2016 with 51% share, marking a drop 

from 56% in 2015.142 Maintaining access to the Chinese market is a critical concern for U.S. 

semiconductor companies. 

The U.S. continues to hold a strong position in semiconductor manufacturing and has become a 

leader in microelectronics design by using the fabless model, focusing on integrated circuit

design, and outsourcing fabrication to dedicated foundries.

143

 Increasingly, however, fabless 

companies are investing in design capabilities and services offshore. To address these threats, 

DoD is investing in trusted foundry capabilities to serve critical defense needs, and is working 

with interagency partners to develop the Microelectronics Innovation for National Security and 

Economic Competitiveness strategy to address current and future microelectronics needs, 

threats to assured access to a robust industrial base, and continued U.S. leadership.
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Case Studies: Electronics Sector Impacts on National Security

Gaps in the electronics sector reduce the ability deliver technological advantage in capability, 

performance, and reliability against adversaries. The case studies below illustrate the increasing 

divergence of commercial business models and defense requirements in electronics. 

Strategic Radiation Hardened Microelectronics

Strategic radiation hardened microelectronics are a critical component of the nuclear 

deterrent; they must be able to withstand short bursts of intense radiation and high 

temperatures in order to satisfy mission requirements not commonly required commercially. 

Strategic radiation hardened and DoD defense-unique requirements have no commercial 

applications and are commercially unviable, creating continual risk for this critical capability

due to changing business conditions or technological obsolescence. 

DoD continues to ensure a domestic source of strategic radiation hardened microelectronics 

through investing in R&D on radiation hardening design techniques and radiation effects on stateof-the-art and state-of-the-practice semiconductor technologies. Additionally, DoD is broadening 

the strategic microelectronics supplier base by developing alternate trust models, processes, and 

techniques, and continuing to work closely with partners in the strategic community.

Printed Circuit Board Manufacturing

U.S. printed circuit board manufacturing struggles to remain current and relevant in the 

global marketplace. Today, 90% of worldwide printed circuit board production is in Asia, 

over half of which occurs in China. The United States accounts for only 5% of global 

production, representing a 70% decrease from $10 billion in 2000 to $3 billion in 2015. As a 

result of this decline, the U.S. industrial base is aging, shrinking, and failing to maintain the 

state of the art for rigid and rigid-flex printed circuit board production capability. Capability 

indicators (such as laser drills and direct imaging tools) are not prevalent across many 

domestic manufacturer facilities, with some advanced high density interconnect products 

simply not producible in the U.S. While commercial technology advances are frequently 

developed in the U.S., they are resolved to practice offshore. 

With the migration of advanced board manufacturing offshore, DoD risks losing visibility into 

the manufacturing provenance of its products. In addition to the potential dissemination of 

design information, many of the offshore facilities do not meet or comply with DoD quality 

requirements. The DoD Executive Agent for Printed Circuit Board Technology has provided 

technical assistance activities with domestic manufacturers and observed awareness gaps 

among manufacturers related to International Traffic in Arms and other Export Control 

regulations, leading to the potential for further unintended dissemination of sensitive 

information. As the equipment and materials supply chain has followed the migration of the 

manufacturer base, supply chain and supplier management is becoming a risk driver for 

access and availability.
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Machine Tools and Industrial Controls Sector

Machine tools are power-driven machines used to shape or form parts made of metal, plastic, or 

composites to support both production and prototyping operations. They are critical to creating 

modern products for defense and industry, and impact transportation, aerospace, electronics, 

energy generation and distribution, and other critical infrastructure sectors. 

Machine tools provide the factory floor foundation for leveraging advances in robotics, high 

precision automation, specialty materials, precision components, and additive, subtractive, and 

hybrid machining. Controlled via manual inputs, analog systems, or digital controls, machine 

tools require inputs from a variety of sources: ferrous and non-ferrous metals and alloys, 

including forgings and castings of various sizes; rubber, plastics, and composites; high-precision 

screws, nuts, and bolts; bearings; and motors, drives, and computer numeric control 

capabilities. Modern machine tools leverage sophisticated industrial control systems, process 

parameter monitoring systems, and networked sensors. Many also incorporate advanced 

materials and precision components, as well as advanced lubricants, bearings, sensors, and 

coatings. 

Case Studies: Machine Tools and Industrial Controls Sector Impacts on 

National Security

Loss of key capabilities within the domestic machine tools industry erodes U.S. ability to 

maintain manufacturing dominance, which underpins technical and economic superiority, 

fundamental elements of national security. The case studies below illustrate how decreasing

U.S. manufacturing market share, reductions in the needed workforce, and reduced 

competitiveness in the global market impact the machine tool sector in the U.S.
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Inadequate U.S. Skilled Labor Supply 

The U.S. machine tools sector lacks assured access to a sufficiently large pool of skilled labor. 

Many skilled workers are exiting the workforce due to age, and there are too few technical 

educational programs to train those who could take their place. Without concerted action 

that provides both a ready workforce and a continuously-charged pipeline of new employees, 

the U.S. will not be able to maintain the large, vibrant, and diverse machine tools sector 

needed to produce the required number and types of products when needed.

Market Forces Decreasing Domestic Capabilities

The U.S. machine tools sector has been shrinking since at least the 1980s due to a number of 

primary and contributing factors,

144 with the U.S. standing dropping significantly since 2000. 

In this mature, highly commercialized market, competition on price and quality145 is fierce, 

and many firms have found themselves in a poor position to leverage emerging computer 

numerical control capabilities. Until the mid-2000s, China accounted for no more than 15% 

of global machine tool consumption. By 2011, China's machine tool consumption accounted 

for 40% of the global total.146 As its need for machine tools increased, China leveraged its low 

cost of capital and labor to build domestic machine tool factories and required foreign 

companies to execute joint ventures to access the Chinese market. The combined effects of 

the 2008 recession and a general trend of industry consolidation further reduced the number 

of machine tool manufacturers. In 2015, China's global machine tool production skyrocketed 

to $24.7B,

147 accounting for 28% of global production,148 while the U.S. accounted for only 

$4.6B, after China, Japan, Germany, Italy, and South Korea. According to the U.S. Census 

Bureau data, in 2015 there were 1,028 machine tool firms employing 27,919 people. 

Cybersecurity Risks

While the cybersecurity industry has placed heavy emphasis on protecting traditional 

information technology systems used in manufacturing enterprises, far less attention has 

been paid to the operational technology systems that actually manufacture products. This 

includes machine tools and industrial control systems, which are increasingly being linked 

through internet protocol addresses for valid business reasons. The unintended result is a 

dramatic, potentially decisive, increase in the manufacturing cyberattack surface. A 

significant constraint on DoD’s ability to respond to all cybersecurity risks is a lack of visibility 

into the lower tiers of the supply chain.149
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Materials Sector

Materials are vital to national defense and economic security. While defense demand may often 

represent a small fraction of overall domestic and foreign supply, there are important subsectors 

that are heavily defense dependent. It is imperative that producers and supply chains of 

materials deemed essential to U.S. defense and civilian demand are robust, resilient, 

competitive, and responsive to support current and long-term economic security, current 

military operations, future wartime mobilization, and unanticipated surge demand. 

The sector includes both raw and “downstream” materials produced by a global supply chain of 

value-added processing and manufacturing companies. These and other materials are 

combined into intermediate, semi-processed, and finished materials and eventually produced 

into end-items (e.g., parts, components, or structures) and incorporated into subsystems and 

integrated systems. 

The range of materials is broad and includes metals and nonmetallic minerals produced from 

mining of primary materials or as a byproduct (e.g., rhenium from copper mining), or 

reclamation (e.g., recycling rare metals from electronics).150 Of equal or greater importance to 

raw material supply is industrial-scale capabilities and sustainable capacity to extract elements 

from mined materials and to produce value-added products. Examples include separating 

elements, processing compounds, smelting metal, alloying, and further downstream production 

(e.g., castings, forgings, and rolled products), particularly for the processing of rare earth 

elements. Important defense applications include high-performance aluminum and steel for 

ground vehicles and Navy ships; titanium and beryllium for military aircraft; tungsten for radars 

and communication systems; rare earths for guided munitions and computers; and ceramics for 

body armor and microelectronics. Another subsector is highly engineered synthetic materials 

and their composites, such as carbon fibers for missiles, aircraft, and space system structures;

fibers and textiles for protective apparel and vehicle survivability; and synthetic materials 
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including energetics for explosives and propellants. Newer materials of increasing importance 

include carbon nanotubes and additive manufacturing materials.151 

Within the materials sector, risk includes shortfalls that impact the production of defense items 

to support current military operations; high U.S. import reliance on foreign countries who may 

become adversaries and cutoff supply during conflicts (e.g., trade embargo or war damage);152

reliance on single foreign sources of proprietary materials that would be difficult to replace; 

injurious foreign trade impacts (e.g., dumping and illegal subsidies) on key DoD suppliers; DoD 

reliance on commercial materials that become obsolete; and dependence on domestic singlepoint-of-failure producers. 

Case Studies: Materials Sector Impacts on National Security

Highlighted below are three case studies which highlight important materials-related risk 

impacts. Please see the limited distribution annex for further details about specific materials 

risks, estimated shortfalls, and mitigation recommendations.

Over Reliance on Sole Foreign Sources for Unique and Proprietary Advanced 

Materials 

Single foreign sources of unique and proprietary carbon fibers from Japan and Europe

represent considerable DoD supply chain vulnerabilities. A sudden and catastrophic loss of 

supply would disrupt DoD missile, satellite, space launch, and other defense manufacturing 

programs. In many cases, there are no substitutes readily available. Replacing a carbon fiber 

factory is very expensive and time consuming. Of similar concern is the uncertainty of 

qualifying replacement suppliers and significant resource requirements. 

Injurious Foreign Trade Impacts on Critical U.S. Material Manufacturers

Unlawful and/or otherwise unfair foreign trade practices, mostly by China, are injuring 

critical U.S. materials-related manufacturers. Predatory practices – including statesponsored dumping, market distorting government subsidies, and intellectual property theft

– are destroying commercial product lines and markets of domestic DoD suppliers. In some 

cases, U.S. suppliers have lost much, and at times all, of their commercial markets supporting

dual-use production lines that manufacture key materials and components for U.S. weapon 

systems. The loss of commercial business can lead to the loss of domestic production 

capabilities essential to U.S. defense and essential civilian needs. In multiple cases, the sole 

remaining domestic producer of DoD-critical materials are on the verge of shutting down 

their U.S. factory and importing lower cost materials from the same foreign producer county 

who is forcing them out of domestic production. Without relief from unlawful and otherwise 

unfair foreign trade, the U.S. will face a growing risk of increasing DoD reliance on foreign 

sources of critical materials. Examples include domestic producers of specialized metals, 

alloys and other materials that are widely used across multiple DoD programs and all major 
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defense sectors (e.g., land, sea, air, and space systems).

153

 Of special concern are U.S. imports 

that undermine domestic producers of materials protected under the Buy American Act, Berry 

Amendment and Specialty Metals Clause.154 155

Overreliance on China for Strategic and Critical Materials

A key finding of this report is that China represents a significant and growing risk to the 

supply of materials deemed strategic and critical to U.S. national security. In addition to 

China dominating many material sectors at the upstream source of supply (e.g., mining), it is 

increasingly dominating downstream value-added materials processing and associated 

manufacturing supply chains, both in China and in other countries.

156

 Areas of concern to 

America’s manufacturing and defense industrial base include a growing number of both 

widely used and specialized metals, alloys and other materials, including rare earths and 

permanent magnets.

Organic Industrial Base Sector

The organic industrial base, a subset of the larger defense industrial base, is comprised of 

resource providers, acquisition and sustainment planners, and manufacturing and maintenance 

performers. While commercial industry is the dominant component of the industrial base, 

government-owned, government operated maintenance depots, shipyards, and manufacturing 

arsenals are critical to U.S. defense. They provide the assurance of a ready and controlled 

source of technical capabilities necessary to maintain weapon systems free from many of the 

economic vulnerabilities and influences that exist in the private sector. This means that every 

military ship, plane, vehicle, and weapon is accompanied by a government-owned ecosystem 

that includes expertise to perform deep repair, the means to provide repair parts to the shop 

floor, and the ability to deliver repaired systems to the time and place of the fight. The organic 

base complies with legislation to provide core logistics capabilities, including personnel, 
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equipment, and facilities that are government-owned, government operated. The law prescribes 

these capabilities as inherently governmental and has allowed for the development of highly 

capable depot artisans and military logisticians.

