USA002573-20 ICR - 2020 - Web

FISCAL YEAR 2020
IN D U STRIAL
CA PA BILITIES
REPORT TO CONGRESS
The estimated cost of this report or study for the Department of

PREPARED BY:
Defense is approximately $159,000 in Fiscal Years 2020–2021. This
OSD A&S INDUSTRIAL POLICY
includes $24,000 in expenses and $134,000 in DoD labor.Generated
JANUARY 2021 on 2020Dec23, RefID: C-C691E6A
TABLE OF CONTENTS
1. Foreword: A 21st Century Defense Industrial Strategy for America...................................................... 7
2. Congressional Requirement............................................................................................................................21
3. Introduction........................................................................................................................................................25
Assess..............................................................................................................................................................27
Invest
...............................................................................................................................................................27
Protect..............................................................................................................................................................28
Promote...........................................................................................................................................................29
4. Industrial Base Council.....................................................................................................................................31
5. COVID-19 Response Highlight..........................................................................................................................35
6. Defense Industry Outlook...............................................................................................................................39
Characteristics of the Market/Overview.....................................................................................................40
The Big Six Defense Suppliers......................................................................................................................40
Research & Development Spending............................................................................................................44
Global Military Spending...............................................................................................................................46
7. Sector Assessments...........................................................................................................................................49
Introduction....................................................................................................................................................50
Aircraft.............................................................................................................................................................52
Chemical, Biological, Radiological, and Nuclear.........................................................................................59
Cybersecurity for Manufacturing.................................................................................................................62
Electronics.......................................................................................................................................................65
Ground Systems.............................................................................................................................................71
Machine Tools.................................................................................................................................................75
Materials..........................................................................................................................................................80
INDUSTRIAL CAPABILITIES REPORT TO CONGRESS | 2020 ANNUAL REPORT 3

Missiles and Munitions..................................................................................................................................85
Nucler Matter Warheads...............................................................................................................................88
Organic Defense Industrial Base..................................................................................................................90
Radar and Electronic Warfare.......................................................................................................................94
Shipbuilding....................................................................................................................................................97
Software Engineering..................................................................................................................................101
Soldier Systems............................................................................................................................................106
Space
.............................................................................................................................................................109
Workforce...................................................................................................................................................... 112
8. Critical and Emerging Technologies............................................................................................................ 115
Introduction.................................................................................................................................................. 116
Biotechnology............................................................................................................................................... 117
Fully Networked Command, Control, and Communications................................................................. 119
Hypersonics..................................................................................................................................................121
Microelectronics...........................................................................................................................................123
Machine Learning/Artificial Intelligence....................................................................................................125
Quantum.......................................................................................................................................................127
Directed Energy............................................................................................................................................130
5G ..................................................................................................................................................................133
Autonomy......................................................................................................................................................136
Cyber
.............................................................................................................................................................137
4 INDUSTRIAL CAPABILITIES REPORT TO CONGRESS | 2020 ANNUAL REPORT

9. Supporting Actions and Authorities............................................................................................................139
Defense Priorities and Allocations System...............................................................................................140
Defense Production Act Title III..................................................................................................................142
Committee on Foreign Investment in the United States........................................................................144
Office of Small Business Programs............................................................................................................146
Industrial Base Analysis and Sustainment...............................................................................................148
Warstopper Program...................................................................................................................................150
Small Business Innovation Research & Small Business Technology Transfer.....................................152
Rapid Innovation Fund................................................................................................................................154
Manufacturing Technology Program.........................................................................................................156
Hart-Scott-Rodino.........................................................................................................................................158
Trusted Capital..............................................................................................................................................160
10. Appendix..........................................................................................................................................................163
Appendix A: Industrial Base Map...............................................................................................................164
Appendix B: Industrial Base Studies and Assessments..........................................................................165
11. Acronyms.........................................................................................................................................................167
12. Sources .............................................................................................................................................................173
Image Sources...............................................................................................................................................180

SECTION 1
FOREWORD

FOREWORD
America’s defense industrial base was once the

A 21ST CENTURY DEFENSE wonder of the free world, constituting a so-called
INDUSTRIAL STRATEGY “military-industrial complex” that, regardless of
criticism, was the model for, and envy of, every
FOR AMERICA other country – and the mainstay of peace and
freedom for two generations after World War II.
Introduction to the Fiscal Year Today, however, that base faces problems that
2020 Industrial Capabilities necessitate continued and accelerated national
Report to Congress focus over the coming decade, and that cannot be
solved by assuming that advanced technologies like
In many ways, Americans have every reason to be autonomous systems and artificial intelligence (AI)
confident about our national security future. and 5G and quantum will wave those challenges
away, and magically preserve American leadership.
The American military is still the most powerful
in the world. Its leading defense industry On the contrary, those advanced technologies
companies are still global leaders in weapons themselves rely on a manufacturing complex
innovation and production. Likewise, the whose capability and capacity will have to be
Department of Defense is still the colossus of trusted and secure to protect the Pentagon’s most
the federal system, i.e., the single biggest buyer vital supply chains. These include microelectronics,
of goods in the U.S. government. But unless the space, cyber, nuclear, and hypersonics, as well as
industrial and manufacturing base that develops the more conventional technologies that make up
and builds those goods modernizes and adjusts our legacy defense equipment.
to the world’s new geopolitical and economic
realities, America will face a growing and likely What will be required is a defense industrial
permanent national security deficit. Our offices, strategy based on a four-part program to:
the Under Secretary of Defense for Acquisition &
Sustainment and the Office of Industrial Policy, 1. Reshore our defense industrial base and
have the primary responsibility for assessing supply chains to the United States and to
this challenge, and are the authors of the 2020 allies, starting with microelectronics, and
Industrial Capabilities Report. restore our shipbuilding base.

2. Build a modern manufacturing and industrial renaissance would depend has become,
engineering workforce and research and in effect, an endangered species.
development (R&D) base.
Together, a U.S. business climate that has favored
3. Continue to modernize the defense acquisition
short-term shareholder earnings (versus long-
process to fit 21st century realities.
term capital investment), deindustrialization, and
4. Find new ways to partner private sector an abstract, radical vision of “free trade,” without
innovation with public sector resources and fair trade enforcement, have severely damaged
demand. America’s ability to arm itself today and in the
future. Our national responses – off-shoring
All these steps will be necessary to create a robust, and out-sourcing – have been inadequate and
resilient, secure, and innovative industrial base. As ultimately self-defeating, especially with respect to
the National Security Strategy noted, a “healthy the defense industrial base.
defense industrial base is a critical element of U.S.
power.”1 The defense industrial base is the key to
preserving and extending U.S. competitive military Manufacturing Employment (Millions of Workers)
dominance in the coming century and, with it, 25
deterrence that will keep Americans safe and keep

20
the peace. Realizing a defense industrial strategy
will require a substantial commitment of capital 15
investment and resources, as well as continuing 10

and extending the reforms to the Defense
5
Department’s industrial base that have been
underway in the past several years. 0
1950 1960 1970 1980 1990 2000 2010 2020
*****
Net Output ($100 billions, 2009 dollars)
The issues confronting our defense industrial 25
base can be viewed in the context of four major

20
evolutions stretching over more than a half-
century, each of which requires us to accelerate 15
change and reform. 10
5
The first has been the steady
deindustrialization of the United States over 0
the past five decades, including workforce and 1950 1960 1970 1980 1990 2000 2010 2020
manufacturing innovation. From 40 percent of

the U.S. gross domestic product (GDP) in the 1960s, Manufacturing's Share of Total Employment
manufacturing has shrunk to less than 12 percent 35.00%
today, while shedding more than five million 30.00%
manufacturing jobs from 2000 to 2015 alone. Just 25.00%
fifty years ago, manufacturing industries employed 20.00%
36 percent of male workers. Today, manufacturing 15.00%
employs fewer than 11 percent of all workers.2 10.00%
5.00%
While total manufacturing output has grown 0.00%

1950 1960 1970 1980 1990 2000 2010 2020
during this period, thanks in part to labor-saving
technologies, the workforce on which a defense

These trends have had particular impact on the from personal computers, cell phones, and solid-
core element of a successful manufacturing state sensors to the internet and 5G wireless
economy: the machine tool industry. Of the technology along with AI and quantum computing.
world’s top twenty-one machine-tool makers, These technologies are and will continue to be
only two today are American: Gleason and the driving forces of the U.S. and global economy,
Haas Automation. By contrast, eight are based and will also determine the military balance of the
in Japan, and six in Germany. And while its future – while at the same time opening up critical
domestic machine tool sector remains nascent, security threats in peacetime, through cyber and
China has emerged as a major machine tool intellectual property theft and information warfare,
customer. Machine tools laid the groundwork for not to mention future scenarios involving quantum
the mobilization miracle of World War II, a fact computer attacks on critical civilian and defense
understood by friends and foes alike, while America infrastructure.
has allowed its machine tool sector to turn from a
Moreover, these technologies pose new problems
national asset into a national security vulnerability.
for defense contractors and for the Pentagon
The second development was the end of the in securing a trusted supply chain for critical
Cold War, which was seen by many to render items such as processed rare earth elements and
obsolete the assumptions and requirements microelectronics, where gaps and unanticipated
that drove a legacy defense industrial base interruptions can be triggered by the loss of a
aimed at defeating a peer competitor, the sole supplier for purely economic reasons, or by
Soviet Union, i.e., producing weapons that would an embargo or military action by an adversary.
counteract the Soviet advantage in quantity in Events of either type can jeopardize a sustainable
conventional arms. This included building a industrial base.
massive nuclear arsenal, and later innovations
Pentagon leaders recognized that this
such as stealth, precision guided munitions, and
technological revolution would require a major
the multiple independent re-entry vehicle (MIRV).
shift in the military’s basic requirements for
The collapse of the Soviet Union and the end of warfighting, but also would demand building
Cold War tensions and priorities should have relations with an industrial base very different
brought an intense rethinking of the Department from the one that had supplied its equipment
of Defense’s needs, including fundamental changes needs for decades, i.e., with newer companies
to the structure of its industrial base. One change such as Google, Oracle, and many other
that did take place was the drastic consolidation of Silicon Valley firms. To facilitate this shift, the
the largest defense contractors from fifteen to five, Department of Defense launched the Third Offset
which, among other things, reduced competition strategy, using, in the words of one thoughtful
for contracts, formerly a key driver behind DoD official, “combinations of technology,
controlling costs and spurring innovation.3 operational concepts, and organizational
constructs—different ways of organizing our
The War on Terrorism, with its focus on disrupting forces, to maintain our ability to project combat
terrorist cells and havens, and counterinsurgency power into any area at the time and place of our
and stability operations delayed by a crucial own choosing.”4
decade and a half the adjustment to new
geopolitical and military realities, including the However, the Pentagon’s Third Offset did
steady rise of an aggressive and militant China, not evolve into a robust strategic doctrine.
and an unreconciled Russia. Meanwhile, the military services took an
understandable and narrower approach, generally
The third evolution has been the advent of pursuing advanced technologies to fit their
high-tech and advanced digital technology, individual operational needs. This meant that

