As global tensions rise, the U.S. Defense Industrial Base (DIB) finds itself grappling with a range of escalating supply chain risks, particularly those emanating from China. These risks are not confined to the availability of raw materials and components but extend into the digital realm, where cyber threats pose an increasing danger to national security. The DIB, which plays a critical role in ensuring the readiness and resilience of U.S. military forces, is at a crossroads, facing the urgent need for enhanced security measures, digital transformation, and solutions to labor shortages.
The Department of Defense (DOD) relies heavily on a diverse and complex industrial base, composed of both public-sector facilities and private-sector companies, to supply the products and services that underpin its warfighting capabilities. These commercial entities range from small businesses to some of the world’s largest corporations, providing everything from advanced military platforms like aircraft carriers to everyday items such as laptops and clothing. Additionally, they deliver a wide array of services, from routine IT support to highly specialized tasks like space vehicle launches.
However, the robustness of this Defense Industrial Base (DIB) is increasingly at risk due to the growing influence of foreign powers, particularly China. In October 2018, the Pentagon released a report accusing China of actively seeking to undermine the U.S. military’s industrial capabilities. The report highlighted China’s dominance in global military supply chains, especially in key sectors like rare earth metals used in high-tech defense equipment and specialty chemicals essential for munitions and missiles. It pointed out that China’s aggressive industrial policies had already eroded critical U.S. defense capabilities, including the production of solar cells for military use and flat-panel aircraft displays.
“A sudden and catastrophic loss of supply would disrupt DoD missile, satellite, space launch, and other defence manufacturing programs,” said the report, which warned that in many cases no substitutes were readily available. It contained particularly stark warnings on the risk of China’s growing technology prowess. “At risk is America’s loss of leadership in industries of the future such as artificial intelligence, quantum computing, and robotics,” the report said, noting that these would redefine the battlefield this century.
The Impact of Limited or Sole Sourcing
Adding to the DIB’s challenges is the reliance on limited or sole sourcing for critical components. Many aerospace and defense (A&D) businesses are dependent on a small number of suppliers for key materials and parts, creating significant vulnerabilities. This reliance is particularly problematic in the face of global disruptions, such as those caused by geopolitical tensions or pandemics, which can lead to severe shortages and delays.
Beyond China, the U.S. also faces dependencies on other foreign suppliers. For instance, Japan and European nations are the only sources for certain carbon fibers used in missiles and satellites, while Germany is the prime supplier of special vacuum tubes essential for night vision goggles.
The lack of diversification in the supply base makes it difficult for the DIB to pivot quickly in response to disruptions. To address this, there is a need for strategic investments in developing alternative suppliers, both domestically and with allied nations, to reduce dependency on potentially adversarial sources.
The Cybersecurity Threat: A Growing Concern
A critical and growing concern for the DIB is cybersecurity. In October 2020, the National Security Agency (NSA) warned that Chinese government hackers were targeting U.S. computer networks involved in national defense, labeling the threat from Beijing as a critical priority requiring urgent attention. The NSA’s advisory highlighted the broad range of tactics used by Chinese state-sponsored cyber actors to exploit networks holding sensitive intellectual property, economic, political, and military information.
Cyber-enabled intellectual property theft poses a significant risk to U.S. national security, enabling adversaries to replicate cutting-edge U.S. defense technology without the requisite investments in research and development. Furthermore, adversary access to the DIB could inform the development of offset capabilities, providing insights or access points that could enable adversaries to undermine or manipulate key weapons and systems designed and manufactured within the DIB.
Nevertheless, vulnerabilities within the DIB persist and there are gaps in existing efforts. Two critical shortcomings are, first, that there is no truly shared and comprehensive picture of the threat environment facing the DIB and, second, that efforts to rapidly detect and mitigate threats to DIB networks and systems are lacking. Adversaries operate in cyberspace across multiple areas and sectors within the defense industry. This means that, while an advanced threat actor may be targeting a number of entities within the DIB, any given target can only observe the adversary—its capabilities, tools, techniques and indicators of compromise—as it operates on its own assets, if at all. However, to gain insight into adversaries as strategic organizations, the Defense Department needs a consistent and coherent picture of where, how and why they are operating.
The DIB must adopt robust cybersecurity measures to mitigate these threats, including advanced monitoring, encryption, and threat detection systems. Moreover, the integration of digital twin technology—virtual replicas of physical supply chains—can help in identifying and mitigating risks in real-time, providing a proactive defense against potential disruptions.