The organic industrial base provides maintenance and manufacturing services to sustain 

approximately 440,000 vehicles, 780 strategic missiles, 278 combatant ships157, and almost 

14,000 aircraft.

158 Of $587.9 billion total DoD expenditures in FY 2015,159 $73.4 billion was for 

maintenance. Aircraft represented the greatest expenditure at $25 billion, followed by ships at 

$16.8 billion, and vehicles at $7.7 billion.160 DoD currently operates 17 major organic 

(government-owned, government operated) depot maintenance facilities and three 

manufacturing arsenals.

DoD maintenance is performed by a military and civilian workforce spread throughout the 

world. DoD materiel maintenance is performed at different organizational levels, ranging in 

complexity from daily system inspection to rapid removal and replacement of components, to 

the complete overhaul or rebuild of weapon systems. Depot-level maintenance entails the major 

overhaul or complete rebuild of weapons systems and requires skills or equipment not 

commonly available at lower levels of maintenance. Organic depot-level maintenance also 

includes software maintenance and sustainment, which incorporates correcting defects, 

improving performance, upgrading, and modifying software to adapt the fielded software 

baseline to a changing or changed environment. 

Twenty years of intermittent conflict and war have driven a very high operating tempo and 

unprecedented system usage that has changed previously accepted formulas used to compute 

maintenance requirements. The levels of funding and the manner in which funding has been 

made available and allocated to these sustainment operations have degraded our ability to 

achieve expected performance results. The organic industrial base has suffered from overuse 

and underfunding in its infrastructure and the evidence is clearly reflected in materiel readiness 

levels and facility condition indices. Workforce issues have been exacerbated by sequestration, 

gaps in critical skills, and gaps in hiring. Diminishing manufacturing sources and material 

shortage, counterfeit, foreign manufacturing, and single source of supply issues represent 

further risks to the ability of the organic base to influence materiel readiness through the 

degradation of supply chain integrity and availability of critical materials and human capital 

necessary to maintain weapon systems. 

Case Studies: Organic Base Sector Impacts on National Security

Gaps in the organic base sector directly impact the ability to repair equipment and materiel as 

quickly as possible and ensure its availability for training and future deployments. The case 

studies below illustrate the critical need to ensure continuity of operational readiness during 

times when the private sector may not be able to meet surge requirements.
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Deficiencies in Maintenance Facility Material Condition 

Currently, a lack of available and effective capacity within government owned industrial 

activities, coupled with a high near-term workload, is causing a capacity to workload 

mismatch. This mismatch continues to drive maintenance delays and an increased loss in 

operational days.

DoD has accelerated investments in its Capital Improvement Programs and the replacement 

and modernization of minor property to better align with industry recapitalization standards. 

These efforts and review of work backlogs, stoppages, and cost and schedule metrics are 

targeted to reduce lost operational days, to facilitate on-time availability completions, to 

provide adherence to training schedules, and to ready forces to meet deployment and surge 

requirements. 

Maintenance 

DoD is operating many of its weapon systems well beyond their original designed service 

lives. Coupled with increased operating tempo and exposure to harsh environmental 

conditions, these platforms require engineering and overhaul processes far more extensive 

than those performed under historical organic industrial base infrastructure alignments. The 

infrastructure has not been refreshed to adequate levels of repair and technology 

modernization. 

Organic base depots are Working Capital Funded activities and required to reinvest and 

recapitalize equipment and facilities through their rate structure. Sensitivity to rate increases 

limits each depot’s ability to modernize and restore infrastructure to the extent required. 

While DoD’s budget replaces and refurbishes plant equipment, and statute and policy direct 

follow-through on recapitalization, infrastructure investments have not been adequate. 

Without significant future investment, the organic base will remain challenged by outdated 

equipment, tooling, and machinery. The erosion of organic infrastructure continues to impact 

turnaround time and repair costs of newly fielded weapon systems, reducing inventory, 

decreasing operational readiness, and impacting future deployment schedules.

Workforce Recruitment, Retention, and Onboarding 

The DoD Maintenance Enterprise faces workforce skill gaps across the board. The emergence 

of new weapon technologies coupled with retirements has caused a significant mismatch 

between skill requirements and workforce capabilities. Recruitment and retention of critical 

skill sets are concerns, partially because of sharp competition for labor with the private sector 

and due to a lack of defense specific skills. Training the new workforce is essential, and 

improving the organic industrial base's opportunity to recruit already trained artisans would 

have significant and immediate impacts on productivity and readiness. Exacerbating the 

issue is the lack of policy to authorize security clearance “transfer in status” when technicians 

who have clearances are hired; the statutory requirement outlined by 5 U.S. Code 3326 
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prohibiting the hire of military technicians for 180 days after separating from the military; 

and government shutdowns and furloughs which diminish the ability to recruit, hire, and 

retain talented STEM personnel. 

Software Engineering Sector

The software engineering discipline has evolved rapidly over the past several decades, creating a 

crisis within the industrial base. Software engineering is the application of a systematic, 

disciplined, quantifiable approach to the development, operation, and maintenance of software. 

Software engineering capability includes the processes, resources, infrastructure, and workforce 

competencies to enable systems to meet operational mission requirements and evolving threats. 

Software is virtually in every piece of electronics from firmware, operating systems, and 

applications. This includes DoD weapon systems, mission support systems, maintenance 

systems, business systems, etc. Today’s modern weapon systems rely heavily on software to 

provide functionality. The F-35 is estimated to rely on 90% of its avionics specification 

requirements on software; this has grown significantly over the last four decades when the F15A had just 35% software reliance in 1975. Unlike physical hardware, software can be delivered 

and modified remotely, greatly facilitating rapid adaptation to changes in threats, technology, 

mission priorities, and other aspects of the operating environment. 

Unfortunately, software for many weapon systems is being sustained with processes developed 

decades ago for hardware-centric systems. In addition, much of DoD policy remains hardwarecentric, despite software providing an increasingly larger percentage of system functionality. In 

today’s fast pace changing environments with mounting cyber threats, software engineering for 

our software intensive systems should look to utilize agile software development processes 

accompanied with appropriate contracting practices capable of rapidly delivering incremental 

and iterative changes to the end-user. 
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As a result of the paradigm shift from hardware to software intensive systems, a significant need 

for a more software savvy acquisition workforce is essential. Policy, roles, and responsibilities 

for software engineering at the DoD level are not clearly established to effectively represent 

software equities at the acquisition policy and program levels. A lack of unified policy has 

resulted in various interpretations and implementations across the Services. Currently, there 

exists limited focus and priority on explicitly addressing software engineering sustainability of 

software intensive systems during the requirements process, design, and development of 

systems. The inventory of software that DoD currently possesses is immense and continually 

growing, but there is limited visibility and understanding at the enterprise level of the total size, 

complexity, and characteristics of the inventory, which may be exceed one billion line of custom 

developed software code. A unified source of clear software engineering policy would aid in a 

unilateral implementation of appropriate practices across the industrial base.

Exacerbating the need to strengthen organic software expertise is the issue of a national STEM 

shortage. Today’s education pipeline is not providing the necessary software engineering 

resources to fully meet the demand in the commercial and defense sectors, and resources 

required to meet future demands continue to grow. Until the STEM crisis is rectified, recruiting, 

hiring, and retaining qualified personnel will continue to be challenging.

Case Studies: Software Engineering Impacts on National Security

The software engineering skills gap affects a wide range of occupations and could have 

potentially significant impacts on production of critical defense-related materials, vehicles, 

and machinery, as well as other goods and services necessary to supply our nation's armed 

forces. The below case studies provide specific examples.

F-35 Schedule Delays and Cost Overruns

F-35 provides an example where complexities of highly integrated hardware and software 

systems have led to high risks of program delays related to the release of software, further 

delaying the capabilities required in the field. Hardware and software delays associated with 

the Block 3F release, required to declare Air Force initial operating capability, resulted in a 

five-month delay and projected $532M cost overrun. 

B-52 Mission Planning Agile Software Development

Organic software professionals in the Air Force implemented agile software development 

processes for B-52 Mission Planning as a pilot project in 2010. The agile processes 

streamlined rapid, iterative performance from development to fielding, resulting in the 

delivery of the project on schedule, at a cost of $28M, and included additional major 

capabilities. In addition, major defects discovered during the first operational test were 

reduced by 93% compared to similar programs. Initially, a contract was awarded to industry 

for this effort at $54M in 2007, but was cancelled three months later due to budget shortfalls. 
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Personnel Recovery Command and Control Agile Software Development

In 2014, organic sustainment engineers implemented agile software development processes 

for personnel recovery command and control systems. Implementation overcame poorly 

defined requirements while improving response time to changing needs by field units. In 

addition, defects found during acceptance testing were reduced by 88%. 

Workforce Sector

Workforce includes the occupations for the full lifecycle development and support of defense 

products and inputs, including R&D, design, manufacturing, production, and maintenance. 

Around 1.6 million workers have jobs that, at least in part, support national defense,161

accounting for approximately 1.3% of private sector employment. Within the industrial base, 

the largest occupational groups are production workers (e.g., manufacturers such as welders and 

machinists) and STEM workers. The industrial base also includes workers in transportation, 

business and financial services, management, and office and administrative support.

Manufacturing represents a critical part of the industrial base workforce. The advanced 

weaponry and supporting equipment necessary to dominate in modern warfare require highly 

sophisticated manufacturing, yet the domestic workforce has suffered for decades. The U.S saw 

a sharp decline in manufacturing beginning in the 1970’s, with only a moderate uptick in more

recent years. The manufacturing sector lost 6 million jobs from 1998 to 2010 and while the 

sector has seen some gains – in January 2018, there were 12.6 million manufacturing jobs, up 

approximately 1 million from early 2010 – it still lost 5 million jobs since 1998.162 The skill 

atrophy accompanying such loss can have profound short and long term effects on industrial 

capabilities.
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A National Association of Manufacturers survey of 662 manufacturing companies, conducted in 

December 2017, found the inability to attract and retain a quality workforce is the top business 

challenge, cited by 72.9% of respondents. To address this workforce challenge, 66% of 

respondents said they are increasing the workload of their existing employees. 34.4% stated 

their company had been unable to take on new business and had lost revenue opportunities 

because of the inability to attract and retain workers.163 Given the number of manufacturers 

who exist in the industrial base supply chain, these numbers are significant.

However, the manufacturing and defense industrial base does provide strong employment 

opportunities for growth. In January 2018, the National Association for Manufacturers 

reported 427,000 manufacturing job openings, with 360,000 workers hired – continuing a 

strong trend in hiring since August 2017.164 Although the number of workers engaged in many 

traditional production occupations, such as assemblers, machine setters, and mold makers, is 

projected to continue to decline over the coming decade, several other occupations that enable 

and support the modern, automated manufacturing facility are expected to surge.

While the total number of bachelor’s degrees in the U.S. has increased steadily in the last two 

decades, the number of STEM degrees conferred in the U.S. still pales compared to China.165 In 

addition, the U.S. has seen an increase in students on temporary visas, many of whom would be 

unable to gain the security clearances needed to work in the defense ecosystem.166

Growth in advanced science and engineering degrees shows the U.S. graduating the largest 

number of doctorate recipients of any individual country, but 37% were earned by temporary 

visa holders167 with as many 25% of STEM graduates in the U.S. being Chinese nationals.168 

Case Studies: Workforce Sector Impacts on National Security

The skills gap affects a wide range of occupations and could have significant impacts on 

production of critical defense-related materials, vehicles, and machinery, as well as other 

goods and services necessary to supply our nation's armed forces. Examples include a lack of 

industrial machinery mechanics for motor vehicles, welders for surface and subsurface 

vehicles, and biophysicists for physiological sensor systems. In many of the traditional 

sectors, workforce issues were identified as key impacts – the below case studies merely add 

to that narrative.