the opportunity for a more extensive systematic Japan, South Korea, the Philippines, and Vietnam
rethinking and reordering of DoD’s industrial base combined, and is second only to the United States
was missed or at a minimum delayed. Today’s in its military budget. China’s lower costs may
overseers of the defense industrial base have mean that its defense spending has purchasing
been busy making up for lost ground, as the parity with ours.
Industrial Capabilities Report demonstrates.
China’s defense spending is augmented by its
The fourth evolution has been the rise of The policy of “military-civil fusion,” which erases
People’s Republic of China (PRC) as a dual barriers between civilian and military sectors to
threat, both military (the Chinese Navy is now ensure the latest technologies like AI and quantum
the largest in the world with 350 vessels) and computing are quickly integrated into security
economic, which threatens critical supply chains, capabilities.
and also challenges our export control, foreign
investment, and technology transfer policies. Though the exact amount of China’s defense
spending is opaque for the most part, the NATO
China’s spectacular rise as the world’s second- definition of China’s military expenditures
largest economy is well known, with GDP growing captures the activities normally associated with
at an average annual rate of 9.45 percent since defense spending and provides a reasonable
1978, and China is now poised to become the benchmark. While China’s defense budget is
world’s biggest economy by 2040. The rise of smaller than the U.S. defense budget, it is the
China’s military spending has also been widely vectors of that spending that are most alarming.
reported, with a nearly twenty-five-fold increase
over the past two decades, jumping from over One is naval construction. The buildup of China’s
$10 billion in 1999, to over $250 billion in 2019. navy, including aircraft carriers, has been one of
China currently spends more on defense than do the most remarkable and strategically disruptive
global defense spending trends in the past two
China's Defense Spending 1999-2018

300
250
200
US $B
150
100
50
0
20 9
20 0
20 1
20 2
20 3
20 4
20 5
20 6
20 7
20 8
20 9
20 0
20 1
20 2
20 3
20 4
20 5
20 6
20 7
18
9
0
0
0
0
0
0
0
0
0
0
1
1
1
1
1
1
1
1
19
Data Source: World Bank

https://www.macrotrends.net/countries/CHN/china/military-spending-defense-budget

decades. By commissioning fourteen warships outlined in the Industrial Capabilities Report:
a year, Beijing has made clear that it intends to assessment, investment, protection, and
be a world-class maritime power in addition to promotion of our defense industrial base, both
having the world’s largest military on land. While today and in the future.
China’s naval buildup has been able to piggyback
on its rapidly expanding commercial shipbuilding ****
industry, U.S. shipbuilding, by contrast, has
become a key vulnerability in the U.S. defense Assessment. In September 2018, the Department
manufacturing base, as we will see. of Defense released Assessing and Strengthening
the Manufacturing and Defense Industrial Base
Two other critical components in China’s growing and Supply Chain Resiliency of the United States, a
military power have been a huge expansion report in fulfillment of Executive Order 13806.
in its ballistic and anti-ship missile inventory The “13806 report” isolated “five inter-related, but
and its nuclear weapons arsenal. Its missile conceptually distinct, macro forces” affecting the
arsenal contains advanced capabilities such as U.S. industrial base. These included:
maneuverable anti-ship ballistic missiles, MIRVs,
and experimental hypersonic glide vehicles, all − The decline of the U.S. manufacturing base.
designed to target American aircraft carriers and − Budget caps, sequestration, and inconsistent
forward air bases – the mainstays of U.S. military U.S. budgets that sharply reduced resources
power projection in the Indo-Pacific region. In for the military across the board, particularly
addition to the obvious cost in lives, replacing investment in the industrial base.
carriers or other ships, or repairing damaged − “Deleterious U.S. government business and
vessels, would severely challenge the most robust procurement practices,” including contracting
shipbuilding base. Attempting to repair or replace regulations and constant program changes
forward bases in mid-conflict would be an even that drive up cost without necessarily adding
more complex challenge. effectiveness.
Nor should we ignore Beijing’s on-going activities − Industrial policies of nations such as China
as the world’s most egregious cyber threat and that provide an unfair comparative economic
intellectual property (IP) thief. America loses advantage and predatory trade policies
nearly $450 billion on an annual basis to cyber that “degrade the viability, capabilities,
hacking, which originates overwhelmingly and capacity of the U.S. national security
from China. This behavior already has severely innovation base.”
damaged the Department of Defense and its − Diminishing U.S. science, technology,
prime contractors, from stolen plans for major engineering, and mathematics (STEM)
weapons systems such as the F-35, to identity education and industrial jobs, both of which
theft from America’s defense and security have a deleterious effect on the industrial
workforce. base’s ability to sustain itself and to innovate.
The Department of Defense cannot, of course, As a result, the study found examples by the
reverse these global developments by itself. dozens where “the vitality and resiliency of the
However, it is devising an industrial strategy that industrial base” had been acutely affected, from
responds to this highly disruptive and rapidly aircraft design and cybersecurity to machine tools
changing environment, and is leading the way to and materials.
turn these changes to America’s advantage.
How will the Department accomplish this? By

focusing that strategy on the four key categories

Since then, the President and his Secretaries of of life.” The strategy continues, the “genius of
Defense have taken significant steps to ameliorate creative Americans, and the free system that
vulnerabilities in the industrial base’s critical enables them, is critical to American security and
sectors, as described in this report. But the prosperity.”5 We would add, and to the future of
number of cases, typically three to seven levels our defense industrial resources and the ability of
from the top of the supply chain, where there is our military to arm itself effectively today and in
just one – often fragile – supplier is staggering. the future.
This represents a significant deterioration from
just a decade ago when three-to-five suppliers Therefore, we have identified three steps to
existed for the same component, let alone several connect the defense industrial base to that U.S.
decades ago, when the U.S. military generally national innovation base.
enjoyed dozens of suppliers for each such item.
First is integrating new manufacturing
Many U.S. small and mid-size businesses exited technologies and processes, where a series of
the defense field over the last three decades not DoD programs across the military departments
only because of reduced demand (we build a lot and Office of the Secretary of Defense are useful,
fewer platforms than we once did), but because indeed critical.
doing business with the government proved too
difficult, with margins too low. Rules that were The second is a Department of Defense-wide
designed to give good value to taxpayers did focus on supporting an industrial base for peer
not necessarily provide good returns for these conflict. After a decade and a half of equipping
firms, often family-owned. They chose instead to the military for operations in Iraq, Afghanistan,
employ their entrepreneurial talents and financial and elsewhere, and as directed by the National
resources in the commercial market. Defense Strategy, the Pentagon is recalibrating to
face the challenges posed by China and Russia.
The 13806 report also identified sixteen key While the Services never stopped planning and
industrial sectors, whose risks and vulnerabilities procuring for high-end combat, the threats posed
are assessed in more detail below. The core by adversaries require increased investment and
of the department’s industrial base includes focus on the most advanced capabilities, and on
government-owned government-operated the industrial base to support them.
(GOGO) and government-owned contractor
operated (GOCO) shipyards, depots, arsenals, and The third and arguably most difficult is
ammunition plants. These have been at critical confronting difficult but necessary investment
risk for many years thanks to the macro factors choices, including expanded funding for
identified earlier: the decline of manufacturing capital investment in facilities and training and
and STEM education, the need to rely on single maintaining the workforce. Without that serious
suppliers for many critical components, and and targeted investment – billions instead of
a serious erosion of America’s manufacturing millions – America’s defense industrial base
workforce. is simply unsustainable, let alone capable of
supporting our deployed forces and legacy
The National Security Strategy defines the equipment while solving the complex warfighting
National Security Innovation Base as the challenges posed by advanced technologies in the
“American network of knowledge, capabilities, 21st century, from AI and cyber to hypersonics
and people—including academia, National and autonomous air and sea systems.
Laboratories, and the private sector—that turns
ideas into innovations, transforms discoveries into The Office of the Under Secretary for Acquisition &
successful commercial products and companies, Sustainment works with the Military Departments
and protects and enhances the American way to produce the analysis to drive actions to solve

these problems. The Industrial Base Council (IBC) ships (two Virginia-class submarines, one America-
is the “executive-level forum established to ensure class amphibious assault ship, three littoral
industrial base readiness and resilience” at the combat ships, two Spearhead-class expeditionary
three- and four-star level. The Office of Industrial fast transports, one Arleigh Burke-class destroyer,
Policy and the Defense Contract Management and one Lewis B Puller-class expeditionary
Agency chair the IBC’s Joint Industrial Base sea base) is a remarkable achievement. It is
Working Group, which oversees the flow of a harbinger of what can be done with even a
information concerning the critical industry modest expansion of that capacity.
sectors identified under E.O. 13806 and emerging
technology domains. Alexis de Tocqueville noted in 1832 that Americans
“are born to rule the seas….” In the final analysis,
The Office of Industrial Policy assessed America’s reaching our nation’s minimum naval goals will
shipbuilding woes, both defense and commercial, demand substantial investment in refurbishing old
which began more than five decades ago. Fourteen yards and establishing new ones, and partnering
defense-related new ship-construction yards have more with trusted allies who want to invest in the
shuttered, and three have exited the defense U.S. shipbuilding base. More broadly, a renewed
industry. Only one new-ship-construction yard has commitment to reinforcing America’s place as
opened. Today, the Navy contracts primarily with the world’s leading maritime nation will, as it
seven private new-construction shipyards, owned always has, lead to jobs, workers with skills that
by four prime contractors, to build its future Battle will be useful to a variety of other domains such
Force, representing significantly less capacity than as electric transportation, and next-generation
the leading shipbuilding nations. energy storage and batteries that loom large in
America’s future.
The Future Naval Force Study (FNFS), developed
by the Department of Defense to ensure American Another area of concern, but also an example
naval supremacy, sets forth a multi-year program of recent progress, is software engineering.
divided into five-year increments with careful Software acquisition remains one of the most
attention to meeting base budgetary limitations to expensive and most complex sectors in the DoD.
achieve the goal of a 355-ship navy. Yet that plan For example, the F-35 Joint Strike Fighter has
has to rely on a maritime industry, both naval and required more than eight million lines of code,
commercial, that has significantly less capacity than almost all of which had to be written by its prime
the world’s other leading shipbuilding nations – contractor and sub-contractors, virtually from
South Korea, Japan, and, ominously, China. scratch and, then again, after Chinese cyber-theft.
All software “blocks” – the systems designed to
So while today, the United States Navy’s Battle take the plane from testing to full production –
Force consists of 297 ships, China has managed experienced serious production and budgetary
to build the world’s biggest navy with 350 vessels. delays. These, in turn, contributed to expanding
China’s shipbuilders also enjoy the advantage of the Lightning II’s total price tag.
being part of the world’s biggest national steel
producer and user. The United States meanwhile One could argue that today’s defense systems
is fourth, after China, India, and Japan. are no more or less than physical platforms for
software, yet developing and buying that software
How do we fill the shipbuilding gap? Start by had become a major bottleneck.
building more ships. Not only will that expand
the fleet, it will drive the analysis and decisions Standard Pentagon programming was not
required to ensure a shipbuilding base that can designed to deal with software, so crucial to
produce and sustain an expanded Navy. That our operating systems large and small, including
shipbuilders delivered in 2020 no fewer than ten networked warfare. The Department of Defense

