By Doug Orsi

The results of a 2023 wargame simulating a Chinese amphibious invasion of Taiwan showed that the combined forces of Taiwan, Japan, and the U.S. successfully denied Chinese objectives and defeated the invasion. However, multiple aircraft carriers and dozens of cruisers and destroyers were lost. Additionally, critical munitions needed to defeat Chinese forces were rapidly depleted due to limited magazine capacity and delayed logistics support. Current events in Ukraine, Russia, and the Middle East have confirmed the wargame’s conclusions as prescient, revealing the U.S. defense industrial base struggles to support the nation’s military commitments and policy goals. As a result, although the country still produces advanced systems and munitions, it lacks the capacity to replace material losses and expenditures during prolonged combat. The country must promptly address these issues by expanding policies, authorities, investments, and partnerships with like-minded nations that foster co-manufacturing, maintenance, and knowledge sharing in the construction of combat platforms to compensate for existing industrial base deficiencies.

Atrophy and Sounding the Alarm

The health of the defense industrial base is vital to the success and sustainability of military campaigns. In 2024, a bipartisan Commission on the National Defense Strategy found that the defense industrial base “is unable to meet the equipment, technology, and munitions needs of the U.S. and its allies and partners.” Through inattention, flawed policy, and poor strategic decisions, the U.S. allowed its defense industrial base to atrophy. The decline of the defense industrial base also included years of neglect of government-owned facilities, which served as the purveyor for the military’s higher-end modernization priorities.

An examination of current shipbuilding capacity highlights the challenge: a country’s ability to produce commercial ships also enables it to build warships. In the 1970s, the nation constructed 5% of the world’s commercial ocean-going vessels, but today that figure has fallen to less than 0.2%. Currently, the U.S. Navy relies on seven shipyards to build large warships and is decommissioning ships faster than it commissions new ones. This situation, along with rising costs for new warships and delays in production, indicates an impending crisis due to insufficient capacity to expand the fleet and quickly repair ships damaged during wartime. 

Previous administrations recognized the challenges posed by China and Russia and took steps to revitalize manufacturing. In 2017, President Trump signed an executive order calling for a health assessment of the defense industrial base. This was followed by the Biden administration’s review of ways to strengthen supply chain resilience and U.S. manufacturing. The war in Europe prompted the U.S. to accelerate plans to address issues in the industrial base. 

Responding to the Russian invasion of Ukraine, the U.S. Army quickly increased funding to boost the production of 155mm artillery ammunition. Although these efforts demonstrated that the country could accelerate production, the pace was still insufficient to meet demand during large-scale combat operations. Another challenge to munitions replenishment is the expansion of U.S. weapon systems and munitions acquired through Foreign Military Sales, Direct Commercial Sales, and Presidential Drawdown Authority. While these authorities and sales benefit the industrial base over the long term, potential short-term supply shocks, such as allied and partner use in Ukraine exceeding production capacity for 155mm artillery munitions, are concerning. One way to address these shortages is by expanding existing authorities, policies, and strategies. 

A Means Forward

The Defense Production Act of 1950 is a tool for Presidents to prioritize, expand production, and protect private companies from foreign mergers and takeovers to bolster national defense. The Act’s Title III authorities support production capacity by funding critical materials, technology, and workforce development. However, years of neglect and offshoring will require significant capital investments to reverse deindustrialization in steel production, manufacturing, and mining.

One approach is to increase the amount of Defense Production Act (DPA) Title III funds, focusing on specific areas of the defense industrial base that support large-scale combat operations. This includes funding for workforce development, munitions facilities, mines for strategic and critical materials, and expanding shipyards. A recent example is the Title III award to two companies that enhanced the capability and capacity of solid rocket motors, a critical component of precision-guided munitions. In 1992, Title III was amended to include Canada as part of the domestic industry, enabling the allocation of funds. Further expansion of Title III occurred in 2024, with the addition of the United Kingdom and Australia. 

Current and future administrations must keep expanding relationships with allies and partners to strengthen the defense industrial base. Considerations should include their capabilities, capacity, and strategic location. For example, Indo-Pacific ally New Zealand is modernizing its military through its existing industrial base and “closer defense relations” with Australia. New Zealand’s efforts align with the Five Eyes intelligence-sharing alliance and the National Technology and Industrial Base framework. Japan, another technologically advanced long-term regional ally, can assist and reinforce the U.S. through co-production enabled by recent defense investments and shipyard initiatives. Another longstanding ally, Norway, already co-produces the advanced Naval Strike and Joint Strike Missiles and is building another facility in the U.S. Including these nations among those eligible for Defense Production Act funding will improve the capacity to expand domestic and allied magazine depths in the Indo-Pacific and European regions. 