Challenges to Recruit and Retain

Many companies in the industrial base recognize that significant skills gaps exist across 

multiple occupations, creating the potential to interfere with efficient acquisition of a wide 

variety of military equipment and other goods and services. Still more difficulties may be 

posed during a surge in defense production. A study by the Bureau of Industry and Security

shows that companies with access to classified material – a potential indicator of a company's 

membership in the defense ecosystem – face significant workforce shortages. The review of 
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9,634 facilities found that 41% of the facilities cited labor availability/costs, 31% cited 

worker/skills retention, and 15% cited an aging workforce as concerns.169

Traditional vs Future Trade Skills

Although the number of workers engaged in many traditional production occupations, such as 

assemblers, machine setters, and mold makers, is projected to continue to decline over the 

coming decade, several other occupations that enable and support the modern, automated 

manufacturing facility are expected to surge. Occupations expected to grow often require the 

technical skills to program, maintain, troubleshoot, and repair increasingly sophisticated 

production machinery. For example, the number of computer-controlled machine operators 

and programmers are projected to grow by more than 17% by 2024, adding an additional 

25,000 operators and more than 4,000 programmers. The number of machinists needed to 

set up and repair machine tools is expected to reach 343,200 nationwide by 2024, a 7.8% 

increase over 2014 employment levels. An expected 13.2% increase in industrial machinery 

mechanics would increase the ranks of such workers to nearly 201,000 nationwide over the 

next decade. And while the number of industrial production managers is expected to shrink 

through 2024, 55,500 replacement workers with appropriate skills will be needed to fill 

existing positions. 

The Bureau of Labor Statistics projects that STEM jobs will see an increase of 962,000 jobs by 

2026. This 11% increase is much higher than the average occupational rate increase, which is 

expected to be 7.4% between 2016 and 2026.

170

Security Clearances

Ongoing challenges face DoD and its suppliers in getting personnel cleared to work on 

classified projects or in classified spaces. Concerns about the integrity of the investigation 

process coupled with diminished resources have created an ever growing backlog of 

employees waiting for clearances. However, a major effort is underway to address the issue. 

Pursuant to the National Defense Authorization Act for FY 2018, DoD recently stood up the 

Defense Vetting Directorate within the Defense Security Service. The newly announced 

directorate will oversee the creation and execution of a comprehensive personnel vetting 

strategy, to renew the entire personnel security clearance process. As part of streamlining 

efforts, the directorate will utilize the National Background Investigative System, which will 

include automated records checks as well as risk assessment protocols and other capabilities. 

The system will be founded on advanced analytics and sounds risk assessment to serve as key 

capabilities, ensuring a timely, trustworthy, loyal, and reliable workforce clearance process.
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Appendix Three: Contributing U.S.

Government Agencies

Department of Defense

Air Force (USAF)

 Air Combat Command (ACC)

o Warfare Center (USAFWC)

 Air Staff (AF)

o Strategic Plans and Programs (AF/A5/8)

 Air Reserve Assessments Division (A5SM)

 Materiel Command (AFMC)

o Life Cycle Management Center (LCMC)

o Research Laboratory (AFRL)

 Electronics and Sensors Branch (RXME)

 Materials (Materials)
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o Technical Engineering Services Directorate (EZAD)

 Secretary of the Air Force (SAF)

o Office of the Assistant Secretary of the Air Force for Acquisition, Technology & 

Logistics (AQ)

 Logistics and Product Support (AQD)

 Missiles and Munitions Program Element Monitor (M&M PEM)

o Space Command (AFSPC)

 Space and Missile Systems Center (SMC)

Army (USARMY)

 Headquarters (HQDA)

o Logistics Directorate (HQDA G-4)

 Intelligence and Security Command (INSCOM)

o National Ground Intelligence Center (NGIC)

 Materiel Command (AMC)

o Chemical Materials Activity (CMA)

o Chief Information Officer – Information Assurance (CIO-IA)

o Joint Munitions Command / Joint Munitions and Lethality Life Cycle Management 

Command (JMC/JM&L)

o Research, Development and Engineering Command (RDECOM)

 Armament Research, Development and Engineering Center (ARDEC)

 Aviation and Missile Research Development and Engineering Center (AMRDEC)

 Communications-Electronics Research, Development and Engineering Center 

(CERDEC)

 Intelligence and Information Warfare Directorate (I2WD)

 Contracting Command (ACC)

 Aberdeen Proving Ground Plans, Analysis, and Integration Office (APG 

PAIO)

 Edgewood Chemical Biological Center (ECBC)

 Natick Soldier Systems Center (NSSC)

 Research Laboratory (ARL)

o Tank-Automotive and Armaments Command (TACOM) 

 Life Cycle Management Command (LCMC)

 Materiel Systems Organization (MSO)

 Integrated Logistics Support Center (ILSC)

 Chemical / Biological Defense Product Support Integration 

Directorate (Chem/Bio PSID)
Assessing and Strengthening the Manufacturing and Defense Industrial Base

and Supply Chain Resiliency of the United States UNCLASSIFIED

107 UNCLASSIFIED

o Office of the Assistant Secretary of the Army for Acquisition, Logistics & Technology 

(ASA (ALT))

 Joint Program Executive Office for Chemical Biological Defense (JPEO CBD)

 PEO Ground Combat Systems (GCS)

 PEO Missiles and Space

 PEO Soldier 

Defense Contract Management Agency (DCMA)

 Industrial Analysis Group (IAG)

Defense Intelligence Agency (DIA)

Defense Logistics Agency (DLA)

 Acquisitions 

o Strategic Sourcing

Joint Chiefs of Staff (JCS)

 Strategic Plans & Policy (J5)

Marine Corps

 Headquarters (HQMC)

o Installations and Logistics (DC, I&L)

 Logistics Command (LOGCOM)

 Systems Command (MARCORSYSCOM) 

o PEO Land Systems (LS)

 Ground Air Task Oriented Radar (G/ATOR)

Massachusetts Institute of Technology Lincoln Laboratory (MITLL)

Missile Defense Agency (MDA)

 Electronic Counter-Measures (ECM)

 Office of the Assistant Director for Assurance Integration

o Quality, Safety, and Mission Assurance (QS)

 Office of the Director of Engineering (DE)

National Reconnaissance Office (NRO)

 Advanced Systems & Technology Directorate (AS&T)

 Systems Engineering Directorate (SED)

Navy (USN)

 Office of the Chief of Naval Operations (OPNAV)

o Office of the Assistant Secretary of the Navy for Research, Development, and 

Acquisition (ASN(RDA))
Assessing and Strengthening the Manufacturing and Defense Industrial Base

and Supply Chain Resiliency of the United States UNCLASSIFIED

108 UNCLASSIFIED

 Deputy Assistant Secretary of the Navy for Air Programs (DASN AIR)

 DASN for Ships (DASN SHIPS) 

 PEO for Integrated Warfare Systems (IWS)

 Rotating Radar Program Office (2R1E)

 Naval Air Systems Command (NAVAIR)

 Naval Sea Systems Command (NAVSEA)

 Naval Surface Warfare Center – Crane (NSWC Crane)

 Naval Surface Warfare Center – Dahlgren (NSWC Dahlgren)

Office of the Secretary of Defense (OSD)

 Office of the Under Secretary for Acquisition and Sustainment (A&S)

o Logistics and Materiel Readiness (L&MR)

 Office of the Deputy Assistant Secretary of Defense for Supply Chain Integration 

(SCI)

 Office of the Deputy Assistant Secretary of Defense for Maintenance Policy and 

Programs (MPP)

o Office of the Deputy Assistant Secretary of Defense for Industrial Policy (IndPol)

o Office of the Assistant Secretary of Defense for Acquisition (ASD(A))

 Office of Space, Strategic, and Intelligence Systems (SSI)

 Ground-Based Strategic Deterrent (GBSD)

 Long Range Strike Office (LRSO)

 Military Satellite Communication (MILSATCOM)

 Missile Defense

 NRO Systems

 Space-Based Infrared System

 Office of the Under Secretary for Research and Engineering (R&E)

o Office of Systems Engineering (DASD SE)

 United States Special Operations Command (USSOCOM)

 Defense Microelectronics Activity (DMEA)

 Defense Security Service (DSS)

Central Intelligence Agency (CIA)

Department of Commerce (DOC)

 Bureau of Industry and Security (BIS)

o Office of Technology Evaluation (OTE)

o Office of the Deputy Assistant Secretary for Export Administration
Assessing and Strengthening the Manufacturing and Defense Industrial Base

and Supply Chain Resiliency of the United States UNCLASSIFIED

109 UNCLASSIFIED

 International Trade Administration (ITA)

o Office of the Deputy Assistant Secretary for Manufacturing

 National Institute of Standards and Technology (NIST)

o Industry & Innovation Services (I&IS)

 Manufacturing Extension Partnership (MEP)

Department of Energy (DOE)

 National Nuclear Security Administration (NNSA)

 Office of Energy Efficiency and Renewable Energy (EERE)

o Advanced Manufacturing Office (AMO)

 Office of Environmental Management (EM)

o Chief of Nuclear Safety (CNS)

o Los Alamos National Laboratory (LANL)

 Office of Science

o Oak Ridge National Laboratory (ORNL)

Department of Health and Human Services (HHS)

 Office of the Assistant Secretary for Preparedness and Response (ASPR)

 Office of the Senior Counselor to the Secretary

Department of Homeland Security (DHS)

 Office of Trade and Transportation Policy

Department of the Interior (DOI)

 United States Geological Survey (USGS)

Department of Labor (DOL)

 Office of the Assistant Secretary for Administration and Management (OASAM)

 Office of the Assistant Secretary for Policy (OASP)

Department of State (DOS)

 Policy Planning Staff (S/P)

Department of the Treasury (DOT)

 Office of International Affairs
Assessing and Strengthening the Manufacturing and Defense Industrial Base

and Supply Chain Resiliency of the United States UNCLASSIFIED

110 UNCLASSIFIED

International Trade Commission (ITC)

National Aeronautics and Space Administration (NASA)

National Science Foundation (NSF)

 National Center for Science and Engineering Statistics

National Security Agency (NSA)

Office of the Director of National Intelligence (ODNI)

 National Counterintelligence and Security Center (NCSC)

White House / Executive Office of the President (WH/EOP)

 National Security Council (NSC)

o Director for International Trade and Investment

o Director for Nonproliferation and Strategic Trade

 Office of Management and Budget (OMB)

o National Security Division 

 Defense Science and Technology Examiner

 Office of Policy Development

o Domestic Policy Council

o National Economic Council (NEC)

 Director for International Economic Affairs

 Office of Science and Technology Policy (OSTP)

 Office of Trade and Manufacturing Policy (OTMP)

Non-U.S. Government Organizations

 ANSER

 Institute for Defense Analyses (IDA)

 Manufacturing USA NextFlex Institute
Assessing and Strengthening the Manufacturing and Defense Industrial Base

and Supply Chain Resiliency of the United States UNCLASSIFIED

111 UNCLASSIFIED

Appendix Four: U.S. Government 

Sources

Department of Defense

Air Force (AF)

 Air Force Annual Industrial Base Assessment

 Air Force ManTech AESA Radar Roadmap: A Sub-Tier Industrial Base Perspective

 Air Force Research Laboratory (AFRL) 

o Sustainment Overview

o AFRL Materials and Manufacturing Directorate Electronics and Sensors Branch 

(RXME)

 Industrial Base Assessment Aerospace Applications for Carbon Nanotubes

 Industrial Base Assessment AESA Suppliers – Market Survey and Issues

 Industrial Base Assessment APG-68(V)9/(V)10 and APS-143G(V)1 Radar Systems

 Industrial Base Assessment KC-46 Supplier Chain Risk Assessment

 Industrial Base Assessment Multifunctional Materials Assessment
Assessing and Strengthening the Manufacturing and Defense Industrial Base

and Supply Chain Resiliency of the United States UNCLASSIFIED

112 UNCLASSIFIED

 Industrial Base Assessment North American Military and Commercial Engine 

Assessment

 Industrial Base Assessment Remotely Piloted Aircraft

 Industrial Base Assessment Three-Dimensional Expeditionary Long-Range Radar 

Sub-tier Supplier Industrial Base Potential Issues

 Industrial Base Assessment Unmanned Systems Integrated Roadmap, FY2013-2038

 Industrial Base Assessment Update to AESA Suppliers – Market Survey and Issues

 Capital Investment Study on Air Force Depots

Army (USARMY)