has traditionally acquired IT and software-based A skilled workforce is especially critical in a
systems in the way it bought aircraft carriers – as defense-focused industrial strategy, which
if they were physical items to be forged or welded requires innovative and bold solutions and
or mass-produced. The standard acquisition cycle production and integration of extremely complex
has been geared around multiyear milestones and systems. Here the OSD Industrial Base Analysis
intensive evaluation reviews that can take months & Sustainment (IBAS) capability plays a crucial
or years. The modern software development role. It is finding ways to close the gap, including
cycle, by contrast, moves in weeks, days, and programs for training and incentivizing a new
even hours and seconds – because software is manufacturing workforce. It is preparing the way
a digital item, subject to real-time improvement for new affordable manufacturing of defense
and innovation, whose only limits are the human systems, and reducing the risk of over-extended
imagination and the speed of an electron. To take supply chains and chronically low inventories.
one example, given the unique iterative dynamic of
software development, the Pentagon’s traditional Unfortunately, the budget allotted for IBAS, which
serial approach to “the color of money” – different has ranged from $10-104 million, is empirically
budget accounts for development, production, and inadequate for the job to be done. A budget of $1
sustainment – was a major obstacle. billion would enable the program to expand, by a
vast number, employment in the U.S. production
The Department of Defense Innovation Board and sectors. The current mismatch between mission
Defense Science Board dug into this problem and and means hampers the ability to focus solutions
other challenges with software development and on the right problems across industrial sectors,
acquisition. Based on their findings, we issued in and grow large numbers of highly-skilled, well-
October 2020 a ground-breaking new direction: paying American jobs.
the Software Acquisition Pathway. We have been
working with the Congress and the Services to This issue is one that should be confronted more
pilot the creation of “software colored money” as broadly, under the headings of:
an imperative.
1. Investment. The mismatch between what
Fixing software acquisition was part of a larger must be spent to support key programs and
process of changing another key vulnerability, initiatives and the resources available must
namely, how an outdated and sclerotic acquisition be addressed to avoid a series of catastrophic
system, layered since the 1960s, has hampered vulnerabilities in critical sectors of the defense
the industrial sector. industrial base. Fortunately, there are new
paradigms available for public-private partnering
Ultimately, the most important asset our defense to accomplish these ends, including creating a
industrial base possesses isn’t machines or flexible manufacturing workforce that would be
facilities, but people. America needs an ambitious available for rapid mobilization of the defense
effort, like the Eisenhower National Defense industrial base in the event of a major conflict.
Education Act, to support education and training Many of these are outlined in this report. We will
for manufacturing skills required to meet DoD take time here to point out two of them.
and wider U.S. requirements. As the Industrial
Capabilities Report notes, while China has four The first is in the critical area of semiconductors
times the U.S. population, it has eight times as and microelectronics. Microelectronics are critical
many STEM grads, while Russia has almost four to producing and maintaining existing military
times more engineers than the United States. We systems, for advancing emerging technologies
have lost ground also in many equally important like AI, 5G, and quantum computing, and for
touch labor industrial skills sets. sustaining critical infrastructure and indeed, our
entire modern economy. Microelectronics are in

nearly everything, including the most complex can afford if they are to produce chips that are
weapons the Department of Defense buys, such price-competitive – that is, that Americans and
as Aegis warships, the F-35 joint strike fighter, other customers will buy. Chip manufacturing
soldier systems, and our nuclear weapons and equipment is hugely expensive and has to be
their command-and-control – which together form replaced with each new wave of innovation.
the backbone of our national defense.
Outside of the United States, foreign governments
Thirty years ago, more than one-third of all and their citizens pay the lion’s share, one way
microchips produced worldwide came out of or another, of the cost of building the fab. The
the American companies that gave Silicon Valley companies do not. They take on the other massive
its name (silicon being the key ingredient in set of costs: running the fab. The hard truth is
manufacturing microchips containing millions of that if the United States does not start doing the
microscopic transistors). Today that number has same, our nation will continue to see its historically
slipped to only 12 percent, with most production low share of chip production continue to decline
in Asia. China is projected to dominate global to irrelevance. We will have few new fabs. We will
semiconductor production by 2030, and in the have fewer semiconductor production jobs. We
meantime, current suppliers in Taiwan, South will have frightening vulnerability to foreign cut-
Korea, Malaysia, and elsewhere are in easy range offs whose impact would make our COVID-related
of Chinese missiles, subversion, or air or maritime shortages look miniscule.
interference.
A recent success story is the recent ribbon-
Thus in addition to its growing dominance in cutting for the new Skywater Technology
the area of production, Beijing is already in a Foundry in Bloomington, Minnesota – the first
position, through its geographic and political new semiconductor fab to open in the United
position, to threaten virtually our entire supply States in a generation. A combination of Defense
chain through theft, corruption of microelectronic Department investment in facilities and research
products, disruption of supply, coercion, and and development and private equity capital to
other measures even short of military action. streamline operations is producing integrated
This leaves American deterrence and critical circuits for the automotive, computing and cloud,
warfighting capabilities at the mercy of our main consumer, industrial, and medical sectors, and
strategic competitor. radiation-hardened microelectronics that are vital
for the military’s use of outer-space.
The Boston Consulting Group and the
Semiconductor Industry Association recently Congress’s recent bipartisan passage of the
issued a report calling for public-private funding of landmark semiconductors legislation opens vistas
up to nineteen new semiconductor manufacturing for future creative pooling of federal and private
facilities (or fabs) in the continental United States capital to fund fabs in the United States. A cost-
over the next decade.6 The report estimates effective and hugely successful model worthy
that this will require at least a $50 billion federal of intense American study is the Taiwanese
investment in addition to industry’s share. approach, which catapulted the island in just
However, it also forecast that initiative will create several decades into the leading producer of
more than 70,000 high-paying jobs, and would microelectronics in the world.
position the United States to capture a quarter of
the world’s growing chip production. Hypersonics development and nuclear weapons
sustainment are other areas quickly approaching
The cost of a new fab today is roughly $10-30 a tipping point in terms of investment. Facilities
billion, which is far more capital investment than – including unique production equipment and in
even America’s biggest semiconductor companies many cases the necessary workforce – require

reconstitution, major modernization, and increases A landmark achievement was the bipartisan
in capacity. Test ranges and instrumentation need passage of the Cornyn-Feinstein sponsored
significant capacity increases and modernization. Foreign Investment Risk Review Modernization Act
Investment in both industry and Defense (FIRRMA), which President Trump welcomed and
Department facilities is necessary to achieve the executed with vigor. It updated the interagency
required capability and capacity. Committee on Foreign Investment in the United
States (CFIUS) to further restrict investment by
Finally, it is also worthwhile to take a hard look adversaries, including China, in U.S. companies
at the overall research and development (R&D) and the economy. New rules were also put in
picture. The United States continues to lead place to limit allies’ reliance on Chinese technology
the world in gross domestic spending on R&D in and industry when purchasing American defense-
2019, although China is rapidly and consistently related goods.
closing the gap. Nonetheless, aerospace and
defense companies are among the lowest R&D The DoD Directorate for Foreign Investment Review
spenders compared to other critical sectors. is marshalling the information and insight of more
America’s six biggest defense contractors have than thirty Department of Defense components
spent on average 2.5 percent of their sales on to contribute to the effort by U.S. national security
R&D each year. This compares to 10 percent of and financial authorities to halt dangerous Chinese
sales for “big tech” firms like Facebook, Amazon, acquisition of hard-earned American economic
and Google. So, while defense companies’ R&D crown jewels and the private personal data of
spending has increased from 2014 to 2019, and ordinary Americans.
while aerospace firms in general spend more
than pure defense firms, R&D spending per firm Foreign investment is welcome, especially from
would have to increase by 50-60 percent to keep allies and friends. That is why the Pentagon
pace with other domestic technology leaders. It has encouraged participation in the National
remains for lawmakers and the Department to Technology and Industrial Base (NTIB) by allies
find ways to incentivize internal research and such the U.K., Australia, and Canada, and why
development (IRAD) so that our leading defense steps should be considered to expand our base
companies expand their engines of innovation and of trusted partners, when they are willing to take
technological breakthroughs. the steps necessary to strengthen their foreign
investment screening and defense industrial
The bottom line is: if we are going to secure the security rules.
future versus China, then far more investment is
going to be required both by Federal authorities Of course, and as evidenced by extensive reporting
and the private sector. That includes funding to on Chinese and Russian cyberattacks, the same
ensure that research, development, and resulting protections need to be implemented within the
products are safe and secure from adversary Department of Defense and its contractor base
influence and manipulation. to protect our industrial assets from foreign
cyberattacks and cyber theft. Preserving the U.S.
2. Protection. One of the most important overmatch in defense technology inside cyberspace
developments in the past four years has been how is an explicit objective of the National Cyber
the White House, the Defense and other Cabinet Strategy, including ramping up offensive, defensive,
departments, and Congress have worked together and cybersecurity capabilities. The on-going effort
to limit adversarial foreign investment into and to protect the industrial base also meshes with the
technology transfer out of our defense industrial recently established DoD Cybersecurity Maturity
base – especially from and to China. Model Certification (CMMC) program, with its five
levels of new cybersecurity standards for all DoD
contractors.

But there are also important vulnerabilities It would also be a mistake to overlook how
concerning major defense platforms that deserve the Department of Defense can be a leader in
to be addressed as part of progress on industrial promoting innovation in America’s industrial and
base reform. manufacturing base. Here a flagship program
can emerge from the Manufacturing Technology
3. Promotion. The hard truth is, in a globalized program in the Office of the Secretary of
economy, America cannot solve its defense Defense, whose nine institutes showcase how the
industrial problems (or indeed many of our other Pentagon’s own manufacturing techniques and
industrial challenges) solely by itself. The days innovations can lead not just its own industrial
when our military could arm itself effectively by base but American industry as a whole.
relying entirely on its domestic manufacturing
base, as it did during World War II and the Cold Created in 1956, Manufacturing Technology is
War, are long gone. Instead, a long-term strategy comprised of component investment programs
of reshoring defense manufacturing must balance operated out of the Office of the Secretary of
and mitigate the risks of relying on other countries Defense, Army, Navy, Air Force, Defense Logistics
as supply chain partners, in particular, countries Agency, and Missile Defense Agency. Its nine
that are allied or friendly with the United States manufacturing innovation institutes are public-
but also have economic and/or technological private partnerships designed to overcome the
ties to China, or are simply vulnerable to Chinese challenges faced by manufacturing innovators in
coercion, disruption, pressure or military action. various technology areas, from light manufacturing
Another side of the reshoring imperative is crafting to composite materials and biotechnology. To
an effective export policy for the U.S. and its allies date, the DoD has invested $1.2 billion in the
that protects national security while not hampering Manufacturing Technology Institutes, with $1.93
innovation or key scientific advances – while also billion in matching funds from industry, state
promoting the idea that the safest course always governments, and academia. To become a truly
is having American companies manufacturing global leader in manufacturing innovation, a two to
defense goods, right here in America. three-fold increase in the innovation budget by the
Congress is needed.
With both these points in mind, we have been
constantly looking for ways to draw in reliable Finally, officials need to demonstrate how
international partners to become part of a trusted advancing and modernizing the defense industrial
industrial base and supply chain. This effort might base is vital to keeping costs down and innovation
be dubbed “strategic reshoring,” which includes up for present and future military readiness as
expanding the reach of mechanisms like the NTIB the U.S. prepares its armed forces in the 21st
and the U.S.-India Defense Technology & Trade century. This will be especially true of naval and
Initiative (DTTI), as well as the new DoD Trusted maritime forces, where reviving U.S. shipyards
Capital Program to facilitate capital investment into and launching new initiatives for manufacturing
the industrial base from safe foreign and domestic advanced systems for sea control, such as
sources. unmanned and robotic systems, will be a hinge
for strategic success. But the same applies to air
The promotion of partnerships is not just limited to and land defense assets, where making acquisition
foreign partners. For example, the OSD Office of cost-effective as well as timely will depend on the
Small Business Programs has been expanding the strength and health of our defense industrial base.
opportunities for small and medium-sized firms
across the fifty states to participate in creating a In short, following through on promoting a strong
new reshored American industrial base. and resilient industrial base can point the way
to streamlining the Department of Defense’s
acquisition process and defense systems’ life cycle,

