In 2025, U.S. defense planners come face-to-face with the stark realization that the nation’s industrial base, once the envy of the world, is riddled with bottlenecks, foreign dependencies, and brittle supply chains. Fighter jets delayed by months, missile stockpiles depleted in weeks, and critical microelectronics sourced from potential adversaries-these are not merely hypothetical risks but operational facts. The warning signs echo those of past eras when industrial mobilization determined victory or defeat.
The CHIPS and Science Act shows how decisive, large-scale industrial policy can reverse decline in a strategic sector. But semiconductors are merely one part of the equation. Similar urgency applied across the propulsion systems, shipbuilding, munitions, and advanced materials could restore resilience necessary for military readiness. Following is an analysis of nine critical policy and industry actions that need to be pursued by defense leaders before the window for decisive change closes.
1. Treat Defense Manufacturing Like the CHIPS Act
The $52 billion package for semiconductor fabrication, R&D, and workforce training in the CHIPS and Science Act showed what happens when Washington aligns funding, incentives, and strategic urgency. Applying that model to defense manufacturing-reviving foundries, expanding forging capacity, and modernizing assembly lines-could offset decades of offshoring that saw two-thirds of U.S. foundries disappear since 2000. As Jason Forrester documented in The Defense Post, Pratt & Whitney’s $2 billion investment in domestic plants is a good start, but smaller firms will struggle to follow without a coordinated national program.
2. Secure the Microelectronics Pipeline
AI-enabled systems, ISR networks, and precision munitions-all need trusted, high-performance microelectronics. However, as National Defense University’s Dr. James Giordano has warned, foreign-made components can harbor “rogue” functions-latent kill switches that jeopardize operational continuity. Mission-relevant chip design, fabrication, and packaging must be on-shored. Friend-shoring should be limited to vetted allies under bilateral inspection frameworks, while the off-shoring of critical subsystems for C5ISR or kinetic targeting should be forbidden categorically.
3. Reduced Reliance on Taiwan for Advanced Chips
The reliance of America on Taiwan Semiconductor Manufacturing Co. for over 90% of the world’s most advanced logic chips is a single point of failure. A disruption-military conflict, blockade, or natural disaster-would halt production of the AI accelerators that are integral to its defense systems. While TSMC’s fab in Arizona will produce 5 nm chips, by that time the state of the art may have advanced to 3 nm, still produced in Taiwan. The U.S. needs to accelerate its build-up of domestic capacity and the expansion of secure partnerships with Japan, South Korea, and the EU to close this gap.
4. Reform Pentagon Procurement to Attract New Entrants
Over 2,000 pages of Federal Acquisition Regulations favor incumbents and stifle innovation. The SPEED and FoRGED Acts codify portfolio-based management, commercial-first approaches, and reduced compliance burdens for non-traditional contractors. By lowering these barriers and rewarding efficiency, these reforms may help promising startups across the “Valley of Death” from prototype to production, introducing more agile solutions into the defense supply chain.
5. Build Surge Capacity Through Output-Based Grants
Annual appropriations and uncertain order quantities discourage investment in excess capacity. Output-based grants, as proposed by The Heritage Foundation, would pay manufacturers for sustaining latent production capability overhead for unprocured units. This would smooth demand curves and allow rapid scaling in wartime without forcing unnecessary peacetime purchases.
6. Map and Digitize the Defense Supply Chain
Most US manufacturing relies on incompatible, decades-old systems that isolate suppliers from real-time coordination. AI-powered platforms, like Govini and Sustainment, can map supplier networks, flag foreign ownership risks, and assess capacity. A Manhattan Project-style effort toward the development of a common digital model of the defense industrial base, along with middleware solutions like STITCHES that focus on bridging the incompatibility divides in CAD/CAM, would offer dynamic production re-allocation during crises.
7. Harden Against Cyber and Supply Chain Attacks
Manufacturing is now the most targeted sector for cyber intrusions. PLA doctrine on system destruction warfare envisages disabling industrial capacity early in conflict. As RAND research has shown, just 25 targeted cyberattacks could cripple much of America’s advanced weapons production. Zero-trust architectures, redundant backups, and real-time anomaly detection need to become the norm throughout defense and allied manufacturing facilities.
8. Close the Workforce Gap in Critical Sectors
By 2030, the U.S. will have a shortage of 67,000 semiconductor technicians and engineers. Similar shortages persist across industries in aerospace, shipbuilding, and advanced materials. State-led returned-value formulas tying higher education to job outcomes, along with expanded vocational programs in STEM fields and targeted immigration reform, will be instrumental in rebuilding this vital talent pipeline. Without skilled labor, even the best-funded industrial capacity cannot be activated.
9. Integrate Allied Industrial Policy for Co-Innovation
In industrial mobilization, allies are force multipliers. Projects such as AUKUS on submarine production and the ICE Pact on Arctic icebreakers are examples of what can be achieved through co-innovation. Securing allied industries in early design phases, export controls aligned, and a sharing of R&D funding can expand capacity and resilience beyond U.S. borders, countering China’s scale advantage in manufacturing. The United States cannot afford a piecemeal approach to rebuilding its defense industrial base. The CHIPS Act proved that coordinated, well-funded industrial policy can shift trajectories in strategic sectors.
Extending that urgency to propulsion, munitions, shipbuilding, and microelectronics while reforming procurement, digitizing supply chains, and integrating allied capacity will determine whether America retains its military edge in the coming decade. The clock is ticking, and the next crisis will not wait for incremental change.