 Aerospace Casting Study

 Aerospace Composite Analysis

 Analysis of H-47 Supply Chain Risks

 Armed Scout Helicopter Divestiture Industrial Base Report

 Aviation and Missile Research Development and Engineering Center (AMRDEC) 

o Aerospace Bearing Industry Sector Analysis

o Puma/Raven Unmanned Aircraft System (UAS) Supplier Analysis

 Avionics Sector Analysis

 B-52H Re-engine Alternate Supplier Market Research

 Body Armor Working Group Data

 CH-47 Block II Analysis of Alternatives Industrial Capabilities Assessment

 Defense Industrial Base E-Repository

 Gray Eagle Industrial Capabilities Assessment

 Industrial Base Baseline Assessments

 Industrial Base Data Warehouse

 Missile and Aviation Supply Chain Operations Tool

 Program Executive Officer Ground Combat Systems (PEO GCS)

o Industrial Base Considerations for Increased Vehicle Production to the Chief of Staff 

of the Army

 Rotorcraft Engine Industrial Base Sector Analysis

 Rotorcraft Forging Industrial Base Sector Analysis

 Specialty Steel Sector Analysis

 Supplier Risk Tracker

 Tank-Automotive and Armaments Command (TACOM)

o Industrial Base Baseline Assessment

o UAS Sector Analysis

Defense Contract Management Agency (DCMA)

 A-10 Wing Replacement Program Rate Analysis
Assessing and Strengthening the Manufacturing and Defense Industrial Base

and Supply Chain Resiliency of the United States UNCLASSIFIED

113 UNCLASSIFIED

 Active Electronically Scanned Array (AESA) Design Skills Assessment Report 

 Annual Aircraft Industry Economic Forecast Assessment

 eTools Delegation Data

 eTools Industrial Base Integrated Data System 

 eTools Supplier Risk System 

 Ground Combat Systems Manufacturing Capacity Assessment

 Industrial Analysis Center Tactical Airborne AESA Radar White Paper

 Industrial Capabilities Assessment: Advance Digital Data Set

 Industrial Capabilities Assessment: Advanced Airborne Sensor 

 Industrial Capabilities Assessment: Aircraft Sector

 Industrial Capabilities Assessment: Body Armor

 Industrial Capabilities Assessment: BQM-177A Subsonic Aerial Target

 Industrial Capabilities Assessment: CH-53K King Stallion

 Industrial Capabilities Assessment: F-35 Long Lead Material Supplier Assessment

 Industrial Capabilities Assessment: Future Vertical Lift

 Industrial Capabilities Assessment: Infrared Search and Track System (F-18)

 Industrial Capabilities Assessment: Microwave Tube

 Industrial Capabilities Assessment: MQ-1C Gray Eagle UAS

 Industrial Capabilities Assessment: MQ-4C Triton UAS

 Industrial Capabilities Assessment: MQ-4C Triton UAS Addendum

 Industrial Capabilities Assessment: MQ-8 Fire Scout UAS

 Industrial Capabilities Assessment: Multi-Spectral Camouflage Netting

 Industrial Capabilities Assessment: Next Generation Jammer

 Industrial Capabilities Assessment: Night Vision

 Industrial Capabilities Assessment: Parachutes

 Industrial Capabilities Assessment: RQ-21A Integrator Small Tactical Unmanned 

Aircraft System

 Industrial Capabilities Assessment: Small Arms

 Infrared Decoy Industrial Base Assessment

 Military Rotary Wing Design and Engineering Capabilities Assessment

 Munitions Industry Production Analysis Report

Defense Logistics Agency (DLA)

 Casting Industry Assessment

 Defense Strategic and Critical Materials Operations Report To Congress

 Fragility and Criticality Assessments Army Robotics

 Fragility and Criticality Assessments Body Armor

 Fragility and Criticality Assessments Critical Energetic Materials

 Fragility and Criticality Assessments F-18
Assessing and Strengthening the Manufacturing and Defense Industrial Base

and Supply Chain Resiliency of the United States UNCLASSIFIED

114 UNCLASSIFIED

 Fragility and Criticality Assessments F-22 (Sustainment)

 Fragility and Criticality Assessments Fixed Wing Aircraft

 Fragility and Criticality Assessments Focal Plane Arrays

 Fragility and Criticality Assessments Gray Eagle

 Fragility and Criticality Assessments Ground Combat Systems

 Fragility and Criticality Assessments Ground Robotics

 Fragility and Criticality Assessments Ground Vehicles

 Fragility and Criticality Assessments Military Satellite Communications Systems

 Fragility and Criticality Assessments Navy Shipbuilding

 Fragility and Criticality Assessments Radar

 Fragility and Criticality Assessments Rotary Wing

 Fragility and Criticality Assessments Space

 Fragility and Criticality Assessments Tobyhanna Army Depot Skills

 Fragility and Criticality Assessments Vertical Lift Design Skills

 Fragility and Criticality Assessments Warfighter Information Network-Tactical 

Increment 1

 Steel & Specialty Metals Pricing Analysis

Missile Defense Agency

 Fragility and Criticality Assessments Missile Seekers

 Fragility and Criticality Assessments Missiles 

Navy (USN)

 Naval Air Systems Command (NAVAIR)

o Military Aviation Industrial Base Review (Tactical Aircraft Design)

o Supplier Database

o Tactical Combat Training System Analysis

 Naval Sea Systems Command (NAVSEA) 

o Rare Earth Metals & Usage in Microwave Tubes Briefing

Office of the Secretary of Defense (OSD)

 Annual Aviation Inventory and Funding Plan, FY 2017-2046

 Annual Industrial Capabilities Report to Congress FY2013

 Annual Industrial Capabilities Report to Congress FY2014

 Annual Industrial Capabilities Report to Congress FY2015

 Annual Industrial Capabilities Report to Congress FY2016

 Annual Industrial Capabilities Report to Congress FY2017

 Annual Industrial Capabilities Report to Congress FY2018

 Critical Energetic Materials Working Group Data

 Defense Innovation Unit Experimental (DIUx)
Assessing and Strengthening the Manufacturing and Defense Industrial Base

and Supply Chain Resiliency of the United States UNCLASSIFIED

115 UNCLASSIFIED

o Defense Innovation Capital

 F-16 AESA Radar Upgrade Acquisition Strategy Paper 

 Federal Procurement Data System 

 Fuze Integrated Product Team Data

 Joint Industrial Base Working Group Data

 Industrial Policy (IndPol) 

o Body of Knowledge Electronic Warfare

o Body of Knowledge Fixed Wing Aircraft

o Body of Knowledge Rotary Wing Aircraft

o Body of Knowledge UAS

o Identifying and Mitigating the Impact of the Budget Control Act on High Risk Sectors 

and Tiers of the Defense Industrial Base

o Impact of the Budget Control Act on the Defense Industrial Base

o Program Management Review Meeting Defense Production Act Title III Tungsten 

Rhenium Wire Production Sustainment Project

o Proposed Acquisition of Sikorsky Aircraft by Lockheed Martin

 National Defense Strategy 

 Nuclear Posture Review

Congressional Research Service 

 China’s Mineral Industry and U.S. Access to Strategic and Critical Minerals: Issues for 

Congress

 Rare Earth Elements in National Defense: Background, Oversight Issues, and Options 

for Congress

 The Buy American Act—Preferences for “Domestic” Supplies: In Brief

 The Specialty Metal Clause: Oversight Issues and Options for Congress

Department of Commerce

 Bureau of Industry and Security (BIS)

o Cost-Metric Assessment of Diminishing Manufacturing Sources and Material 

Shortages

o Critical Facilities Survey Data

o Critical Technology Assessment: Fine Grain, High-Density Graphite

o Critical Technology Assessment: Impact of U.S. Export Controls on Green 

Technology Items

o Critical Technology Assessment: Night Vision Focal Plane Arrays, Sensors, and 

Cameras

o Cybersecurity Framework Manufacturing Profile

o Defense Industrial Base Assessment of Counterfeit Electronics
Assessing and Strengthening the Manufacturing and Defense Industrial Base

and Supply Chain Resiliency of the United States UNCLASSIFIED

116 UNCLASSIFIED

o Defense Industrial Base Assessment of Rocket Propulsion 

o Defense Industrial Base Assessment of the Telecommunications Industry 

Infrastructure

o Defense Industrial Base Assessment of the U.S. Underwater Acoustics Transducer 

Industry

o Defense Industrial Base Assessment of U.S. Textiles, Apparel, and Footwear 

o Framework for Improving Critical Infrastructure Cybersecurity

o Industrial Base Assessment of Consumers of U.S. Electro-Optical Satellite Imagery

o National Aeronautics and Space Administration’s (NASA) Human Space Flight 

Industrial Base in the Post-Space Shuttle/Constellation Environment

o National Security Assessment of the C-17 Globemaster Cargo Aircraft’s Economic & 

Industrial Base Impacts

o National Security Assessment of the Cartridge and Propellant Actuated Device 

Industry: 4th Review

o Reliance on Foreign Sourcing in the Healthcare and Public Health Sector: 

Pharmaceuticals, Medical Devices, and Surgical Equipment

o Sector to Sector, Tier to Tier Data

o The Effect of Imports of Aluminum on the National Security, an Investigation 

Conducted under Section 232 of the Trade Expansion Act of 1962, as Amended

o The Effect of Imports of Steel on the National Security, an Investigation Conducted 

under Section 232 of the Trade Expansion Act of 1962, as Amended

o U.S. Bare Printed Circuit Board Supply Chain Assessment

o U.S. Integrated Circuit Design and Fabrication Capability 

o U.S. Space Industrial Base "Deep Dive" Assessment: Employment in the U.S. Space 

Industrial Base

o U.S. Space Industrial Base "Deep Dive" Assessment: Impact of U.S. Export Controls 

on the Space Industrial Base

o U.S. Space Industrial Base "Deep Dive" Assessment: Small Businesses in the Space 

Industrial Base

o U.S. Strategic Material Supply Chain Assessment: Carbon Fiber Composites

o U.S. Strategic Material Supply Chain Assessment: Select Rare Earth Elements

o U.S. Strategic Material Supply Chain Assessment: Titanium

 National Institute of Standards and Technology (NIST)

o National Institute of Standards and Technology (NIST) Manufacturing Extension 

Partnership Cybersecurity Self-Assessment Handbook For Assessing NIST SP 800-

171 Security Requirements in Response to Defense Federal Acquisition Regulations 

Cybersecurity Requirements

Department of Energy 

 Critical Materials Strategy
Assessing and Strengthening the Manufacturing and Defense Industrial Base

and Supply Chain Resiliency of the United States UNCLASSIFIED

117 UNCLASSIFIED

Department of the Interior 

 Managing Materials for a Twenty-First Century Military

 Mineral Commodity Summaries

 U.S. Geological Survey Data and Reports

Department of Labor 

 Bureau of Labor Statistics Data

Government Accountability Office 

 Defense Supply Chain: The Department of Defense Needs Complete Information on 

Single Sources of Supply to Proactively Manage the Risks

 Nuclear Weapons: The National Nuclear Security Administration Needs to Determine 

Critical Skills and Competencies for Its Strategic Materials Programs

Joint Army Navy NASA Air Force Interagency Propulsion Committee

 Bi-Annual Propulsion Industrial Sector Integrated Program Plan and Key Decision 

Points

White House / Executive Office of the President

 National Security Strategy

 Office of Trade & Manufacturing Policy (OTMP)

o China's Strategies of Economic Aggression: How China Threatens the Intellectual 

Property and Technologies of America and the World

U.S. Government-Sponsored Sources

 A.T. Kearney Combat Vehicle Industrial Base Study

 Institute for Defense Analyses (IDA) Assessment Activities for Industrial Policy in 

Support of Executive Order 13806

 IDA Munitions Resilience Study

 MFORESIGHT America's Next Manufacturing Workforce

 MFORESIGHT Cybersecurity for Manufacturers

 MFORESIGHT Democratizing Manufacturing

 MFORESIGHT Ensuring American Manufacturing Leadership Through NextGeneration Supply Chains

 MFORESIGHT Metamaterials Manufacturing
Assessing and Strengthening the Manufacturing and Defense Industrial Base

and Supply Chain Resiliency of the United States UNCLASSIFIED

118 UNCLASSIFIED

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and Supply Chain Resiliency of the United States UNCLASSIFIED

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Appendix Five: Industry Listening 

Sessions

The below list includes the industry listening sessions the Interagency Task Force conducted. 

Many of the sessions were hosted and facilitated by trade associations, allowing the working 

groups a breadth of industry representatives in one meeting.