The National Technology and Industrial Base (NTIB) exists to support a “more robust domestic defense industrial base” through “dual-use research and development (R&D), production, maintenance, and related activities.” Established from experience in World War II and codified into law in 1993, the initial agreement between the U.S. and Canada has now expanded to include the United Kingdom, Australia, and New Zealand. Extending the NTIB to other countries, such as Japan, South Korea, and European allies like Norway, can bring benefits, including increased production and maintenance efforts, especially in areas where the U.S. faces shortages, such as munitions and shipbuilding. This may involve more joint production projects, overseas and within the U.S. The upcoming National Security Strategy should also highlight the importance of strengthening the defense industrial base, which will help guide Congress and the Department of War’s budget priorities.

The U.S. also needs to address domestic tool and machinery manufacturing to support the defense industrial base. For example, the U.S. purchased production equipment from Turkey to expand its 155mm munition manufacturing. Five-axis CNC machines used in advanced manufacturing are now mostly foreign. Investments in precision machinery are expensive, and their return on investment depends entirely on the amount of work expected. A way to improve this is to incorporate more multi-year contracts into defense deals to motivate the industry to invest in its factories and modernize, thereby stabilizing demand and revenue. 

The 2023 National Defense Industrial Strategy promoted risk reduction by increasing cooperation with allies and partners in areas such as sustainment, supply chain management, maintenance, repair, and overhaul, and by enhancing interoperability through sharing science and technology. The strategy’s Implementation Plan included “co-development and co-production of priority defense systems” with allies and partners as a key effort. The Department of War’s recently published Acquisition Transformation Strategy calls for the Department to “engage with allied Nation’s Industry partners for technology assessment, integration, and procurement, driving research, development, test and evaluation (RDT&E) expenditure reductions and worldwide supply chain diversification.” The U.S. government should not delay implementation and must start working with key stakeholders to advance this initiative and achieve improvements in industries. A crucial initiative should create more opportunities for non-defense domestic companies and allies to help address industrial base deficiencies. For example, America’s latent automotive industrial strength was once tapped to build aircraft and armor.

Allies & Partners

The U.S. has historically relied on allies to address its deficiencies in domestic mining, processing, and refining of raw materials essential to national defense. In 2021, Australia, the United Kingdom, and the U.S. established an “enhanced trilateral security partnership,” more commonly known as AUKUS. It aims to “promote deeper information sharing and technology sharing; and foster closer integration of security and defense-related science, technology, industrial bases, and supply chains.” AUKUS Pillar One enables Australia to develop nuclear-powered attack submarines. Pillar Two ensures interoperability through technology sharing, including artificial intelligence, hypersonics, electronic warfare, and command-and-control systems. Recent remarks by President Trump reaffirm his ongoing support for this partnership and the need to expedite deliveries. However, without substantial investments from all three partners, submarine production will not accelerate enough to meet the required timelines. The U.S. needs to expand Pillar Two to strengthen workforce, supply chain, and infrastructure capacities that affect current submarine, joint platform, and munition production. 

Expanding joint production overseas with allies and industrial partners is a way to reduce current capacity strain on combat platforms and munitions manufacturing; however, how it is implemented is crucial. For example, the F-35 Lightning II program shows poor use of allied co-production. The program is hindered by the aircraft’s complexity and by production delays caused by parts shortages, stemming from supply chains optimized for efficiency rather than capacity. Also, manufacturing was spread globally to encourage partner cooperation and sales. This model of co-production is a poor example to follow for similarly complex systems. A better approach is to focus on smaller programs and simpler systems, such as infantry fighting vehicles or munitions, prioritizing redundant capacity over efficiency. The joint ventures between Raytheon and the European missile manufacturer MBDA to produce Patriot munitions in Germany, and between Lockheed Martin and Thales Australia to produce Guided Multiple-Launch Rocket System missile components, are excellent examples. These show how leveraging local industrial capacity can help ease near-term strain on high-demand platforms, munitions, and combat components.