which not only saves money but makes our men saw an experiment in radical trade policies –
and women in uniform safer and more effective – dropping reciprocity – that made earlier presidents,
while securing our national security future. such as FDR, Eisenhower, and JFK, all advocates
of free trade, look, with their prudent tariffs, like
**** protectionists.
In conclusion, our defense industrial base The industrial base enabled our War and Navy
has reached an inflection point in its Departments to execute the first of these defense
history regarding the balance between its production miracles during World War II when our
vulnerabilities and its opportunities for military had to move from a virtual standing start
modernization and reform. Some might say (the U.S. Army ranked nineteenth in the world in
restoring our defense industrial and manufacturing 1939) to becoming the most powerful military and
base dominance will require nothing less than a industrial base in the world in less than three years.
miracle. The truth is, the United States and its
military organizations have performed similar A similar pivot took place during the Eisenhower
“miracles” before: the resolve to see that miracle administration in the 1950s, when the Cold War
through is deeply steeped in our history as a forced the Department of Defense to re-engineer
nation. Ambitious policies like these require an its concept of how to achieve victory over a
ability and willingness to make strategic decisions, conventionally-armed Soviet Union, with a bold
for example, recognizing that what may have shift of resources from World War II-era strategic
worked in the past is no longer working and will doctrines to nuclear deterrence and ballistic
not work in the future. The consensus is growing, missiles. This strategic rebalance resulted in a
across political lines, on the need to reshore critical corresponding shift in America’s defense industrial
industries, create American jobs, and counter the and scientific-technological base, the First Offset.
challenges of China.
With the Second Offset in the 1970s and 1980s,
In fact, the requirement that the federal the Department of Defense learned how to
government guide and direct the Nation’s industrial incorporate new technologies including GPS,
future, including its defense needs, is part and networked computers, and stealth technology into
parcel of the American tradition. In his ground- a bold strategic vision and capabilities that made
breaking Report on Manufactures published in 1791, our warfighters more powerful and lethal, yet
Secretary of the Treasury Alexander Hamilton also safer and more secure. That transformation
urged Congress to promote what we would call also led to a corresponding shift in supply chains,
America’s industrial base so that the United States especially a new reliance on emerging commercial
could be “independent on foreign nations for off-the-shelf technologies and companies as well as
military and other essential supplies.” In addition the traditional defense contractor base.
to protecting national independence, support for
manufacturing incentives for emerging industries Later came the Third Offset as a way to integrate
would level the playing field in the global markets the latest advanced technologies, including cyber
of the day. and autonomous systems and artificial intelligence,
into a military that would have to be ready to deal
Virtually every U.S. president from Hamilton’s with rising Russian and Chinese challenges. What
day until the dawn of the twentieth century we have learned in the past four years is that such
understood that sensible and targeted trade an offset will not take place without conscious,
measures – anti-dumping fees, countervailing difficult decisions and investments to repair and
duties, and even modest tariffs to level an unfair modernize our defense industrial base, including
playing field – formed the principal tool by which the need for a larger reshoring of American
America fostered its industrial base. The 1990s manufacturing as a whole.

Fortunately, as noted above, a broad consensus Today we see more clearly than ever what America
is emerging in our political leadership and the must do to restore and sustain its vital defense
American public as a whole on the need both to industrial base. The elements for a comprehensive
reshore our manufacturing and to deal boldly with defense industrial strategy are all in place. Now
the global threat of China. must come the hard work of making that “robust,
resilient, and innovative industrial base” a reality
The reshoring imperative has received an – for our women and men in uniform in the 21st
additional impetus from the coronavirus pandemic, century and for all Americans.
which demonstrated the hazards of relying on
other, especially adversarial nations for critical
materials and medical equipment. The U.S.
Government successfully ramped up production
of vital medical supplies, most notably vaccines, as
well as ventilators, personal protection equipment
(PPE’s), and other products under Title III of the
Defense Production Act and the Coronavirus Aid,
Relief, & Economic Security (CARES) Act. This
initiative relied on the World War II industrial
mobilization model described in Arthur Herman’s
Freedom’s Forge: How American Business Produced
Victory in World War II and James Lacey’s The Ellen M. Lord, Under Secretary of Defense
Washington War: FDR’s Inner Circle and the Politics of
Power That Won World War II. The same model in
Operation Warp Speed has produced coronavirus
vaccines – in what can only be described as a
medical research, development,
and manufacturing miracle.
All these examples prove that federal resources

and direction combined with the private sector’s
unique manufacturing and industrial ingenuity can
respond to a national crisis, especially when the
objectives are well-defined and funds effectively
deployed. The Department of Defense, the
Jeffrey (Jeb) Nadaner,
President, and the Congress can – and must – join
Deputy Assistant Secretary of Defense
to reduce America’s vulnerabilities, increase its
security, and provide the resources for an industrial
renaissance that will lift up the economic prospects
and dignity of millions of ordinary Americans.

SECTION 2
CONGRESSIONAL
REQUIREMENT

CONGRESSIONAL REQUIREMENT
Section 2504 of title 10, U.S. Code requires the a. A map of the industrial base;
Secretary of Defense to submit an annual report b. A prioritized list of gaps or vulnerabilities
to the Committee on Armed Services of the in the national technology and industrial
Senate and to the Committee on Armed Services base, including—
of the House of Representatives by March of each
c. A description of mitigation strategies
year. The report is to include:
necessary to address such gaps or
1. A description of the departmental guidance vulnerabilities;
prepared pursuant to section 2506 of this i. The identification of the Secretary
title. concerned or the head of the Defense
2. A description of the assessments prepared Agency responsible for addressing such
pursuant to section 2505 of this title and gaps or vulnerabilities; and
other analyses used in developing the budget ii. A proposed timeline for action to
submission of the Department of Defense address such gaps or vulnerabilities; and
(DoD) for the next fiscal year.
iii. Any other steps necessary to foster and
3. Based on the strategy required by section safeguard the national technology and
2501 of this title and on the assessments industrial base.
prepared pursuant to Executive order or
section 2505 of this title—

4. Identification of each program designed to
sustain specific essential technological and
industrial capabilities and processes of the
national technology and industrial base.
This Industrial Capabilities Report for Fiscal Year

(FY) 2020 satisfies the requirements pursuant
to section 2504, title 10, U.S. Code. It does not
respond to section 2504a, title 10, U.S. Code,
which will be delivered as a separate report.
House Report 116-442, accompanying the FY2021

National Defense Authorization Act (NDAA),
directs the Secretary of Defense to include a
supply chain and vulnerability assessment for
rare earth elements, tungsten, neodymium-
iron-boron magnets, niobium, indium, gallium,
germanium, and tin in the annual Industrial
Capabilities Report, along with recommendations
for stockpiling actions for those materials and
any other relevant materials. The Department
will satisfy this reporting requirement with the
submission of the Strategic and Critical Materials
2021 Report on Stockpile Requirements, in
accordance with 50 U.S.C. 98h–5.

SECTION 3
INTRODUCTION

INTRODUCTION
By law, the Secretary of Defense must submit − An appendix including a map of U.S. industrial
an annual report to the congressional armed base COVID-related ‘hotspots’ and summaries
services committees on the actions, investments, of the industrial capabilities studies and
and assessments conducted in support of assessments completed in FY2020. This
the U.S. defense industrial base (DIB). The FY appendix contains controlled unclassified
2020 Industrial Capabilities Report satisfies the information (CUI) and will not be included in the
requirements pursuant to title 10, U.S. Code., public report.
Section 2504, and provides context to the
challenges facing the U.S. DIB. The Office of Industrial Policy within the Office of
the Under Secretary of Defense for Acquisition and
This report includes the following components: Sustainment (OUSD(A&S)) is tasked with compiling
this report. However, there is an extensive list of
− A description of the Department’s primary lines stakeholders across the Office of the Secretary
of effort (assess, invest, protect, and promote) of Defense (OSD), Military Departments, and
to build resiliency in the DIB and implement the other federal agencies, whose assessments and
National Defense Strategy (NDS); knowledge provide critical contributions to the
− A summary of the Department’s response to the Industrial Capabilities Report and the ongoing work
coronavirus pandemic and its impacts on the of building resilience in the DIB.
DIB;
The coronavirus pandemic created new risks
− An overview of the U.S. defense industry and its
within the industrial base, and exacerbated
outlook relative to the global defense market;
existing vulnerabilities. The Department’s
− Assessments of each of the 16 industrial response to coronavirus pandemic drove
base sectors, including priority gaps and industrial base actions and investments in FY2020.
vulnerabilities, and FY2020 developments; Collectively, U.S. government and industry
− Assessments of emerging technology sectors; stakeholders strove to navigate the challenges
brought about by the pandemic, and continue to
− Overviews of the primary DIB authorities and
ensure a robust, secure, resilient, and innovative
investment mechanisms; and
industrial base. The Office of Industrial Policy will