Date Host Session Title

Sector(s) 

Addressed

Dec. 15, 2017 National Defense Industrial 

Association

Industry Listening Session Electronics

Jan. 22, 2018 Center for Strategic and 

International Studies

Charting a New Course for 

the Industrial Base

Macro forces

Jan. 25, 2018 Association for Manufacturing 

Technology and Georgia 

Tech Global Learning Center

AMT Machine Tools Data 

Gathering Workshop

Machine Tools

Jan. 26, 2018 Association for Manufacturing 

Technology

Advanced Manufacturing 

Workshop

Machine Tools
Assessing and Strengthening the Manufacturing and Defense Industrial Base

and Supply Chain Resiliency of the United States UNCLASSIFIED

120 UNCLASSIFIED

Date Host Session Title

Sector(s) 

Addressed

Jan. 31, 2018 Professional Services Council Leadership Summit Workforce

Feb. 7, 2018 Cowen Inc. Aerospace and Defense 

Conference

Macro forces

Feb. 8, 2018 University of California San 

Diego 21st Century China 

Center

New Approaches to 

Reviewing and Regulating 

Chinese High Tech 

Investment

Macro forces

Mar. 1, 2018 National Defense University Foundation Breakfast 

Briefing

Macro forces

Mar. 7, 2018 National Institute of Standards 

and Technology 

Manufacturing Extension 

Program

Advisory Board Meeting Macro forces

Mar. 20, 2018 Precision Strike Association Annual Review Munitions & Missiles

Mar. 28, 2018 Aerospace Industries 

Association

Industry Listening Session Aircraft

Mar. 28, 2018 Aerospace Industries 

Association

Industry Listening Session Space

Mar. 29, 2018 Aerospace Industries 

Association

Industry Listening Session Munitions & Missiles

Mar. 29, 2018 Aerospace Industries 

Association

Industry Listening Session Radar & EW

Apr. 3, 2018 National Defense Industrial 

Association

Industry Listening Session Ground Systems

Critical to the cybersecurity working group efforts were a series of nearly thirty sessions hosted 

by the National Institute of Standards and Technology Manufacturing Extension Partnership 

program from January - December 2017. Many of the sessions, which were conducted in over 

twenty states and reached over 1,000 U.S. manufacturers, included participation from DoD 

Procurement Technical Assistance Centers. The sessions familiarized small and medium size 

companies with the DFARS requirement to ensure adequate cybersecurity protections are in 

place by implementing the security controls contained in NIST SP 800-171. Direct personal 

interactions that occurred during the sessions regarding the challenges small and medium 

manufacturers face in terms of defensive and offensive cybersecurity, informed the 

cybersecurity in manufacturing working group's inputs and recommendations as part of the EO 

13806 effort.
Assessing and Strengthening the Manufacturing and Defense Industrial Base

and Supply Chain Resiliency of the United States UNCLASSIFIED

121 UNCLASSIFIED

Appendix Six: Agreements with 

Foreign Governments

Security of Supply Agreements

DoD has entered into arrangements with several nations to ensure the mutual supply of defense 

goods and services. These bilateral Security of Supply arrangements allow the DoD to request 

priority delivery for DoD contracts, subcontracts, or orders from companies in these countries.

Similarly, the arrangements allow the signatory nations to request priority delivery for their 

contracts and orders with U.S. firms.

Conducted under the overarching Declarations of Principles for Enhanced Cooperation in 

Matters of Defense Equipment and Industry that have been signed with certain nations, Security 

of Supply arrangements implement the “Meeting National Defense Requirements” section. The 

arrangements recognize the potential for a certain degree of mutual interdependence of supplies 

needed for national security, and calls for the parties to explore solutions for achieving 

assurance of supply. Reciprocal industrial priority systems encourage partner nations to acquire 
Assessing and Strengthening the Manufacturing and Defense Industrial Base

and Supply Chain Resiliency of the United States UNCLASSIFIED

122 UNCLASSIFIED

defense goods from each other, promote interoperability, and provide assurance of timely 

delivery during peacetime, emergency, and armed conflict.

The following countries are party to Security of Supply agreements with the United States: 

Australia, Canada, Finland, Italy, Netherlands, Norway, Spain, Sweden, and the United 

Kingdom.171

Cooperative International Agreements

DOD has a highly structured process governing the development, negotiation, coordination, and 

implementation of cooperative international agreements:

 Memoranda of Understanding;

 Memoranda of Agreement;

 Projects Agreements and Arrangements; and 

 Equipment and Material Transfer Arrangements 

International agreements are used to establish information exchanges; personnel exchanges and 

assignments; cooperative research, development, test and evaluation projects; cooperative 

acquisitions; cooperative production (including licensed coproduction); or cooperative or 

reciprocal logistics support. 

Any international agreement between the U.S. and another nation constitutes a commitment 

binding in international law on the part of the U.S. and the foreign government. The 

agreements obligate both governments to commit resources – funds, equipment, labor, 

information, or action – and outline the authorization and approval process to ensure the U.S. 

only commits to a course of action that is implementable and in its best interest.

Reciprocal Defense Procurement Agreements

Title 19, U.S. Code, Section 2512(a) directs the President to prohibit the procurement of foreign 

products from any country that is not a party to the Trade Agreements Act of 1979, so as to 

provide appropriate reciprocal competitive government procurement opportunities to U.S. 

products and suppliers of U.S. products. Title 19, U.S. Code, Section 2512(b) allows the 

President to authorize the Secretary of Defense to waive the prohibition on procurement of 

foreign products of any country that enters into a reciprocal procurement agreement with DoD. 

A Reciprocal Defense Procurement agreement is an example of such an agreement. 

Under a Reciprocal Defense Procurement agreement, countries afford each other certain 

benefits on a reciprocal basis, consistent with their national laws and regulations. Each 

Reciprocal Defense Procurement agreement provides a framework for ongoing communication 

between or among DoD and its respective counterparts regarding market access and 

procurement matters that contribute to effective defense cooperation. Key Reciprocal Defense 
Assessing and Strengthening the Manufacturing and Defense Industrial Base

and Supply Chain Resiliency of the United States UNCLASSIFIED

123 UNCLASSIFIED

Procurement agreement principles include: fair competition, reduced market barriers, 

transparent processes, and protection of intellectual property.

The authority to conclude a Reciprocal Defense Procurement agreement is found at Section 2531 

of Title 10, U.S. Code. A country that has concluded a Reciprocal Defense Procurement 

agreement with DoD is termed a “qualifying country” in the DoD Federal Acquisition Regulation 

Supplement.172 The DoD has Reciprocal Defense Procurement agreements in effect with the

following 27 countries: Australia, Austria, Belgium, Canada, Czech Republic, Denmark, Egypt, 

Estonia, Finland, France, Germany, Greece, Israel, Italy, Japan, Latvia, Luxembourg, 

Netherlands, Norway, Poland, Portugal, Slovenia, Spain, Sweden, Switzerland, Turkey, and the 

United Kingdom.

Reciprocal Government Quality Assurance Agreement

Paragraph (h) of Section 2761 of title 22, U.S. Code, provides the legal authority for an 

agreement for the performance of quality assurance services on a reciprocal no-charge basis 

between DoD and its counterparts for any contract or subcontract for defense articles, defense 

services, or design and construction services. Government Quality Assurance agreements 

promote the use of common quality assurance standards and protocols whereby each 

government supports purchases of defense equipment from its industry by the other 

government, and by defense contractor performing work for the other government. Such 

agreements help promote the interoperability and standardization of conventional defense 

equipment used by the U.S. Armed Forces and the partner’s armed forces, and facilitate 

cooperation between our defense industries. 

Government Quality Assurance agreements take either the form of a Government Quality 

Assurance annex to the Reciprocal Defense Procurement agreement that DoD has with the 

partner government, or as a stand-alone document. DoD has Government Quality Assurance 

agreements with the following 21 countries: Australia, Belgium, Canada, Czech Republic,

Denmark, Finland, France, Germany, Greece, Israel, Italy, Republic of Korea, Netherlands, 

Norway, Poland, Romania, Spain, Slovakia, Sweden, Turkey, and the United Kingdom.173
Assessing and Strengthening the Manufacturing and Defense Industrial Base

and Supply Chain Resiliency of the United States UNCLASSIFIED

124 UNCLASSIFIED

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Photo Credits

Page Credit

Cover iStock

1 Photo by John Snyder, Watervliet Arsenal

https://www.dvidshub.net/image/4155302/arsenals-new-contract-will-increase-soldiers-safetyartillery-range

7 U.S. Air Force photo by Justin Connaher, Joint Base Elmendorf-Richardson Public Affairs

https://www.dvidshub.net/image/4419918/making-pointy-end

11 Courtesy photo by the Defense Contract Management Agency

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15 U.S. Air Force photo by Tommie Horton, 78th Air Base Wing Public Affairs

https://www.dvidshub.net/image/2084946/cmxg-working-toward-achieving-art-possible

19 U.S. Air Force photo by Senior Airman Quay Drawdy, 18th Wing Public Affairs

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45 U.S. Army photo by Debralee Best, Rock Island Arsenal – Joint Manufacturing and Technology

Center (RIA-JMTC)

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Assessing and Strengthening the Manufacturing and Defense Industrial Base

and Supply Chain Resiliency of the United States UNCLASSIFIED

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Page Credit

53 U.S. Marine Corps photo by Staff Sgt. Britni M. Garcia Green, U.S. Marine Corps Force, Europe 

and Africa

https://www.dvidshub.net/image/4560212/spmagtf-cr-af-moves-towards-3d-printing

59 U.S. Air Force photo by Wesley Farnsworth, 88th Air Base Wing Public Affairs

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63 U.S. Navy photo by Mass Communication Specialist 1st Class Richard Doolin

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64 U.S. Navy photo by Mass Communication Specialist 3rd Class Alex Corona, USS Theodore 

Roosevelt

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67 U.S. Air Force Photograph by Donna L. Burnett, Maxwell Air Force Base Public Affairs

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69 U.S. Army photo by Visual Information Specialist Getrud Zach

https://www.dvidshub.net/image/3690808/1st-battalion-8th-infantryregiment-calfex

71 U.S. Marine Corps photo by Lance Cpl. Cody J. Ohira

https://www.dvidshub.net/image/3855061/2nd-laad-stinger-range

73 U.S. Air Force photo by Airman 1st Class Braydon Williams, 90th Missile Wing Public Affairs

https://www.dvidshub.net/image/4204337/missile-maintainers-tear-down-icbm-maintenance

75 U.S. Navy photo by Mass Communication Specialist Seaman Vance Hand

https://www.dvidshub.net/image/3833040/uss-america-sailor-mans-radar-terminal

78 U.S. Navy photo by Petty Officer 2nd Class Kihlo Park

https://www.dvidshub.net/image/287557/uss-harry-s-truman-passes-gibraltar-takes-supplies

81 U.S. Marine Corps photo by Pfc. Melanye Martinez, 2nd MARDIV, Combat Camera

https://www.dvidshub.net/image/1826576/2d-mardiv-headquarters-battalion-9-mile-hike

84 U.S. Air Force courtesy photo by United Launch Alliance

https://www.dvidshub.net/image/3241843/wgs9-launch

87 Photo by Petty Officer 2nd Class Nathaniel Moger, Joint Task Force Guantanamo Public Affairs 

https://www.dvidshub.net/image/103088/information-assurance-cyber-defenders

89 U.S. Air Force courtesy photo, Air Force Research Laboratory

https://www.dvidshub.net/image/4046791/afrl-american-semiconductor-create-flexible-systemchip-internet-things

92 Photo by John Snyder, Watervliet Arsenal

https://www.dvidshub.net/image/3670607/army-apprentices-experiencing-best-most-difficultyears-their-lives

94 Photo by Debralee Best, Rock Island Arsenal – Joint Manufacturing and Technology Center (RIAJMTC)

https://www.dvidshub.net/image/3794962/ria-jmtc-produces-production-aid-depot

96 U.S. Army Engineering and Support Center photo, Huntsville Public Affairs Office

http://www.hnc.usace.army.mil/Media/News-Releases/Article/588223/

project-underway-to-upgrade-heating-system-at-rock-island-arsenal/

99 Photo by James Lentz, Tobyhanna Army Depot

https://www.dvidshub.net/image/3962789/tobyhanna-assists-testing-encryption-solution