Growing Fleets

The shortage of U.S. shipyards and repair facilities presents a dilemma should a kinetic conflict with China occur in the Pacific. Although the U.S. prevailed in the wargame, the heavy losses in personnel and resources made it a Pyrrhic victory. The decline of shipbuilding in the U.S. is well documented and not the focus here. While this situation is concerning, there is some reassurance that many allies and partners, including Japan, South Korea, and Italy, maintain strong shipbuilding industries. The challenge with leveraging allies’ capabilities is that current law prevents the nation from purchasing warships from foreign shipyards. Title 10 USC 8679 states:

“Except as provided in subsection (b) [Presidential Waiver for National Security Interests], no vessel to be constructed for any of the armed forces, and no major component of the hull or superstructure of any such vessel, may be constructed in a foreign shipyard.”

Although Japan and South Korea have strong commercial and naval shipbuilding abilities, they are close to China and its vast arsenal. European countries, such as Italy, also have domestic shipbuilding capabilities that the U.S. could leverage to address this issue.

The President, members of Congress, and key stakeholders are doing their part to develop policies and legislation to address the shipyards issue. The recent executive order, “Restoring America’s Maritime Dominance,” directs actions to “ensure the Security and Resilience of the maritime Industrial Base,” including the use of Defense Production Act Title III and other investments to support the commercial and defense shipbuilding industries. Other congressional efforts include the bipartisan Shipbuilding and Harbor Infrastructure for Prosperity and Security for America Act (SHIPS Act), which aims to improve the nation’s ability to produce commercial ships and their related infrastructure. The bill “calls for the U.S. to add 250 ships within the decade to the international fleet of U.S.-flagged vessels…” Congressional support is crucial for expanding shipyard capacity and introducing new innovative manufacturing capabilities that allies possess. Reinvigorating commercial shipbuilding is a positive step that can create more jobs, which can then be used for military construction. 

The shortage of qualified workers is affecting the nation’s shipbuilding and submarine-building industries. An example of these challenges is the Gulf Coast region’s 5,000-worker shortfall needed to support new Navy contracts. Similarly, the Navy indicated that “workforce challenges and material shortfalls” are causing scheduling issues for refitting nuclear aircraft carriers. This lack of capacity now prevents the repair or production of ships at the speed and scale needed during wartime. The Biden administration and Congress sought to leverage the strengths of regional allies and partners to bridge these gaps.

Expand Overseas Maintenance

The Department began making some headway in addressing maintenance operations for ships and systems serving overseas. The 2024 Regional Sustainment Framework, which advocates forward maintenance, repair, and overhaul operations in allied nations rather than at home, is a first step toward addressing maintenance downtime. In the past, a damaged ship was brought back to a stateside government or commercial repair facility. Under this new framework, five regional sustainment centers will conduct maintenance and repair work in the Indo-Pacific, with European yards also considered. This is a positive first step that acknowledges modern capabilities and increased capacity of allies and partners, and can serve as a stepping stone to increase readiness rates, especially in the area of deferred maintenance by the U.S. Navy. The challenge with the recent maritime executive order, which focuses on rebuilding America’s naval and commercial shipping, is that it will take years to implement before stateside facilities can increase capacity to improve fleet readiness and expansion.

The U.S. readily acknowledges that Japan, South Korea, and Europe design and produce excellent warships. The development of the U.S. Navy’s Constellation-class Frigate Program is off plan, but the idea of using a mature, existing allied frigate design and modifying it slightly has merit, regardless of its implementation woes. Despite the program’s multiple challenges, the need for modern allied capabilities and capacity, especially in shipyards, remains.

The Next Steps

There is a compelling case for the country to involve allies and partners in co-production with direct investment and potential purchases of subsystems and components, given America’s current inability to recover from wartime losses. Recent comments from the White House show that the time may be right for this approach. According to media reports, President Trump stated, “…we may buy some ships from other countries that we’re close to and do great jobs with ships.” Recent analysts have proposed purchasing Arleigh Burke-class destroyers from allies to expand the Navy’s fleet while rebuilding its own shipbuilding infrastructure. This is a politically sensitive position, as American shipyard workers, their advocates, and citizens would argue it is harmful to the U.S.