The Cyberspace Solarium Commission has identified critical gaps in the cybersecurity posture of the Defense Industrial Base (DIB) and advocates two key recommendations:
- Mandatory Threat Intelligence Sharing: Congress should legislate that DIB companies, as part of their contracts with the Department of Defense (DoD), participate in a mandatory threat intelligence sharing program. Existing voluntary programs, like the Cyber Crime Center and DIB Cybersecurity Program, primarily benefit large prime contractors, leaving smaller subcontractors vulnerable. A comprehensive program would merge real-time data from DIB networks with U.S. government intelligence, providing a clearer understanding of adversary actions and enabling proactive defense. Key elements of this program include tying participation requirements to a company’s Cyber Maturity Model Certification (CMMC) level, incentivizing participation, establishing clear reporting frameworks, and enabling direct intelligence tipping from the NSA and DoD to DIB entities.
- Mandatory Threat Hunting: The Commission also recommends that Congress direct the executive branch to mandate threat hunting on DIB networks through the Defense Federal Acquisition Regulation Supplement. This proactive approach involves searching for cyber threats on networks, particularly those targeted by adversaries, to enhance the security of critical assets. Mandatory threat hunting would allow the DoD and DIB network operators to detect, contain, and mitigate cyber threats more effectively, ensuring greater security and resilience within the DIB.
These measures aim to close existing gaps by enhancing the security of the entire DIB supply chain, ensuring that even smaller contractors are protected from cyber threats.
To combat these threats, the Department of Defense has taken steps to enhance cybersecurity within the DIB. The 2018 Department of Defense Cyber Strategy emphasizes the defense of the DIB as a crucial imperative, noting that the department will collaborate to strengthen the cybersecurity and resilience of DOD, Defense Critical Infrastructure, and DIB networks and systems.
Strengthening the Industrial Base: A National Strategy
Recognizing these vulnerabilities, the U.S. government, under President Joe Biden, has initiated a comprehensive review of key supply chains, including those for semiconductors, high-capacity batteries, medical supplies, and rare earth metals. This review aims to assess the resilience and capacity of the American manufacturing supply chains and the defense industrial base to support national security and emergency preparedness.
The ongoing efforts to secure the DIB extend beyond cybersecurity and legislative measures. The Pentagon report from 2018 recommended the creation of a national advanced manufacturing strategy to diversify supply sources away from politically unstable countries that could cut off U.S. access. The strategy also emphasizes the need for targeted investments in domestic manufacturing, particularly in companies that produce items critical to the U.S. military, such as high-performance aluminum, steel, tungsten, and carbon fibers.
One such initiative includes a $250 million increase in funding for small and medium manufacturers in the submarine supply chain. This investment aims to address critical bottlenecks, support fragile suppliers, and mitigate single points of failure within the DIB.
Legislative Efforts: The MICROCHIPS Act
In response to these mounting threats, the U.S. Congress is considering new legislation to bolster the defense of the supply chain. The proposed Manufacturing, Investment, and Controls Review for Computer Hardware, Intellectual Property, and Supply (MICROCHIPS) Act would require U.S. intelligence officials to create a comprehensive plan to defend the supply chain, including the establishment of a National Supply Chain Security Center. The act is particularly focused on addressing threats from China, especially in light of allegations that products from Chinese companies like Huawei may enable Chinese government actors to spy on users.
Additionally, the Senate bill proposes amending the Intelligence Authorization Act to establish a National Supply Chain Intelligence Center within the Office of the Director of National Intelligence. This center would be responsible for collecting and providing supply chain intelligence, including threat assessments and vulnerability details. The center would be led by a director appointed by the President and include senior management from the Departments of Defense, Justice, Homeland Security, and Commerce.
Another significant provision would amend Section 303 of the Defense Production Act of 1950, authorizing the President to allocate funds to manufacturers of critical technologies and components to enhance supply chain defenses. This amendment has also been included in the Senate’s version of the National Defense Authorization Act. Senator Warner emphasized the need for a national strategy to protect the U.S. supply chain from Chinese threats, which continue to result in billions of dollars in intellectual property theft and the compromise of essential systems.
The MICROCHIPS Act would mandate a coordinated, whole-of-government approach to identify and prevent efforts to undermine the U.S. supply chain. It would also provide funding under the Defense Production Act to improve supply chain protections, including for manufacturers of critical technologies and components vital to national security.
Addressing the Challenges
To safeguard the U.S. Defense Industrial Base against growing threats, a comprehensive and strategic approach is essential. Key measures include:
- Strengthened Cybersecurity: Implementing advanced cybersecurity protocols is crucial for protecting sensitive information and critical infrastructure from cyberattacks. This includes adopting state-of-the-art encryption, intrusion detection systems, and regular security audits to counter evolving threats.