101 Photo by Hayley Smith, Crane Army Ammunition Activity

https://www.dvidshub.net/image/4098633/crane-army-produces-practice-rounds-fleet
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105 U.S. Marine Corps photo by Cpl. Joseph Sorci

https://www.defense.gov/Photos/Photo-Gallery/igphoto/2001873640/

111 U.S. Navy photo by Lt. David Babka

https://www.dvidshub.net/image/4090662/180120-n-zz999-0002

119 U.S. Marine Corps photo by Marines Corps photo by Lance Cpl. Brennon A. Taylor, 2nd Marine 

Division

https://www.dvidshub.net/image/4108812/charlie-company-2d-reconnaissance-battalion-diveinsertion-training-key-west

121 U.S. Army photo by Gertrud Zach

https://dod.defense.gov/Photos/Photo-Gallery/igphoto/2001894477/

125 U.S. Marine Corps Photo by Lance Cpl. Jamin M. Powell, 3rd Marine Logistics Group

https://www.dvidshub.net/image/4541411/practice-makes-perfect

129 U.S. Air Force photo by Tech. Sgt. Gregory Brook, U.S. Air Force Central Command Public Affairs

https://www.dvidshub.net/image/4201092/83rd-erqs-guardian-angels-conduct-tactical-criticalcasualty-care-working-with-us-army-ch-47s
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Endnotes

1 President Donald Trump, Executive Order 13806, July 2017. https://www.whitehouse.gov/presidentialactions/presidential-executive-order-assessing-strengthening-manufacturing-defense-industrial-basesupply-chain-resiliency-united-states/

2 National Security Strategy of the United States, December 2017. https://www.whitehouse.gov/wpcontent/uploads/2017/12/NSS-Final-12-18-2017-0905.pdf

3 2018 National Defense Strategy of the United States of America, January 2018, pg. 2.

https://www.defense.gov/Portals/1/Documents/pubs/2018-National-Defense-Strategy-Summary.pdf

4 National Science Foundation, “Science and Engineering Indicators, 2018,” 2018.

https://www.nsf.gov/statistics/2018/nsb20181/digest/sections/u-s-and-global-stem-education

5 President Donald Trump, Executive Order 13806, July 2017. https://www.whitehouse.gov/presidentialactions/presidential-executive-order-assessing-strengthening-manufacturing-defense-industrial-basesupply-chain-resiliency-united-states/

6 The Interagency Task Force determined the assessment would focus on the capabilities needed for the 

“fight tonight,” thus scoping the effort to the nine traditional and six cross-cutting sectors outlined in 

Figure 1. The Interagency Task Force and the Office of Trade and Manufacturing Policy agreed early on 

that the most effective way to approach the task was to scope the first effort for the fight tonight and 

conduct follow-on efforts to assess manufacturing and defense industrial base needs for a great power 

conflict scenario, as well as evaluating next generation technologies for future threats. The classified 

Action Plan provides descriptions of follow-on efforts.

 
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7 In their study supporting the Industrial Policy Office, the Defense Science Board listed the following as 

components of the defense industrial base: for-profit companies, not-for-profit companies, universities 

and associated university-affiliated research centers, federally-funded research and development centers, 

and the open-source community that provides both hardware and software.

8 W. L. Mackenzie King, Hyde Park Declaration, April 1941. 

http://wartimecanada.ca/sites/default/files/documents/WLMK.HydePark.1941.pdf

9 FY2017 National Defense Authorization Act, Section 881. Greater Integration of the National 

Technology and Industrial Base.

10 Despite these designations, National Technology and Industrial Base partners are subject to a variety of 

U.S. export control laws and regulations, except in those specific cases where exceptions or parallel 

structures have been established. The Canadian defense industry enjoys special exceptions to some of the 

most rigorous export control elements, including the International Traffic in Arms Regulations regime. 

Defense industry relations with the United Kingdom and Australia, however, are separately governed by 

preexisting Defense Trade Cooperation Treaties. Currently, DoD is developing a plan to reduce the 

barriers to the seamless integration across the National Technology and Industrial Base, as mandated by 

the FY2017 National Defense Authorization Act. 

11 Center for Strategic and International Studies, What the Continuing Resolution Means for Defense 

Spending in FY2018, September 27, 2017. https://www.csis.org/analysis/what-continuing-resolutionmeans-defense-spending-fy-2018

12 In the 2011 Budget Control Act, Congress set budget limits known as sequestration. The deficit 

reduction sequester required nine annual sequesters of $109 billion – half from defense and half from 

non-defense programs – to reduce the deficit by $1.2 trillion. The first of these annual sequesters took 

effect in March 2013.

13 Bradley Martin et al, A Strategic Assessment of the Future of U.S. Navy Ship Maintenance, RAND, 2017. 

https://www.rand.org/content/dam/rand/pubs/research_reports/RR1900/RR1951/RAND_RR1951.pdf

14 The Naval Registry.

15 Vehicle, missiles, and aircraft numbers derived from Service Property Book data repositories.

16 Log Cost Baseline calculation.

17 Maintenance and Availability Data Warehouse.

18 Analysis of data from DoD Comptroller’s Green Book.

19 Center for Strategic and International Studies, Measuring the Impact of Sequestration and the Defense 

Drawdown on the Industrial Base, 2011-2015, 22 January 2018. 

https://www.csis.org/analysis/measuring-impact-sequestration-and-drawdown-defense-industrial-base

20 Defense Production Act Title III.

21 CNAS, A Brief History of Budget Instability, 2017. https://www.cnas.org/publications/reports/a-briefhistory-of-defense-budget-instability, includes two additional CRs of December 2017 and January 2018.

22 CSIS, “What a Continuing Resolution Means for Defense Spending,” 2017. 

https://www.csis.org/analysis/what-continuing-resolution-means-defense-spending-fy-2018

23 U.S. Government Accountability Office Report: DOD Is Taking Steps to Address Challenges Faced by 

Certain Companies, GAO-17-644, Washington, DC: Government Accountability Office, July 2017. 

https://www.gao.gov/assets/690/686012.pdf

24 Sree Ramaswamy, et al., “Making it in America: Revitalizing U.S. Manufacturing,” McKinsey Global 

Institute, November 2017. https://www.mckinsey.com/global-themes/americas/making-it-in-americarevitalizing-us-manufacturing

25 National Security Strategy of the United States, December 2017. https://www.whitehouse.gov/wpcontent/uploads/2017/12/NSS-Final-12-18-2017-0905.pdf
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26 Robert Atkinson, et al., “Worse Than the Great Depression: What Experts are Missing about American 

Manufacturing Decline,” Information Technology & Innovation Foundation, March 2012. 

http://www2.itif.org/2012-american-manufacturing-decline.pdf

27 Bureau of Labor Statistics, “Multifactor productivity slowdown in U.S. manufacturing.” Monthly Labor 

Review, July 2018.

28 Heather Long, “U.S. has lost 5 million manufacturing jobs since 2000,” CNN Money, March 2016.

http://money.cnn.com/2016/03/29/news/economy/us-manufacturing-jobs/index.html

29 Data from the Bureau of Labor Statistics, U.S. Department of Labor, 

https://data.bls.gov/timeseries/CES3000000001. 

30 Joel Yudken, Ph.D., “Manufacturing Insecurity: America’s Manufacturing Crisis and the Erosion of the 

U.S. Industrial Base,” Cornell University ILR School, September 2010. 

https://digitalcommons.ilr.cornell.edu/cgi/viewcontent.cgi?referer=https://www.google.com/&httpsredi

r=1&article=1122&context=laborunions

31 Center for Strategic and International Studies, “Measuring the Impact of Sequestration and the 

Drawdown on the Defense Industrial Base,” 22 January 2018. https://www.csis.org/analysis/measuringimpact-sequestration-and-drawdown-defense-industrial-base

32 Sree Ramaswamy, et al., “Making it in America: Revitalizing U.S. Manufacturing,” McKinsey Global 

Institute, November 2017. https://www.mckinsey.com/global-themes/americas/making-it-in-americarevitalizing-us-manufacturing

33 MForesight, “Ensuring American Manufacturing Leadership Through Next Generation Supply Chains,” 

June 2017. http://mforesight.org/projects-events/supply-chains/

34 Ibid.

35 Ibid.

36 Robert Atkinson, et al., “Worse Than the Great Depression: What Experts are Missing about American 

Manufacturing Decline,” Information Technology & Innovation Foundation, March 2012. 

http://www2.itif.org/2012-american-manufacturing-decline.pdf

37 Vaclav Smil, “The Rise and Retreat of American Manufacturing.” The MIT Press. 2013.

38 Lee Simmons, “Rare-Earth Market,” Foreign Policy, July 12,2016. 

http://foreignpolicy.com/2016/07/12/decoder-rare-earth-market-tech-defense-clean-energy-chinatrade/

39 The 2017 National Security Strategy reclassified China as a “strategic competitor” that is engaged in 

“economic aggression.” National Security Strategy of the United States, December 2017, pg. 45. 

https://www.whitehouse.gov/wp-content/uploads/2017/12/NSS-Final-12-18-2017-0905.pdf 

40 As an example of China’s economic aggression, after effectively putting the sole rare earth mine in 

America out of business, China tried to buy the mine. Henry Sanderson. “Battle Heats Up for Control of 

Sole US Rare Earth Mine,” Financial Times, 30 May 2017. https://www.ft.com/content/2c3dea3e-3fc2-

11e7-82b6-896b95f30f58

41 Keith Bradsher, “Amid Tension, China Blocks Vital Exports to Japan,” New York Times, 22 September 

2010. https://www.nytimes.com/2010/09/23/business/global/23rare.html

42 Lok –Won Kim & John D. Villasenor, “A System-On-Chip Bus Architecture for Thwarting Integrated 

Circuit Trojan Horses,” IEEE Transactions On VLSI Systems, Vol. 19, No. 10, pp. 1921-1926, October 

2011. http://ieeexplore.ieee.org/xpl/login.jsp?tp=&arnumber=5556060

43 National Research Council, “Rising to the Challenge: U.S. Innovation Policy for the Global Economy,” 

The National Academies Press, 2012. https://doi.org/10.17226/13386 

44 Ibid.
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45 Steven Kline, Jr. "Understanding the Machine Tool Industry's Ups and Downs," Modern Machine Shop 

Online, https://www.mmsonline.com/articles/understanding-the-machine-tool-industrys-ups-anddowns, 1 May 2017.

46 Gardner Research World Machine Tool Survey, 2016, p6. https://www.gardnerweb.com/articles/2016-

world-machine-tool-survey

47 Dashan Kalyani, “IBISWorld Industry Report 33351 Metalworking Machinery Manufacturing in the 

U.S.,” September 2017, IBISWorld Inc.

48 Randy Starr and William Lay, "2016 Aerospace and Defense Industry Trends." Strategy&, 11 March 

2016. Accessed January 11, 2018. https://www.strategyand.pwc.com/trends/2016-aerospace-anddefense-industry-trends

49 In full recognition of this challenge, one of the National Defense Strategy’s lines of effort is reforming 

DoD’s business practices for greater performance and affordability. To that end, DoD leadership is 

currently reviewing the Defense Acquisition University teaching model to determine a more effective and 

efficient way to educate and empower DoD’s acquisition professionals to combat contracting barriers and 

inefficiencies across a broad spectrum of challenges.

50 House Committee on Armed Services, Challenges to Doing Business with the Department of Defense: 

Findings of the Panel on Business Challenges in the Defense Industry (Washington, DC: U.S. Congress, 

March 2012).

https://wcoeusa.org/sites/default/files/Challenges%20to%20Bus%20with%20DOD.3.12.pdf

51 Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations, Volume 1 of 3, 

January 2018.