continue to champion the DIB and implement the sectors which continue to serve as a framework
NDS through four primary lines of effort: assess, for identifying and assessing industrial base risk.
invest, protect, and promote. Sector leads support various interagency working
groups (WGs) and track specific (though frequently
overlapping) gaps and vulnerabilities within the
Assess sector. These working groups are organized
The first step in ensuring a robust, secure, based on DIB sectors and emerging technologies,
resilient, and innovative industrial base is or are further broken down into program or issue-
understanding its components and current specific working groups and integrated product
and future requirements, as well as constantly teams (IPTs).
evolving threats, vulnerabilities, and
opportunities. U.S. government and industry The Joint Industrial Base Working Group (JIBWG),
stakeholders contribute to detailed industrial chaired by the OUSD (IP) and the Defense Contract
sector summaries, fragility and criticality Management Agency (DCMA), serves as a central
assessments, and capacity analyses, to inform hub for U.S. government stakeholders to share
the Department’s budgetary, programmatic, and information, identify and prioritize risks, and
legislative policies in support of a strong and accelerate the implementation of risk mitigation
resilient industrial base. strategies. Dozens of offices and working groups
focused on specific sectors programs, and
Industrial Policy, Assessments risks, feed into the JIBWG to ensure thorough
Subject matter experts within Industrial Policy’s representation of DIB equities.
Assessments Team coordinate with program
offices and other OSD and industry partners to
identify, mitigate, and monitor risks, issues, and
Invest
vulnerabilities across the industrial base. The Invest line of effort supports the Department
to leverage investment opportunities to address
Emerging Technology Assessments risks, priority gaps, and vulnerabilities across the
The Technology, Manufacturing, and Industrial DIB. The DoD plans for sustainment activities as
Base (TMIB) Office acts as Industrial Policy’s part of the annual budgeting process. However,
counterpart within the Office of the Under business closures, changing requirements,
Secretary of Defense for Research and obsolescence, and other issues can result in
Engineering (OUSD(R&E)). The Emerging unforeseen funding requirements.
Technology Assessments team is responsible
for translating technology requirements into The following authorities and investment
manufacturing and industrial base requirements. mechanisms enable the Department to target
The results of these assessments are used to investments toward DIB gaps and vulnerabilities,
create technology and industrial base protection and bring attention to funding requirements
and promotion strategies. that are not addressed through traditional
appropriations.
Industrial Policy continues to identify and assess
risks based on the sectors and risk frameworks The Industrial Base Analysis & Sustainment
developed in the Executive Order (EO) 13806 (IBAS) Program
report, “Assessing and Strengthening the The IBAS Program advances and sustains
Manufacturing and Defense Industrial Base and traditional defense manufacturing sectors, plans
Supply Chain Resiliency of the United States”. for next generation and emerging manufacturing
and technology sectors, and leverages global
As part of the interagency response to EO 13806, manufacturing innovation.
the Department identified 16 industrial base

Defense Production Act (DPA) Title III made a significant readiness investment in N95
The Title III Program leverages authorities provided respirators, coordinated for 3M to rotate six
under the DPA to “create, maintain, protect, million masks for DoD after the H1N1 virus. In the
expand, or restore domestic industrial base midst of the coronavirus pandemic, this strategy
capabilities essential to national defense.” 7 The has proven to be a successful best practice, as
program plays a leading role in strengthening the DLA supported the production of ventilators, and
health and resilience of domestic supply chains of worked with other federal organizations to mirror
strategic importance. This role includes supporting their strategy.
the national response to the coronavirus pandemic
and addressing supply chain risks identified in the
EO 13806 report, such as microelectronics and the Protect
rare earths supply chain. The Protect line of effort includes actions to
protect the industrial base and to mitigate risks
To support national security requirements, DPA associated with counterfeit parts, supply chain
Title III actions stimulate private investment for security, cybersecurity, foreign dependence,
critical components, technology items, materials, predatory investment, industry consolidation, and
and industrial resources. Additionally, on May a number of other factors that introduce risk to
14, 2020, EO 13922 delegated authority under the DIB.
section 302 of the DPA to the U.S. International
Development Finance Corporation (DFC) to make Foreign Investment Review
loans supporting the national response and Within Industrial Policy, the Protect function is
recovery from the coronavirus pandemic or the predominately carried out by the Office’s Foreign
resiliency of any relevant domestic supply chains. Investment Review (FIR) team. FIR leads the
On June 22, 2020, Under Secretary of Defense Committee on Foreign Investment in the United
Ellen Lord and DFC Chief Executive Officer Adam States (CFIUS) reviews for DoD and acts as the
S. Boehler signed a Memorandum of Agreement principal advisor to the USD(A&S) on foreign
(MOA) to implement EO 13922. investment in the U.S. This involves coordination
across more than 30 DoD component
The Manufacturing Technology (ManTech) organizations to identify, review, investigate,
Program mitigate, and monitor foreign direct investment in
The ManTech Program and National the United States. FIR relies on DoD stakeholders
Manufacturing Innovation Institutes (MII) are for the technical expertise needed to analyze
designed to help anticipate and close gaps in the threats, vulnerabilities, and consequences
manufacturing capabilities for affordable, timely, associated with foreign investment.
and low-risk development, production, and
sustainment of defense systems. Predatory and adversarial investments can result
in diminishing U.S. sources and expertise, and
The Warstopper Program increasing foreign dependence and illegitimate
The Defense Logistics Agency’s (DLA) Warstopper technology transfer, thereby threatening U.S.
Program is the Department’s primary industrial military superiority. To address these risks,
readiness program for consumable items Congress passed the Foreign Investment Risk
in sustainment. The program is designed Review Modernization Act (FIRRMA), which
to incentivize industry to meet consumable updated the scope of CFIUS authority. Effective
sustainment requirements for which business February 2020, FIRRMA provides the Committee
would otherwise not support. The program had a with expanded authorities to review transactions
proactive strategy for medical Personal Protective related to critical technologies and infrastructure
Equipment (PPE) items prior to the coronavirus (including the DIB), sensitive personal data, real
pandemic; in 2014, the Warstopper Program estate transactions, and joint ventures. A “non-

notify” team, also part of FIR, is responsible for Office of Small Business Programs (OSBP)
identifying transactions that were not voluntarily The OSBP promotes small business involvement in
brought before the CFIUS process. the DIB by maximizing prime and subcontracting
opportunities that ensure our nation’s small
The statute also strengthens bilateral cooperation businesses remain responsive, resilient, secure,
through “excepted foreign states”, including the and diversified to directly support the DIB,
participating nations of the multilateral National the NDS, and a robust economy. For more
Technology and Industrial Base (NTIB). Citizens information, see the Office of Small Business
from NTIB countries (Australia, Canada and the Programs section of this report.
United Kingdom) do not need to file for minority
investments or real estate transactions. International Outreach
OUSD (IP) and the Office of International
The Department also conducts Mergers & Cooperation (IC) work closely with our
Acquisitions (M&A) activities, which review international allies and partners to strengthen
consolidations in the U.S. defense industrial base and diversify our DIB. Outreach efforts directly
to assess related risks and impacts. support the NDS, which aims to strengthen
alliances and partnerships around the globe
Technology Industrial Base Protection, in support of our national security. OUSD (IP)
Promotion, and Monitoring routinely coordinates government-to-government
Within TMIB, the Technology Industrial Base dialogue with allies and partners on joint
Protection, Promotion, and Monitoring team industrial base concerns and areas for potential
facilitates the creation of strategies to protect and collaboration. Two key areas of government-
promote the industrial base by mitigating risks to-government outreach in FY2020 focused on
and exploiting opportunities identified in emergent enhancing key partnerships, including:
technology assessments. TMIB aims to establish
balance between the protection of technology − The NTIB: OUSD (IP) efforts to seamlessly
and promotion of the industrial base providing it. integrate the United States DIB with those of
This balance aids the Department’s advancement Australia, Canada, and the United Kingdom are
of critical and emergent technologies, while ongoing. In FY2020, NTIB initiatives focused
sustaining a healthy, resilient, and competitive on maintaining the continuity of medical and
industrial base. defense supply chains.
− The United States-India Defense Technology
Promote and Trade Initiative (DTTI): In December
2019, Under Secretary Ellen Lord and
To cultivate a robust, resilient, and innovative
Indian Secretary for Defense Production
industrial base, the Department must maintain
Subhash Chandra signed the DTTI Industry
the current DIB and identify new participants and
Collaboration Forum agreement to provide
opportunities from domestic and international
a mechanism for developing and sustaining
partners. As the lead for industry engagement for
an Indian-United States industry dialogue
the USD(A&S), Industrial Policy facilitates dialogue
on defense technological and industrial
and drives collaboration and communication
cooperation.
between the DoD and global industrial bases.
OUSD(IP) encourages increased international Trusted Capital
participation in the DIB, and facilitates The Trusted Capital program is an unfunded
government-to-government discussions on initiative that connects companies critical to the
industrial policy with partners and allies. defense industrial base with vetted trusted capital
providers. The Trusted Capital Marketplace is
a forum to convene trusted sources of private

capital with innovative domestic companies
that have been previously down-selected by
the military services and operate in emerging
technology sectors critical to the U.S. defense
industrial base. This serves to strengthen
domestic manufacturing by increasing access to
critical technology while simultaneously limiting
foreign access. For more information, see the
Trusted Capital Program section of this report.

SECTION 4
INDUSTRIAL BASE
COUNCIL

INDUSTRIAL BASE COUNCIL
The Industrial Base Council (IBC) is an executive- 3. Leverage the full authorities of the DoD to act
level forum, composed of senior three- and four- decisively to mitigate DIB risks
star level leaders, established to ensure industrial
4. Develop policy and inform planning,
base readiness and resilience across the DoD. The
programming, budgeting, and execution
IBC works to assess industrial base risk, leverage
(PPBE) processes to address DIB
DoD-wide mitigation efforts, and develop policy
vulnerabilities
to address and prevent critical risks. The IBC was
created with four main goals: The IBC is informed by the working-level Joint
Industrial Base Working Group (JIBWG), comprised
1. Provide an aggregated assessment to
of subject matter experts in each industrial base
Congress on DIB risk
sector (Figure 4.1). Interagency working groups
2. Prioritize / align industrial base (IB) efforts to and task forces bring emerging industrial base
DoD’s Strategic priorities
Industrial Base Council Construct
Budget Cycles Senior Leaders Policy Makers
Inform
Industrial Base Council
Joint Industrial Base Working Group
Collaborate
Figure 4.1

risks to the JIBWG for discussion and action. Risks
and issues that require senior-level intervention
are elevated to the IBC. The Council has leveraged
the JIBWG’s subject matter expertise and sector-
based approach to mitigate and prevent systemic
industrial base risk.
The IBC and COVID-19

To respond to the impact of the coronavirus
pandemic on the U.S. industrial base and global
defense supply chains, the IBC became a key
decision-making body, working to manage DPA
investments in response to the pandemic. In
March 2020, the U.S. Congress passed the
Coronavirus Aid, Relief, and Economic Security
(CARES) Act, which appropriated $1 billion to the
DPA Purchases account to prevent, prepare for,
and respond to COVID-19. CARES Act funding
decisions were all approved by the IBC after
analysis and recommendation from the JIBWG.
SECTION 5
COVID-19 RESPONSE
HIGHLIGHT

COVID-19 RESPONSE HIGHLIGHT
Introduction resources on healthcare investments, while the