- Comprehensive Supply Chain Risk Management: Developing and deploying thorough supply chain risk management strategies is vital for identifying and mitigating potential vulnerabilities. This entails continuous monitoring, risk assessments, and the integration of predictive analytics to foresee and address disruptions before they escalate.
- Diversification of Supply Chains: To minimize dependence on single or limited sources, it is critical to diversify the supplier base. This includes fostering partnerships with multiple vendors, encouraging innovation in domestic production, and exploring alternative sourcing options to build a more resilient supply network.
- Expansion of Domestic Manufacturing: Bolstering domestic manufacturing capabilities is a key step in reducing reliance on foreign sources for essential components. Investment in local industries, alongside policy incentives, will not only enhance self-sufficiency but also create jobs and stimulate economic growth.
- Digital Transformation: Embracing digital technologies is fundamental for enhancing supply chain visibility, traceability, and resilience. The adoption of technologies such as blockchain, artificial intelligence, and IoT can significantly improve real-time monitoring, streamline operations, and ensure rapid response to any supply chain disruptions.
Digital Transformation: A Necessity, Not an Option
In response to these challenges, the DIB must undergo a significant digital transformation. The adoption of technologies such as blockchain for secure transactions, artificial intelligence for predictive analytics, and the Internet of Things (IoT) for enhanced visibility and control are no longer optional but essential for the future resilience of the defense supply chain. These technologies can help in tracking the provenance of materials, ensuring the authenticity of parts, and preventing counterfeit components from entering the supply chain—a growing concern with the increased reliance on global suppliers.
However, the path to digital transformation is fraught with challenges, not least of which is the current shortage of skilled labor. The DIB is already constrained by labor attrition, an aging workforce, and difficulties in attracting new talent with the necessary technical skills. This talent gap hampers the adoption of new technologies and limits the DIB’s ability to respond swiftly to emerging threats.
Addressing Vulnerabilities in the U.S. Defense Industrial Base
In response to escalating geopolitical tensions, particularly with China, Intel Corporation has secured a crucial contract with the U.S. Navy to enhance domestic semiconductor manufacturing for national defense. Intel Federal LLC, a subsidiary of Intel, has been tasked with supporting the U.S. in reshoring its defense industrial base. As one of only three companies globally capable of producing advanced processors, Intel’s involvement underscores its critical role in safeguarding vital semiconductor technology. The contract involves developing prototypes with Intel’s innovative “Chiplets” technology, which integrates multiple smaller chips into a single package to manage the high costs of advanced silicon manufacturing. This partnership is part of a broader strategy to fortify national security and maintain the integrity of U.S. technology against global threats.
In a related development, the U.S. Defense Microelectronics Activity (DMEA) has awarded GlobalFoundries U.S. 2 LLC a $400 million contract, raising the total value to $1.1 billion. This contract is part of the DMEA’s State of the Art Trusted Foundry Services project, aimed at ensuring the confidentiality and integrity of military microelectronics. GlobalFoundries will supply both leading-edge and legacy microelectronics, leveraging its expertise in CMOS and silicon germanium BiCMOS technologies to produce critical components like ASICs and microprocessors. The contract highlights the increasing importance of secure and reliable microelectronics in defense systems, especially in an era where global supply chain vulnerabilities are a growing concern.
Conclusion
The U.S. Defense Industrial Base is a vital component of national security, but it faces significant risks from foreign dependencies, cyber threats, and a lack of domestic manufacturing capacity in critical sectors. The challenges facing the U.S. Defense Industrial Base are complex and multifaceted, requiring a coordinated and strategic response. The federal government, through initiatives like the MICROCHIPS Act and the national advanced manufacturing strategy, is taking steps to mitigate these risks and ensure the DIB remains resilient and capable of supporting the nation’s defense needs.
Cyber threats from China, coupled with the need for digital transformation and the constraints of limited sourcing, pose significant risks to national security. Addressing these issues will require a concerted effort to enhance cybersecurity, invest in new technologies, and develop a more resilient and diversified supply chain. Only by taking these steps can the DIB ensure its continued ability to support U.S. military operations and maintain its technological edge in an increasingly competitive global landscape. As the global landscape evolves, continued vigilance and proactive measures will be essential to safeguarding the integrity and security of the U.S. defense supply chain.
References and Resources also include:
https://technosports.co.in/2020/10/04/intel-bags-deal-with-us-navy-to-aid-in-improving-its-defense/
https://www.lawfareblog.com/ensuring-cybersecurity-and-resilience-defense-industrial-base