52 U.S. Government Accountability Office Report: DOD Is Taking Steps to Address Challenges Faced by 

Certain Companies, GAO-17-644, Washington, DC: Government Accountability Office, July 2017. 

https://www.gao.gov/assets/690/686012.pdf

53 Defense Business Board, Innovation: Attracting and Retaining the Best of the Private Sector, 

Washington, DC: Defense Business Board, 2014. 

http://dbb.defense.gov/Portals/35/Documents/Reports/2014/DBB-FY14-02-

Innovation%20report%20(final).pdf

54 Federal Acquisition Regulation, 48 Code of Federal Regulations §§15 1997.

https://www.gpo.gov/fdsys/pkg/FR-1997-09-30/pdf/97-25666.pdf#page=7

55 U.S. Government Accountability Office Report: DOD Is Taking Steps to Address Challenges Faced by 

Certain Companies, GAO-17-644, Washington, DC: Government Accountability Office, July 2017. 

https://www.gao.gov/assets/690/686012.pdf

56 David Tate, “Acquisition Cycle Time: Defining the Problem,” IDA, October 2016.

57 AMRDEC MORE Tool. https://www.amrdec.army.mil/amrdec/pdf/MORE%20Tool.pdf

58 U.S. Government Accountability Office Report: DOD Is Taking Steps to Address Challenges Faced by 

Certain Companies, GAO-17-644, Washington, DC: Government Accountability Office, July 2017. 

https://www.gao.gov/assets/690/686012.pdf

59 Defense Security Cooperation Agency, “Fiscal Year 2017 Sales Total $41.93B,” 28 November 2017. 

http://www.dsca.mil/news-media/news-archive/fiscal-year-2017-sales-total-4193b

60 U.S. Census Bureau data. https://www.census.gov/foreign-trade/balance/c0004.html

61 U.S. Census Bureau data. https://www.census.gov/foreign-trade/balance/c5700.html

62 U.S. Census Bureau data. https://www.census.gov/foreign-trade/balance/c0003.html

63 Reuters, “Technical Textile Market Size, Share, Report, Analysis, Trends & Forecast to 2022,” 10 May 

2017. https://www.reuters.com/brandfeatures/venture-capital/article?id=5437
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64 Department of Commerce, Industrial Base Assessments: U.S. Textiles, Apparel, and Footwear, 

https://www.bis.doc.gov/index.php/other-areas/office-of-technology-evaluation-ote/industrial-baseassessments

65 National Council of Textile Organizations, “U.S. Textile Industry,” April 2018.

http://www.ncto.org/facts-figures/us-textile-industry/

66 Department of Commerce, Industrial Base Assessments: U.S. Textiles, Apparel, and Footwear. 

67 World Trade Organization, “World Trade Statistical Review 2017,” October 2017. 

https://www.wto.org/english/res_e/statis_e/wts2017_e/wts17_toc_e.htm

68 National Council of Textile Organizations, “U.S. Textile Industry.”

69 Department of Commerce, Industrial Base Assessments: U.S. Textiles, Apparel, and Footwear, 2017. 

https://www.bis.doc.gov/index.php/other-areas/office-of-technology-evaluation-ote/industrial-baseassessments 

70 As the National Security Strategy notes: “China is gaining a strategic foothold in Europe by expanding 

its unfair trade practices and investing in key industries, sensitive technologies, and infrastructure.” 

National Security Strategy of the United States of America,” December 2017, p. 47.

https://www.whitehouse.gov/wp-content/uploads/2017/12/NSS-Final-12-18-2017-0905.pdf.

71 For an analysis of China’s strategy to capture leading industries, see Josh Wübbeke, Mirjam Meissner, 

Max J. Zenglein, Jaqueline Ives, and Björn Conrad, “Made in China 2025: The Making of a High-Tech 

Superpower and Consequences For Industrial Countries,” Mercator Institute for China Studies, December 

2016, p. 54. https://www.merics.org/sites/default/files/2017-09/MPOC_No.2_MadeinChina2025.pdf. 

See also the Office of Trade and Manufacturing Policy’s report, “China’s Strategies of Economic 

Aggression,” January 2018. 

72 The World Bank Group, “Countries and Economies, China GDP,” 2017. 

https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?locations=CN

73 Department of Defense, “Annual Report to Congress on the Military Power of the People’s Republic of 

China,” 12 July 2002, pg 1. 

https://www.globalsecurity.org/military/library/report/2002/d20020712china.pdf

74 Department of Defense, “Annual Report to Congress on Military and Security Developments Involving 

the People’s Republic of China 2017,” May 2017, pg 66. 

https://www.defense.gov/portals/1/documents/pubs/2017_china_military_power_report.pdf

75 State Council of the People’s Republic of China, Made in China 2025, 8 May 2015, Staff translation.

76 For discussion, see, for example, “China’s Plan to Crush the U.S. Robotics Industry”, CNBC.Com, 6 

September 2017, https://www.cnbc.com/2017/09/06/chinas-blueprint-to-crush-the-us-roboticsindustry.html; “China is Opening a New Quantum Research Supercenter,” Popular Science, 20 October 

2017, https://www.popsci.com/chinas-launches-new-quantum-research-supercenter; “China aims to 

become world leader in AI, challenges U.S. dominance,” Reuters, 20 July 2017, 

https://www.reuters.com/article/us-china-ai/china-aims-to-become-world-leader-in-ai-challenges-u-sdominance-idUSKBN1A5103

77 For a review of Chinese protectionism, see, for example, Chapter 1: U.S.-China Economic and Trade 

Relations p. 35-140 of “2017 Annual Report,” US-China Economic and Security Commission, 15 

November 2017, or “American Business in China,” AmCham China, 2017.

78 According to the “Findings of the Investigation Into China’s Acts, Policies, and Practices Related to

Technology Transfer, Intellectual Property, and Innovation Under Section 301 of the Trade Act of 1974,” 

Office of the U.S. Trade Representative, 03/22/18, p. 6, 

https://ustr.gov/sites/default/files/Section%20301%20FINAL.PDF: “Technology is defined broadly in 

this investigation to include knowledge and information needed to produce and deliver goods and 

services, as well as other methods and processes used to solve practical, technical or scientific problems. 

In addition to information protected by patents, copyrights, trademarks, trade secrets, and other types of 
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intellectual property protections, the term also includes “know-how,” such as production processes, 

management techniques, expertise, and the knowledge of personnel.”

79 Forced technology transfer is prohibited by the World Trade Organization rules.

80 Documentation of China’s domination of global manufacturing dates back to Peter Navarro and Greg 

Autry, Death By China, Pearson FT Press, May 2011.

81 As evidence of China’s use of overcapacity in the solar and steel industries, see, for example, “Press 

Release: China’s Industrial Overcapacity is Destroying Key European Industries,” AEGIS Europe, 14 July 

2016. For autos, see, for example, Trivedi, Anjani, “China Looks to Export Auto Overcapacity on SlowGrowth World,” The Wall Street Journal, 1 May 2017. For robotics, see, for example, Bland, Ben, “China’s 

Robot Revolution Poses US Risks, Warns Wilbur Ross,” Financial Times, 27 September 2017.

82 Department of Justice, Office of Public Affairs, “US Charges Five Chinese Military Hackers for Cyber 

Espionage Against US Corporations and a Labor Organization for Commercial Advantage,” 19 May 2014.

83 Department of Justice, “United States of America v. Wang Dong, Sun Kailiang, Wen Xinyu, Huang 

Zhenyu, Gu Chunhui,” 1 May 2014, pg 14-15.

84 Coalition for American Solar Manufacturing, “Analysis: China’s New Five-Year Plan for Solar Calls for 

Escalation in Government Sponsorship of Export-Intensive, Price-Subsidized Trade,” 2 May 2012. 

http://www.americansolarmanufacturing.org/news-releases/05-02-12-chinas-five-year-plan.htm

85 Department of Commerce, International Trade Administration, “Fact Sheet: Commerce Finds Dumping 

and Subsidization of Crystalline Silicon Photovoltaic Cells, Whether or Not Assembled into Modules from 

the People’s Republic of China,” 2012. http://ia.ita.doc.gov/download/factsheets/factsheet_prc-solarcells-ad-cvd-finals-20121010.pdf

86 As reported by the “Findings of the Investigation Into China’s Acts, Policies, and Practices Related to

Technology Transfer, Intellectual Property, and Innovation Under Section 301 of the Trade Act of 1974,” 

Office of the U.S. Trade Representative, 03/22/18, p. 158-159, 

https://ustr.gov/sites/default/files/Section%20301%20FINAL.PDF: “In 2012, while SolarWorld was 

litigating a petition it had filed against solar imports from China, the 3PLA stole thousands of sensitive 

files from SolarWorld. According to the indictment, these files included: “(i) cash-flow spreadsheets that 

would enable a competitor to identify how long SolarWorld would be able to withstand a market shock; 

(ii) detailed manufacturing metrics, technological innovations, and production line information that 

would enable a competitor to imitate SolarWorld’s proprietary production capabilities; (iii) production 

costs for manufacturing inputs that would enable a competitor to undermine SolarWorld financially 

through underpricing of solar products; and, (iv) privileged attorney-client communications regarding 

SolarWorld’s ongoing trade litigation with China, including confidential Question and Answer documents 

submitted to the [Department of Commerce] that were not discoverable by the Chinese respondents.

According to the indictment, “such information would have enabled a Chinese competitor to target 

SolarWorld’s business operations aggressively from a variety of angles.”

87 European Chamber of Commerce, “China Manufacturing 2025,” 2017, pg 2. 

http://www.europeanchamber.com.cn/en/china-manufacturing-2025

88 Arne Delfs and Patrick Donahue, “German Spy Chief Says China’s Tech Takeovers Are a Security Risk,” 

Bloomberg, 24 June 2018. 

89 The Associated Press, “Australia Bans Huawei From 5G Network Over Security Concerns,” The New 

York Times, 23 August 2018.

90 This strategy has already been highly successful. China controls over 95% of the world’s rare earth 

minerals; see “Rare earths: Battling China’s monopoly after Molycorp’s demise,” Mining.com, 10 

September 2016. http://www.mining.com/rare-earths-battling-chinas-monopoly-after-molycorpsdebacle/

91 China’s highly successful neo-colonial approach to securing global resources is documented in Peter 

Navarro and Greg Autry, Death By China, Pearson FT Press, May 2011, Chapter 7. See also “2017 Annual 

Report,” US-China Economic and Security Commission, 15 November 2017.
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92 United States Census Bureau, “Trade in Goods with China,” 1985-2017. 

https://www.census.gov/foreign-trade/balance/c5700.html 

93 Demand for U.S. dollars to buy U.S. Treasuries drives up the value of the U.S. dollar relative to the 

yuan. For discussion, see, for example, Global Finance School, “How China Keeps the Yuan Undervalued,” 

Undated. https://www.globalfinanceschool.com/blog-post/how-china-keeps-yuan-undervalued As this 

missive notes: “How does China keep the Yuan weak? By buying US currency and treasury notes on the 

open market, China keeps demand for the US dollar high. They can afford to buy and hold so much US 

currency due to their huge trade surplus with America, and they buy US currency roughly equal to this 

surplus. To keep the influx of dollars from increasing the Chinese money supply, China “sterilizes” the 

dollar purchases by selling bonds to Chinese investors like commercial banks. By boosting the dollar, still 

one of the most powerful worldwide currencies, the Yuan looks weak in relation.”

94 For a discussion generally of how foreign governments help finance U.S. trade deficits, see John 

Benedetto, “Who Financed Recent Trade Deficits?” United States International Trade Commission, 

Journal of International Commerce and Economics, May 2014. 

https://www.usitc.gov/publications/332/journals/volume_vi_u_s_trade_deficit.pdf

95 World Bank Open Data, multiple data pulls, https://data.worldbank.org/.

96 Christine Kim and Ben Blanchard, “China, South Korea Agree to Mend Ties After THAAD Standoff,” 

Reuters, 30 October, 2017.

97 Andrew Higgins, “In Philippines, Banana Growers Feel Effect of South China Sea Dispute,” Washington 

Post, 10 June 2012. 

98 The Japan Times, “No Improvement in China’s Rare Earths Ban,” 13 October 2010.

99 Ralph Jennings, “China’s Efforts to Increase Pressure on Old Foe Taiwan Are Backfiring,” Forbes, 28 

June 2017.

100 Kai Schultz, “Sri Lanka, Struggling With Debt, Hands a Major Port to China,” The New York Times, 12 

December 2017.