DoD allocated remaining Title III funds to mitigate
The coronavirus pandemic poses a severe threat
COVID-19 impacts on the defense industrial base.
to essential industrial base capabilities, sources,
and workforce skills. On March 2020, the President The DPA Title III program also provided critical
declared a national emergency and issued a series support to HHS and the Department’s Joint
of Executive Orders covering nearly every DPA Acquisition Task Force (JATF) by right-sizing
authority, including priority ratings and allocations investments against COVID-19 requirements and
(Title I), domestic production expansion and overcoming obstacles to successful execution
loans (Title III), and the formation of voluntary by the industrial base. The JATF and DLA also
agreements among industry (Title VII). provided substantial assistance to HHS by
increasing domestic production capacity and
In March 13, 2020, Congress appropriated
replenishing HHS’s Strategic National Stockpile.
$1 billion to the DPA Purchases account through
the CARES Act; a two-fold increase from the
combined total of the past decade. The program Spending Plans
executed 46 awards in less than six months,
In May 2020, the DPA Title III program submitted a
compared to a historic program baseline of
spend plan for CARES Act investments to Congress
less than five new-start actions per year. The
and has provided subsequent weekly briefings
Department made a series of initial investments
on the plan’s implementation. Of the $1 billion
to improve supply chains and increase domestic
appropriated to the DPA Purchases account, the
production of health resources, such as N95
Department allocated approximately $676 million
respirators and testing consumables.
to defense industrial base risk mitigation, $213
million to healthcare sector investments, and
The CARES Act also provided the Department
$100 million to a Federal Credit Loan program in
of Health & Human Services (HHS) with
cooperation with the DFC.
authority and funding to increase domestic
production of personal protective equipment
The IBC reviewed subject matter input from
(PPE) and other health resources. HHS focused its
across the Department and issued DIB investment

decisions for Title III CARES Act funds. For ratings to industrial resources necessary for
healthcare investments, the Title III program Puritan’s production scale-up. When incumbent
forged partnerships with HHS and the Federal suppliers could not meet the need, DoD assisted
Emergency Management Agency (FEMA), Puritan with identifying alternative suppliers. The
quickly responding to both agencies’ requests Title III program and the Department of State also
for assistance. As the Department’s COVID-19 assisted Puritan personnel and its subcontractors
response activities became more complex, the with overseas travel, so they could debug and
Title III program also joined the JATF in supporting accept automated production equipment.
industrial base expansion and other interagency
functions.
Defense Industrial Base Case
Although the Department did not issue any loans Study – eMagin Corporation
through the DFC loan program in FY2020, it eMagin Corporation (“eMagin”) is the leading
expects to conclude several loan agreements in domestic technology supplier of high brightness
FY2021 and continue the program in FY2022. organic light emitting diode (OLED) microdisplays.
eMagin’s OLED microdisplays support DoD
programs of record and ongoing requirements.
Medical Industrial Base Case
Study – Puritan Medical Product As the COVID-19 epidemic spread through the
Company state of New York, eMagin and several of its
Swabs are a key node in the logistics “chain” for suppliers were compelled to shut down operations
COVID-19 testing, which stretches from swabs and for multiple weeks. The shutdown resulted in
PPE at the collection site to chemical reagents and reductions in production and revenue, increases
test batteries at a laboratory facility. in the costs of goods sold, and cancellation
of or delays in many of eMagin’s customer
In late April 2020, DoD entered into a $75.5 million opportunities into 2021.
(not-to-exceed) agreement with Puritan Medical
Product Company (“Puritan”) under DPA Title III. DPA Title III investment at eMagin prevented
Pursuant to this agreement, Puritan will increase the immediate loss of a critical DoD supplier,
its aggregate production capacity for foam swabs which would have been costly and difficult to
by at least 20 million units per month, thereby reconstitute in a post-COVID-19 environment.
doubling its production capacity. eMagin will use DPA Title III funds to refurbish
existing production equipment and purchase
With this award, Puritan Medical Products new equipment that will increase product yields,
established a new swab manufacturing facility debottleneck production, and increase aggregate
in Pittsfield, Maine, where it renovated 95,000 capacity.
square feet of unused factory space and added
more than 100 people to its workforce. Puritan This effort will enable the recipient to retain
realized initial production gains by June 2020, and current staff put at risk by COVID-19 and will
exceeded production rate targets, established in create 14 new jobs made up of engineers,
their agreement with the Title III program, by the maintenance technicians, and manufacturing
end of September 2020. personnel. It will also ensure the U.S. government
maintains access to this critical domestic
The U.S. government and Puritan accomplished capability.
this rapid production increase by coordinating
supply chain activities on a nearly daily basis.
Puritan, the Title III program, and the JATF engaged
the Department of Commerce to apply priority

Defense Industrial Base Case
Study – General Electric-Aviation
General Electric (GE) Aviation is one of two U.S.
suppliers capable of producing large advanced
combat engines. As part of the national response
to the coronavirus pandemic, in support of
the Propulsion defense industrial base, the
DoD entered into a $20 million contract with
GE Aviation to sustain critical industrial base
capability for highly-specialized engineering
resources.
GE Aviation will retain more than 100 highly-

skilled and experienced design and mechanical
engineers, preserving critical engineering skillsets
and subject matter expertise. GE Aviation will
accomplish this by expanding development in
advanced manufacturing techniques (including
additive manufacturing), promoting advanced
material development, and improving digital
engineering proficiencies. This will enable GE
Aviation to retain critical workforce capabilities
and sustain engineering positions put at risk
by commercial aviation contraction during the
pandemic.

SECTION 6
DEFENSE INDUSTRY
OUTLOOK
DEFENSE INDUSTRY OUTLOOK
Characteristics of the high absenteeism, furloughs, and financial

instability. The decline in global air passenger
Market/Overview traffic due to the coronavirus pandemic also
The Aerospace and Defense (A&D) sector declined threatens the viability of commercial airlines,
in performance compared to the previous year. aircraft manufacturers and their suppliers,
The decline in performance is due, in large part, and puts many jobs at stake.
to a downturn in the commercial aircraft sector,
The health of the aircraft defense industrial base
preceded by the following events of early 2020:
will be inextricably linked to the recovery of the
− Boeing’s 737 MAX, formerly the largest commercial aircraft industry, which could take
commercial aircraft program in the industry by three to five years to return to pre-COVID global
value, was decertified after two fatal crashes, passenger traffic. The U.S. A&D sector did not
which led to a production halt in January outperform the broader U.S. equity market in 2020,
2020. The production freeze disrupted the suggesting that investors are pessimistic about
production and deliveries of 737 MAX parts the overall health, profitability, and long-term
from the suppliers, dramatically reducing prospects of the sector (Figure 6.1). The A&D sector
revenue and production throughout the averaged 2.2 percent of total Market Capitalization
industry. These events eventually resulted in of the Dow Jones for the last six years.
liquidity issues among suppliers due to work
stoppages and restricted cash flow. Over 100 The Big 6 Defense Suppliers
suppliers for the 737 MAX also provide parts
and services for the DoD. The largest six prime defense suppliers (Lockheed
Martin, Boeing, Northrop Grumman, Raytheon,
− The coronavirus pandemic further aggravated
General Dynamics, and BAE Systems) are known
supply chain issues in the aircraft sector. The
collectively as the “Big Six” and represented 32
sector experienced significant challenges
percent of all DoD prime obligations in 2019.
in maintaining and sustaining the health
They are also the largest companies globally by
of the DIB, as a large number of defense
defense revenue. The Big Six thus provide a useful
suppliers experienced facility shutdowns,

view with which to judge the overall health of the are a combination of U.S. and Foreign based
defense sector. The Big Six are financially healthy, suppliers to the DoD, based on prime obligations,
continue to expand in market share, and have as well as inclusion on the Defense News Top 100
seen a general increase in revenue with a Market list for 2020. These 25 companies represented
Capitalization Weighted Average Combined Annual nine percent of all DoD prime obligations in 2019.
Growth Rate (CAGR) of 5.6 percent from 2014-2019 Average revenues for these companies reached
(Figure 6.2). approximately a quarter of the Big Six average
revenues each year and generally increased with a
Continued growth across the defense sector is Market Capitalization Weighted Average CAGR of
further exemplified by the Market Capitalization 5.9 percent from 2014-2019 (Figure 6.2).
Weighted Average of Revenue for the 25 Mid-Tier
U.S. Defense Suppliers.8 These 25 companies
A&D Sector Performance 2014-2020*
350
304.5
300
Rebased Performance
250
2014=100
200
172.9
172.7
150 170.5
140.1
138.4
100
50
42.0
0
2014 2015 2016 2017 2018 2019 2020*
Defense Aerospace
Industrials Technology
Utilities Oil & Gas
Dow Jones US
Figure 6.1: Stock Performance Trend by Market Sector [CY2014-CY2020*] (2014 Rebase) *2020
Performance as of November 16th 2020. Source: Refinitiv Eikon
Revenue
$80B
$70B
$60B
$50B
$40B
$30B
$20B
$10B
$0B
Lockheed Boeing Northrop Raytheon General BAE Systems Big 6 - Market 25 Mid-Tier -
Martin Defense* Grumman Technologies Dynamics Cap Weighted Market Cap
Avg Weighted Avg
FY2014 FY2015 FY2016 FY2017 FY2018 FY2019

Figure 6.2: Big 6 DoD Primes Annual Revenue & 25 Mid-Tier Market Cap Weighted Avg Revenue [FY2014-FY2019] Source: Refinitiv Eikon
*Only Revenue for Boeing Defense Business Segment Displayed. The large increase in Raytheon revenues compared to prior years’ reports is due to
the merger between Raytheon and UTC. Historic revenues were compiled for the entities taking into account any divestitures by Refinitiv Eikon.

The Big Six are also profitable, showing positive than the Big Six. The 25 Mid-Tier EBITDA Market
Earnings Before Interest, Tax, Depreciation, and Cap Weighted Average CAGR from 2014-2019 was
Amortization (EBITDA), though margins have varied 1.9 percent.
by company over the last five years (Figure 6.3).
Major defense suppliers saw, on average, a growing However, to maintain top line growth and mitigate
demand for their products and services within the the cyclicality of U.S. defense spending, some firms
last year, driving higher sales and greater scale and will continue to diversify their customer base by
helping to reduce costs and boost competitiveness. pursuing international and non-defense customers.
The Boeing Defense Business Segment also helped Over the last several years, the Big Six maintained
to offset significant profit losses for the company in a relatively stable share of sales coming from
2019 resulting from the Boeing 737-Max grounding. outside the United States (Figure 6.4.a). Despite
The 25 Mid-Tier Defense Suppliers also show minimal change as a percent of total revenue, Big
consistent profitability, though at a lower Margin Six international sales increased at an annualized
EBITDA Margin (%)

20%
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
Lockheed Boeing Northrop Raytheon General BAE Systems 25 Mid-Tier -
Martin Grumman Technologies Dynamics Market Cap
Weighted Avg
FY2014 FY2015 FY2016 FY2017 FY2018 FY2019
Figure 6.3: Big 6 DoD Prime & 25 Mid-Tier Market Cap Weighted Average EBITDA Margin
[FY2014-FY2019] Source: Refinitiv Eikon
Sales of Big 6 DoD Primes Sales of 25 Mid Tier DoD Suppliers