There are valid reasons for protecting the nation’s shipbuilding industry and its workforce. There is also the fear that foreign security services are gathering intelligence on technology, tradecraft, vulnerabilities, and the sabotage of overseas production. Times have changed, and if the nation were to face large-scale combat operations as described earlier, the ability to reconstitute losses must be realistic and viable. The U.S. government must lean forward and assist new domestic companies interested in entering the defense industrial base, while expanding existing critical infrastructure and cybersecurity programs for allies who can rapidly enable gains in weapon production, shipbuilding, and repair. Intelligence sharing—an Achilles’ heel in coalition environments—must also be streamlined and expanded to assist our allies and partners and capitalize on their existing strengths.

America’s ability to incorporate non-defense businesses into the war industry was a crucial factor in winning the production effort during WWII. Encouraging firms that can weld, cast, stamp, direct-mold injection, or produce glass to shift into supply chains for combat vehicles, missiles, munitions, drones, optics, and shipbuilding will quickly boost capacity. A racing company that specializes in Motocross can make parts for defense aerospace. An automotive dashboard supplier can adapt their direct-mold injection process to produce drone housings. Because of limited space, many U.S. shipbuilders are utilizing outside facilities to manufacture ship components and then transport them to shipyards for final assembly. This approach can be further improved by involving more non-traditional firms in the production of shipbuilding modules or components, and transporting these modules or components to shipyards for final assembly. Instead of bringing skilled labor to the shipyards, as was done during WWII, distributed manufacturing and on-site installation will expand U.S. shipyard capacity by leveraging dispersed resources. Such efforts can help revive a U.S. industrial core devastated by decades of deindustrialization, transforming Rust Belts into ‘Gold Belts.’

The way forward is to continue seeking direct investment from allies in areas where they have excess capacity. South Korean shipbuilder Hanwha Ocean’s recent purchase of Philly Shipyard and its projected $5 billion investment are positive steps toward revitalizing a moribund commercial shipbuilding market and could lead to naval repair opportunities. Additionally, the Department must collaborate with the government and key stakeholders to secure a Presidential waiver to purchase ship components from important allies, such as Japan, South Korea, or Italy. 

A logical next step is to seek assistance in building Navy fleet auxiliary ships. The outcomes of this initial step could lead to further agreements to purchase components for warships from allies and transfer them to U.S. facilities, where they would be fitted with the necessary weapons, information, and cyber systems to make the ships operational and secure. This assistance is a more acceptable option for the nation and would help speed up current delays in domestic naval shipyards. The Department could mitigate risk by deploying inspectors and personnel at overseas production facilities to help ensure security and maintain the integrity of the manufacturing process. 

Allies and partner nations play a crucial role in helping the U.S. quickly regain its ability to produce combat platforms and essential munitions. The Commission of the National Defense Strategy advised “allowing the Department of Defense to supplement defense production with procurement from allies and partners with advanced manufacturing capability and capacity.” The Department must follow this approach until U.S. industries can meet the country’s needs. China’s shipyards and factories far surpass U.S. capacity to mass-produce both weapons and commercial and military ships, and they are advancing in both sophistication and quality. 

Conclusion

The U.S. defense industrial base has limited capacity to rapidly increase production in the event of large-scale conflict against a peer competitor, and global commitments further widen these gaps. The U.S. should consider seeking allied assistance by expanding DPA Title III funding and NTIB membership, thereby strengthening the industrial base both domestically and internationally through increased overseas joint munitions production. Production priority must focus on munitions with the highest demand signals during kinetic conflicts in the Indo-Pacific, ongoing conflicts in Europe, and in the Middle East. These steps will give the nation time to scale up its production capacity to a sustainable level. Not only will allied and partner facilities improve readiness and keep systems forward-deployed during hostilities, but their investments and expertise will also support the expansion of U.S. shipyards and maintenance facilities. Targeted procurement of components from key allies with superior capabilities and capacity will rapidly grow the fleet, facilitate victory, and reduce combat losses. Without these measures, the U.S. risks being unprepared if deterrence fails, jeopardizing American ideals and way of life.

Doug Orsi is a retired Army Colonel serving as an Assistant Professor at the U.S. Army War College with research interests in the defense industrial base, mobilization, and industrial preparedness. The views expressed in this article are those of the author and do not necessarily reflect those of the U.S. Army War College, the U.S. Army, or the Department of War.

Featured Image: Virginia-class submarine, USS Arkansas, under construction. (Photo via Wikimedia Commons)