101 Chamber of Commerce of the United States of America, “China’s Drive for ‘Indigenous Innovation’ A 

Web of Industrial Policies,” 2010. 

https://www.uschamber.com/sites/default/files/documents/files/100728chinareport_0_0.pdf 

102 Center for Strategic and International Studies, “Made in China 2025,” 1 June 2025. 

https://www.csis.org/analysis/made-china-2025

103 Ibid.

104 Office of the U.S. Trade Representative, “Findings of the Investigation into China’s Acts, Policies, and 

Practices Related to Technology Transfer, Intellectual Property, and Innovation Under Section 301 of the 

Trade Act of 1974,” 22 March 2018. https://ustr.gov/sites/default/files/Section%20301%20FINAL.PDF

105 China’s illegal activities include cyberattacks, cyber theft, and industrial espionage. State-backed 

hackers steal, on average, $300 billion of intellectual property per year. While cyber theft has garnered 

most public attention, the FBI has cited a rise in industrial espionage: caseloads grew 53% from 2013-

2015, with 95% of cases believed to be perpetrated by China. One source estimates that China employed 

250,000-300,000 cyber spies in 2010 and 30,000 to 50,000 humans engaged in insider industrial 

espionage. Source: Intellectual Property Commission, “2017 Update to the IP Commission Report,” 

February 2017. http://www.ipcommission.org/ The 2013 Intellectual Property Commission Report 

estimated that 96% of global cyber espionage originated in China and has led to $100 billion in lost sales 

and 2.1 million lost jobs. Together, these strategies will give China access to the world's most advanced 

capabilities and will erode our technological dominance over time. 

106 China uses five major means to acquire the IP and technologies of America. These include: (1) 

industrial espionage and sabotage through traditional spycraft, cyber espionage, and reverse engineering, 

counterfeiting, and piracy; (2) evasion of U.S. restrictions on technology transfers; (3) coercive regulatory 

gambits to force technology transfers from U.S. companies, typically in exchange for limited access to the 

Chinese market; (4) state-sponsored strategic Chinese investment in the U.S. through vehicles such as 
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acquisitions, greenfield investment, and venture capital financing, often involving elaborate front 

companies and shell corporations and opaque investor networks; and (5) the harvesting of America’s 

national security innovation base through a massive open source collection campaign; the presence of 

large cadres of state-directed Chinese nationals at America’s universities, national labs, and other centers 

of innovation; and a highly coordinated and government-financed program of talent recruitment aimed at 

business, finance, science, and technology experts. As is apparent, some of these techniques are illegal 

either at the national or multilateral (WTO) level, and some are not. For discussion, see the Office of 

Trade and Manufacturing Policy’s report on Chinese economic aggression, January 2018.

107 Rhodium Group, “Two-Way Street: 2017 Update US-China Direct Investment Trends,” May 2017.

108 Michael Brown and Pavneet Singh, “China’s Technology Transfer Strategy: How Chinese Investments 

in Emerging Technology Enable A Strategic Competitor to Access the Crown Jewels of U.S. Innovation ,” 

Defense Innovation Unit Experimental, January 2018, p. 4, 

https://admin.govexec.com/media/diux_chinatechnologytransferstudy_jan_2018_(1).pdf.

109 Ibid.

110 In addition to sensitive reporting, the U.S. Department of Defense has discussed these issues in its 

various reports to Congress on China’s military developments. The most recent report is available at: 

https://www.defense.gov/Portals/1/Documents/pubs/2017_China_Military_Power_Report.PDF

111 For a discussion of the U.S.-China military balance in the open source, see the most recent U.S. 

Department of Defense report to Congress on China’s military developments, It is available at: 

https://www.defense.gov/Portals/1/Documents/pubs/2017_China_Military_Power_Report.PDF

112 Department of Defense, “Annual Report to Congress: Military and Security Developments Involving the 

People’s Republic of China 2017,” 15 May 2017. 

https://www.defense.gov/Portals/1/Documents/pubs/2017_China_Military_Power_Report.PDF

113 Department of Defense, “Report to Congress: Annual Industrial Capabilities.” 16 March 2017. 

http://www.businessdefense.gov/Portals/51/Documents/Resources/2016%20AIC%20RTC%2006-27-

17%20-%20Public%20Release.pdf?ver=2017-06-30-144825-160

114 Ibid.

115 Daniel Kliman, Testimony before the U.S.-China Economic and Security Review Commission, 25 

January 2018. https://www.uscc.gov/sites/default/files/Kliman_USCC%20Testimony_20180119.pdf

116 U.S.-China Economic and Security Review Commission, “China’s High-Speed Rail, Diplomacy, 21 

February 2017. 

https://www.uscc.gov/sites/default/files/Research/China%27s%20High%20Speed%20Rail%20Diploma

cy.pdf

117 Adam Davidson, “Most U.S. Port Terminals Are Foreign-Run,” National Public Radio, 26 February 

2006. https://www.npr.org/templates/story/story.php?storyId=5234177

118 For a recognition of the threat in the telecommunications sector by the U.S. Congress, see Wolf, Jim. 

“U.S. Lawmakers Seek to Block China Huawei, ZTE U.S. Inroads,” Reuters, 7 October 2012.

119 Data provided by Institute for Defense Analyses.

120 Manufacturing Institute and Deloitte, “The Skills Gap in U.S. Manufacturing: 2015 and Beyond,” 2015, 

pg. 7. 

http://www.themanufacturinginstitute.org/~/media/827DBC76533942679A15EF7067A704CD/2015_Sk

ills_Gap_Report.pdf

121 Ibid, pg 15.

122 Ibid, pg 13.

123 National Science Foundation, Science and Engineering Indicators, 2018. 

https://www.nsf.gov/statistics/2018/nsb20181/digest/sections/u-s-and-global-stem-education
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124 National Science Foundation, Science and Engineering Indicators, 2014. 

https://www.nsf.gov/statistics/seind14/index.cfm/chapter-2/c2s2.htm#s2-2

125 Ibid.

126 Ibid.

127 Matthew Patane, “Creston helicopter parts maker Fansteel files for bankruptcy,” Des Moines Register, 

September 2016. https://www.desmoinesregister.com/story/money/business/2016/09/15/crestonhelicopter-parts-maker-fansteel-files-bankruptcy/90407356/

128 National Association of Manufacturers, Manufacturers Outlook Survey, December 2017. 

http://www.nam.org/Data-and-Reports/Manufacturers-Outlook-Survey/2017-Fourth-QuarterManufacturers-Outlook-Survey/

129 Ben Watson, “The US Army Just Ordered Soldiers to Stop Using Drones from China’s DJI,” Defense

One, 4 August 2017.

130 Internet Security Threat Report, Symantec, 2015.

131 Data Breach Investigations Report, Verizon, 2015.

132 Manufacturers received 20% of all attacks across all industries globally in 2014. Symantec. “Internet 

Security Threat Report,” 2015, pg 13.

133 Cyber-espionage consisted of 60% of all attacks on manufacturers in 2014. In fact, manufacturers 

received more cyber-espionage attacks than any other industry globally in 2014 (27.4%, p. 52). Other 

motivations for attacks on manufacturers were crimeware (malicious software designed to carry out or 

facilitate illegal online activity, 34%), insider misuse (4%) and web-app attacks (1%) (p. 34). Verizon, 

“Data Breach Investigations Report,” 2015.

134 Studies by organizations such as the National Defense Industry Association, Defense Science Board, 

Alliance for Manufacturing Foresight, and McKinsey Global Institute have also highlighted (1) the 

centrality of small and medium manufacturers to the U.S. manufacturing supply chain for domestic 

economic growth, (2) small and medium manufacturers criticality to the DIB for national security, and (3) 

small and medium manufacturers vulnerability to cybersecurity threats and breaches.

135 While multiple size standards exist for different industry sectors, the U.S. Small Business 

Administration generally considers small and medium-sized manufacturers to have fewer than 500 

employees at a location.

136 NDIA, “Cybersecurity for Manufacturing Networks,” 2017.

137 IC Insights, “2018 Integrated Circuit Market Drivers,” 2017.

138 Semiconductor Industry Association, “2017 Factbook,” May 2017.

139 DIBNow data extraction, NAICS code 304, 24 January 2018.

140 World Electronic Circuits Council (WECC), "WECC Global PCB Production Report for 2015,” WECC, 

October 2016.

141 Ibid.

142 Semiconductor Industry Association, “2017 Factbook,” May 2017.

143 A “foundry” is a semiconductor manufacturing facility that manufactures third party designs. 

144 Interview with Brian Papke, President of Mazak USA, 16 November 2017.

145 Dashan Kalyani, “IBISWorld Industry Report 33351 Metalworking Machinery Manufacturing in the 

U.S.,” September 2017, IBISWorld Inc.

146 Steven Kline, Jr. "Understanding the Machine Tool Industry's Ups and Downs," Modern Machine Shop 

Online, https://www.mmsonline.com/articles/understanding-the-machine-tool-industrys-ups-anddowns, 1 May 2017.
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147 Gardner Research World Machine Tool Survey, 2016, p6. 

https://www.gardnerweb.com/articles/2016-world-machine-tool-survey

148 Dashan Kalyani, “IBISWorld Industry Report 33351 Metalworking Machinery Manufacturing in the 

U.S.,” September 2017, IBISWorld Inc.

149 Department of Defense, “Report to Congress: Annual Industrial Capabilities,” 16 March 2017. 

http://www.businessdefense.gov/Portals/51/Documents/Resources/2016%20AIC%20RTC%2006-27-

17%20-%20Public%20Release.pdf?ver=2017-06-30-144825-160

150 Department of Interior, U.S. Geological Survey, Mineral Commodity Summaries, 2018. 

https://minerals.usgs.gov/minerals/pubs/mcs/2018/mcs2018.pdf

151 National Academy of Sciences, Managing Materials for a Twenty-first Century Military, DOI 

10.17226/12028. 2008. http://nap.edu/12028

152 Zina D. Merrit, et al., Defense Supply Chain: DOD Needs Complete Information on Single Sources of 

Supply to Proactively Manage the Risks. GAO-17-768, Government Accountability Office, Washington, 

2017. https://www.gao.gov/assets/690/687432.pdf

153 Congressional Research Service, Rare Earth Elements in National Defense: Background, Oversight 

Issues, and Options for Congress, CRS Report No. R41744, 2013. 

http://www.dtic.mil/dtic/tr/fulltext/u2/a590410.pdf

154 Congressional Research Service, The Buy American Act—Preferences for “Domestic” Supplies: In Brief, 

CRS Report No. R43140, 2016. https://www.hsdl.org/?abstract&did=792493

155 Congressional Research Service, The Specialty Metal Clause: Oversight Issues and Options for 

Congress, CRS Report No. RL33751, 2014.

https://www.everycrsreport.com/files/20140206_RL33751_a9432dab10baa886b9c902c56d2aec279d29

b844.pdf

156 Congressional Research Service, China’s Mineral Industry and U.S. Access to Strategic and Critical 

Minerals: Issues for Congress, CRS Report No. R43864 2015. https://fas.org/sgp/crs/row/R43864.pdf

157 Naval Registry.

158 Vehicle, missiles, and aircraft numbers derived from Service Property Book data repositories.

159 Log Cost Baseline calculation.

160 Maintenance and Availability Data Warehouse.

161 Bureau of Labor Statistics.

162 Federal Reserve Bank of St. Louis, FRED. https://fred.stlouisfed.org/series/MANEMP. Not all 

manufacturing job loss represents diminished U.S. manufacturing; some has been caused by automation 

within manufacturing facilities that have remained in the United States.

163 National Association of Manufacturers, Manufacturers Outlook Survey, December 2017. 

http://www.nam.org/Data-and-Reports/Manufacturers-Outlook-Survey/2017-Fourth-QuarterManufacturers-Outlook-Survey/

164 National Association of Manufacturers, Economic Report, March 2018. 

http://www.nam.org/Newsroom/eNewsletters/Monday-Economic-Report/2018/Monday-EconomicReport---March-19--2018/

165 National Science Foundation, Science and Engineering Indicators, 2018. 

https://www.nsf.gov/statistics/2018/nsb20181/digest/sections/u-s-and-global-stem-education

166 National Science Foundation, Science and Engineering Indicators, 2014. 

https://www.nsf.gov/statistics/seind14/index.cfm/chapter-2/c2s2.htm#s2-2

167 Ibid.

168 Ibid.
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169 U.S. Department of Commerce, Bureau of Industry and Security, “Critical Facilities Assessment –

Preliminary,” 2017.

170 Bureau of Labor Statistics.

171 For more information, please: http://www.businessdefense.gov/security-of-supply/.

172 See Defense Federal Acquisition Regulations 225.872-1: Other International Agreements and 

Coordination.

173 For more information, see:

https://www.acq.osd.mil/dpap/cpic/ic/reciprocal_procurement_memoranda_of_understanding.html
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Office of the Under Secretary of Defense

for Acquisition and Sustainment

Office of the Deputy Assistant Secretary of Defense

for Industrial Policy

UNCLASSIFIED

UCSS