$400B 70% $400B 70%
$350B 60% $350B 60%

$300B $300B
50% 50%
$250B $250B
40% 40%
$200B $200B
30% 30%
$150B $150B
20% 20%
$100B $100B
10% $50B 10%

$50B
$0B 0%
$0B 0%
2014 2015 2016 2017 2018 2019 2014 2015 2016 2017 2018 2019
U.S. Sales Non-U.S. Sales Share of Non-U.S. Sales U.S. Sales Non-U.S. Sales Share of Non-U.S. Sales
Figure 6.4.a Defense vs. Non-Defense Figure 6.4.b Defense vs. Non-Defense Revenue
Revenue for Big 6 Primes [FY2014-FY2019] for 25 Mid-Tier DoD Suppliers [FY2014-FY2019]
Source: Refinitiv Eikon & Defense News Top 100 Source: Refinitiv Eikon & Defense News Top 100

rate of 2.3 percent over the last six years. Non- Historically, the Big Six trended toward a rise in
U.S. Sales maintained a higher percentage of non-defense revenue. In 2019 the share of non-
total sales for the 25 Mid-Tier Defense Suppliers, defense business revenue decreased for the Big
attributable largely to the inclusion of 12 foreign Six, primarily due to Boeing’s commercial sales
based defense suppliers in the list of 25 (Figure losses resulting from the 737-Max grounding and
6.4.b). Big Six and 25 Mid-Tier Defense Supplier historic business segment realignment following
sales in the U.S. increased at a similar annualized the merger of United Technologies and Raytheon
rate of approximately three percent since 2014. (Figure 6.5).
Non-U.S. Sales for the 25 Mid-Tier Suppliers were
not as constant, but saw an annualized increase of
4.3 percent from 2014-2019.
Revenue Breakdown
$350B 80%
$300B
$250B 60%
$200B
40%
$150B
$100B 20%
$50B
$0B 0%
2014 2015 2016 2017 2018 2019
Total Revenue - Big 6 Primes

Total Revenue - 25 Mid Tier
Big 6 Defense Business - % Share of Total Revenue
Big 6 Non-Defense Business - % Share of Total Revenue
25 Mid Tier Defense Business - % Share of Total Revenue
25 Mid Tier Non-Defense Business - % Share of Total Revenue
Figure 6.5: Defense vs. Non-Defense Revenue for Big 6 & 25 Mid-Tier Defense Suppliers
[FY2014-FY2019] Source: Refinitiv Eikon & Defense News Top 100
Big 6 Capital Deployment

$80B
$60B
$728M $52,229M
$25,584M $15,969M
$40B $18,069M
$17,547M $19,217M
$20B $35,320M
$24,280M $24,226M $24,853M $25,147M
$17,561M
$0B
-$11,586M -$12,520M -$7,219M
-$3,367M -$16,900M
-$20B
2014 2015 2016 2017 2018 2019
Shareholder Return Investment

Net Change in Debt Cash from Operations
Figure 6.6: Capital Deployment of Big 6 Primes [FY2014-FY2019] Investment: Cash for Acquisition of Subsidiaries,
R&D Expense, and CAPEX Shareholder Return: Dividends Paid, Decrease in Capital Stocks
Net Change in Debt: Proceeds from Repayment of Borrowings Source: Bloomberg & Refinitiv Eikon

The Big Six continue to focus their capital of their sales on R&D each year. The 25 Mid-Tier
deployment on Shareholder Return (Five Year Defense Suppliers spent on average about half as
CAGR: -6.3 percent) and Investment (Five Year much each year on R&D compared to the Big Six;
CAGR: 0.6 percent). Investments hit a six year although as a percentage of sales, they averaged
high in 2018 at $52.2 billion with firms investing slightly higher than the Big Six at around four
largely in acquisition of subsidiaries, research percent of sales spent on R&D. A rebased trend
and development, and capital expenditures. plot shows that expenditures on R&D by the Big
Investments in 2019 declined steeply to just over Six closely track DoD Research, Development,
$18 billion following the finalization of several Testing, and Engineering (RDT&E) spending,
mergers (Figure 6.6). while having little effect on the average R&D
spending of the 25 Mid-Tier Defense Suppliers
(Figure 6.7). This implies that the largest defense
Research & Development suppliers rely on the guidance provided by DoD
Spending to drive development of newer technologies and
capabilities, while the Mid-Tier suppliers generally
Globally, A&D companies are among the lowest
spend more of their revenues on further product
R&D spenders compared to other critical sectors.
development internally.
The Big Six have spent on average 2.5 percent
DoD RDT&E and DoD Supplier Avg Change in R&D Spend

Rebase: 2013 = 0
$32B +$30B +$26B

+$28B 4%
$24B
+$19B
$16B +$15B
3%
R&D % of Sales
+$8B +$4B
$8B
+$3B $2B
$0B 2%
-$4B
-$8B -$5B
-$15B
-$11B
Change in R&D Spending
-$16B -$12B -$13B 1%

-$17B -$16B
-$24B
-$32B -$31B
0%
2014 2015 2016 2017 2018 2019
DoD RDTE Budget

Big 6 R&D Spend Average
25 Mid-Tier Suppliers Average R&D Spend
R&D % Sales - Big 6 Average
R&D % Sales - 25 Mid Tier Suppliers Average
Figure 6.7: DoD RDT&E Budget Allocations; Big 6 Avg. R&D Spending; & 25 Mid-Tier Avg. R&D Spending
(Rebased 2013) [FY2014-FY2019] Source: Refinitiv Eikon & DoD Budget
R&D by Country the National Technology and Industrial Base,

consisting of the United States, United Kingdom,
The United States continued to lead the world
Canada, and Australia, averaged just below $100
in Gross Domestic Spending on R&D in 2019,
billion over the last nine years in combined GDS
although China is rapidly and consistently closing
on R&D (Figure 6.8).
the gap with the United States. Meanwhile,

Top Three Countries by R&D Spending; NTIB; & Russia
$600B
$500B
$400B
$300B
$200B
$100B
$0B
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
U.S. China Japan NTIB (Exc. U.S.) Russia

Figure 6.8: Top Three Countries, NTIB, and Russia by Gross Domestic Spending on R&D [CY2009-CY2018]
Source: OECD (R&D Data is Released on a 2-Year Lag)
R&D by Industry decreased average R&D from 2016-2018. R&D

The Technology sector primes known as the FAANG spending appears to be trending up once again
companies (Facebook, Amazon, Apple, Netflix, and for the Aerospace sector in 2019 and consistently
Google) spend, on average, ten percent of their sales increased in the Defense sector from 2014-2019
on R&D each year. Comparable to the characteristics (CAGR: 9.96 percent). The Dow Jones average
of the markets (Figure 6.9), the average R&D spending spending on R&D continues to outperform the U.S.
by the Technology sector continues to outpace all Aerospace and Defense sectors when compared as
other industries. Meanwhile the Aerospace sector whole number averages.
Average R&D Spending by Industry

$1.6B
$1.5B
$1.4B
$1.3B
$1.2B
$1.1B
$1.0B
$0.9B
$0.8B
$0.7B
$0.6B
$0.5B
$0.4B
$0.3B
$0.2B
$0.1B
$0.0B
2014 2015 2016 2017 2018 2019
Defense Aerospace Industrials

Technology Utilities Oil & Gas
Dow Jones US
Figure 6.9: Average R&D Spending by Industry Utilizing Averages of Total Reported
R&D Spending by Companies in Each Market Sector Source: Refinitiv Eikon

Global Military Spending U.S. Position in the Global
Global military spending continues to grow,
Military Market
expanding from $1.81 trillion in 2018 to $1.87 trillion U.S. defense spending fluctuated over the last
in 2019 (in constant 2018 U.S. dollar value). The decade, seeing a 19.9 percent decrease from 2011-
United States maintains its position as the largest 2017 and then rising 8.5 percent to its 2019 level of
purchaser of military goods and services in the $718.7 billion. By contrast, China steadily increased
world. Over the last decade, China established itself its defense spending at an annualized rate of 14.3
as the second largest purchaser of military goods percent over the past decade. The Chinese share
and services, spending just over $266 billion in of global military spending rose from 7.8 percent
2019. Combined, the NTIB countries, excluding the in 2009 to 14.2 percent in 2019, while the United
U.S., spent on average $96 billion each year from States share of global military spending fell from 47.2
2009-2019 on their militaries and defense related percent in 2009 to 38.4 percent in 2019 (Figure 6.11).
goods and services. Military spending grew in the
rest of the world from $639 billion in 2008 to $793 Global Trade in Arms
billion in 2019, led by India, Saudi Arabia, France,
The United States and Russia remain the two
Germany, Japan, and South Korea. Russia continued
largest exporters of arms in the world (Figure 6.12).
to maintain an average of $62 billion over the last ten
The United States and Russia remain the two
years on their military spending (Figure 6.10).
largest exporters of arms in the world (Figure 6.12).
Global Military Spending 2009-2019

$1800B
$1600B
$1400B
Constant FY2018 USD
$1200B
$1000B
$800B
$600B
$400B
$200B
$0B
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
U.S. China Russia NTIB (Exc. U.S.) Rest of the World
Figure 6.10: Global Military Spending (2018 Dollars) [CY2009-CY2019]

Source: SIPRI Military Expenditure Database

The United States increased its market share of Saudi Arabia and India remain the two largest
Global Arms Exports from 28.3 percent in 2009 to importers of arms in the world. Saudi Arabia,
39.5 percent in 2019 (10 Year CAGR: 4.6 percent). India, Australia, and the United Arab Emirates
Russian arms exports continue to trend downward (U.A.E.) all increased market share of Global
contracting from 20.9 percent in 2009 to 17.3 Arms Imported from 2009-2019, while China and
percent in 2019 (ten Year CAGR: -0.7 percent). Pakistan both decreased their market share for the
Finally, China’s global arms exports market share same period (Figure 6.13).
remains relatively small despite its significant
increase in defense spending, growing slightly
from 4.7 percent in 2009 to 5.2 percent in 2019.
US & China Defense Spending
$900B 50%
$800B
$700B 40%
Constant FY2018 USD
% Global Spend
$600B
30%
$500B
$400B
20%
$300B
$200B
10%
$100B
$0B 0%
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
China US US % of Global Defense Spending

China % of Global Defense Spending
Figure 6.11: U.S. & China Defense Spending and % of Global Defense Spending (2018 Dollars)
[CY2009-CY2019] Source: SIPRI Military Expenditure Database
Global Arms Exports Global Arms Imports

35B 35B
30B 30B
Trend Indicator Value (TIV)
Trend Indicator Value (TIV)
25B 25B
20B 20B
15B
15B
10B
10B
5B
5B
0B
0B 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Rest of the World Saudi Arabia India
U.S. Russia France Germany China U.K. Rest of World Australia China UAE Pakistan
Figure 6.12: Global Arms Exports in Trend Indicator Value (Top 5 Figure 6.13: Global Arms Imports in Trend Indicator Value (Top 6
Countries) [CY2009-CY2019] Source: SIPRI Arms Transfers Database Countries) [CY2009-CY2019] Source: SIPRI Arms Transfers Database

U.S. Foreign Military Sales military equipment from the United States over the
last ten years totaling $139.1 billion (Figure 6.14).
U.S. Foreign Military Sales (FMS) remain inconsistent
year to year, requiring the approval of military Products from Lockheed Martin Corporation and
sales by Congress to foreign entities and the Raytheon Technologies Corporation made up the
varying requests for military equipment from those largest share of U.S. FMS over the last several years.
entities. The U.A.E. and Australia purchased military FMS in YTD 2020, however, saw a decrease for these
equipment from the United States every year since two companies’ products (Figure 6.15).
2011. Year to date (YTD) sales in 2020 were made to
Japan, Australia, the U.A.E., Kuwait, and South Korea.
Saudi Arabia in total value purchased the most
U.S. Foreign Military Sales (FMS) by Country
$80B
$60B
Figure 6.14: U.S. Foreign Military Sales
(FMS) by Country (Top 8).
$40B [CY2011-CY2020YTD]
Source: Bloomberg
$20B
$0B
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Saudi Arabia Qatar South Korea Iraq U.A.E.

Japan Kuwait Australia Rest of the World
U.S. Foreign Military Sales (FMS) by Company
$80B
Figure 6.15: U.S. Foreign Military Sales

$60B
(FMS) by Company (Top 10) [CY2011-
CY2020YTD] Source: Bloomberg
$40B * FMS sales reflect the historic
combination of UTC and Raytheon for
2011-2019 and the actual reported
$20B FMS for the new entity Raytheon
Technologies.
$0B
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Lockheed Martin Corp. Raytheon Technologies Corp. Boeing Co.
Northrop Grumman Corp. General Electric Co. General Dynamics Corp.
BAE Systems Plc L3Harris Technologies Inc. Textron Inc.
ITT Corp. All Others

SECTION 7
SECTOR
ASSESSMENTS
SECTOR ASSESSMENTS
Introduction Report (see Table 7.1). The FY2020 DIB sector

assessments identify both ongoing and short-term
On July 21, 2017, President Donald J. Trump signed risks resulting from the coronavirus pandemic.
EO 13806 on “Assessing and Strengthening the
Manufacturing and Defense Industrial Base and Priority gaps and vulnerabilities are also outlined in
Supply Chain Resiliency of the United States.” The the Department’s annual Unfunded Priorities List,
EO directed the Secretary of Defense to conduct which describes investment priorities identified
a whole-of-government effort to assess risks, across the traditional, cross-cutting, and emerging
identify impacts, and propose recommendations industrial base sectors, not included in the
in support of a healthy manufacturing and defense President’s budget. Where the Department has
industrial base. The findings were published in identified concrete steps to address specific risks,
September 2018. this report provides recommended actions and
investments. However, specific timelines for action
Since 2018, OUSD (IP) has continued to use the depend on a variety of factors including; availability
EO 13806 framework as a basis for identification of funding, competing impacts from COVID-19 and
and categorization of industrial base risks. other emerging requirements, and the extent of
However, the industrial base and supply chains industry and international participation. Industrial
are constantly evolving with new requirements, base issues can rarely be addressed unilaterally, if
business entrants, and competitors in the defense ever, and must take into account both defense and
sphere. As the DIB evolves, so do related risks. economic considerations.
The following section provides an assessment of The sector assessments also include a sector
industrial base gaps, vulnerabilities, and major outlook, which discusses emerging technologies
developments within each of the traditional and and strategic competition within each sector. As
cross-cutting sectors defined in the EO 13806 OUSD (IP) and its interagency partners work to

Traditional Sectors Cross-Cutting Sectors
• Aircraft • Materials
• Chemical, Biological, Radiological, Nuclear • Cybersecurity for Manufacturing
• Ground Systems • Electronics
• Missiles and Munitions • Machine Tools
• Nuclear Matter Warheads • Organic Defense industrial base
• Radar and Electronic Warfare • Software Engineering
• Shipbuilding • Workforce
• Soldier Systems
• Space
Table 7.1 Traditional and Cross Cutting Industrial Base Sectors
correct existing vulnerabilities, the Department

continues to identify emerging industries and
technologies to provide for the needs of U.S.
national defense now and in the future.

Aircraft
Sector Overview
The aircraft sector is categorized into three
subsectors: fixed-wing aircraft, rotary-wing aircraft
and unmanned aircraft systems (UAS) (Figure 7.2).
Fixed-Wing Includes fighters, bombers, cargo, transportation, and any manned aircraft that
Aircraft uses a set of stationary wings to generate lift and fly.
Rotary-Wing Includes those that use lift generated by rotor blades revolving around a mast.
Aircraft These aircraft are designed to operate in harsh battlefield environments,
requiring robust, advanced capabilities and systems.
Unmanned Includes the necessary components, equipment, network, and system to control
Aircraft Systems an unmanned aircraft. The unmanned aircraft systems’ industry ranges from
(UAS) bird-size to 100+ foot wingspans. Unmanned aerial vehicles (UAVs) typically fall
into one of six functional categories: target and decoy, reconnaissance, combat,
logistics, R&D, and civil/commercial. The growing demand for increasingly
sophisticated and versatile unmanned systems reflects the warfighter’s need
for intelligence, surveillance, and reconnaissance support that can reduce risk to
combat forces and associated deployment costs.
Figure 7.2
Aircraft prime contractors and suppliers often rely Commercial aviation customers typically bring in
on revenues from both defense and commercial large-volume orders and stable demand forecasts
customers. For example, Boeing’s share of over longer terms than the government’s future
revenue from the U.S. government was around year defense program (FYDP) planning process.
24 percent between 2016 and 2018 and it sharply The suppliers often share their internal resources
increased to 30.5 percent and 33.9 percent in such as equipment, buildings, and human
2019 and 2020, respectively.9 A list of U.S. military resources between commercial and defense
aircraft by prime contractor (fixed-wing, rotary, and work to optimize overhead cost and production
UAS) are listed in Figure 7.3. efficiency. As such, demand from commercial
customers is essential to support and sustain
manufacturers and suppliers within the defense
industrial base.

Prime
Subsector Aircraft Type by Service
Contractor
Army Navy & USMC Air Force
Boeing F/A-18 Hornet/Super A-10 Thunderbolt II

Hornet B-52 Stratofortress
P-8 Poseidon B-1 Lancer
EA-18G Growler C-17 Globemaster III
E-6 Mercury E-3 Sentry
AV-8B Harrier II Command Post
F-15 Eagle
KC-46 Pegasus
VC-25
T-7A Red Hawk
Fixed-Wing Lockheed F-35B/C Lightning II C-130 Hercules /

Martin P-3 Orion/ARIES Compass Call
F-16 Fighting Falcon
F-22 Raptor
U-2 Dragon Lady
F-35A Lightning II
C-5 Galaxy
Northrop E-2D Advanced B-2 Spirit

Grumman Hawkeye B-21 Raider
E-8 Joint STARS
Various C-12 Huron
Prime
Contractor
Airbus UH-72A Lakota UH-72A Lakota
Bell Boeing CMV/MV-22B Osprey CV-22B Osprey
Bell Textron AH-1Z Viper

UH-1Y Venom
Boeing AH-64 Apache MH-139 Grey Wolf

Rotary-Wing
CH-47 Chinook
LM-Sikorsky UH-60 Black Hawk MH-53E, CH-53D/E/K HH-60 Pave Hawk

VH-60N White Hawk, H-60 Seahawk /
Knighthawk
VH-92
VH-3D Sea King

Prime
Contractor
Aerovironment RQ-11 Raven RQ-12A WASP RQ-20 Puma
Boeing RQ-21 Blackjack

MQ-25 Stingray
FLIR Black Hornet 3
General Atomics MQ-1C Gray Eagle MQ-9 Reaper

UAS
Lockheed RQ-170 Sentinel

Martin
Northrop MQ-4C Triton

Grumman MQ-8B/C Fire Scout
Textron RQ-7B Shadow
Figure 7.3
liquidity issues among suppliers due to work
stoppages and restricted cash flow. Over 100
suppliers for the 737 MAX also provide parts
Major Risks & Issues and services for the DoD.
− The COVID-19 outbreak further aggravated
Risk Archetypes supply chain issues in the aircraft sector. All
three aircraft sub-sectors faced significant
− Foreign Dependency challenges in maintaining and sustaining
− Fragile Supplier the health of the DIB due to a large number
− Product Security of defense suppliers experiencing facility
shutdowns, high absenteeism, furloughs, and
financial instabilities.
Downturn of Commercial Aviation
In FY2019, the aircraft sector was considered
one of the strongest and most stable sectors;
Small Unmanned Aircraft Systems (sUAS)
the sector exhibited growing demand in the The small UAS class applies to UAS that have
commercial aircraft sector and stable defense maximum gross takeoff weight of less than 20lbs
demands until two significant events occurred with normal operating altitude less than 1,200ft
consecutively in early 2020. above ground level and airspeed less than 100
knots. As of early 2020, there were five U.S.
− Boeing’s 737 MAX, formerly the largest companies in the top ten of U.S. sUAS market
commercial aircraft program in the industry by share holders. However, the combined market
value, was decertified after two fatal crashes, share of the five companies was only eight percent,
which led to a production halt in January while a single foreign company held 77 percent
2020. The production freeze disrupted the of the U.S. sUAS market share.10 In recent years,
production and deliveries of 737 MAX parts many sUAS manufacturers in the U.S have either
from the suppliers, dramatically reducing exited the consumer market or been consolidated
revenue and production throughout the into a fewer number of entities.
industry. These events eventually resulted in

In the FY2020 DoD budget, both procurement The DIU has also awarded contracts totaling $11
and RDT&E budgets for UAS programs were million to six sUAS companies in 2019 and hosted
approximately $3.2 billion in total. Approximately an event called Blue sUAS Demonstration Day
$153 million was allocated to sUAS programs. The in August 2020, where five of the six companies
DoD’s annual budget for sUAS was less than four presented cybersecure sUAS products. The Blue
percent of the U.S. small drone market size of $4.2 sUAS platforms were approved through a cyber-
billion in 2020, indicating that the U.S. small drone security vetting process and made available for
market is predominantly driven by commercial purchase by any government agencies through the
interests. As such, it is critical that the DoD work GSA schedule in September 2020. Although there
with the commercial sUAS industry to develop are sUAS options that the DoD can safely procure
new and advanced UAS that could benefit both and operate, there are still supply chain risks to be
commercial and defense sectors and to quickly mitigated. An analysis of the bill of materials from
adopt commercially available systems that meet four randomly selected U.S. sUAS platforms that
DoD requirements. meet the DoD requirements revealed that certain
components rely heavily on Chinese suppliers.
Approximately $13.4 million was awarded to sUAS
suppliers under Defense Innovation Unit’s (DIU’s) Fuselage structures (e.g. carbon fiber or plastic
Commercial Solutions Opening using the funds frames), electric motors (e.g. Neodymium Iron
authorized and appropriated under the CARES Act. Boron magnets) and printed circuit board (PCB)
The DPA Title III efforts will allow five domestic sUAS were the top three component categories that
suppliers to build sUAS components and software had the most reliance on parts from China (Figure
to keep the domestic sUAS industrial base healthy 7.4). The DoD is continuously working on efforts to
and competitive with foreign sUAS producers. The identify and mitigate supply chain risks within the
DIU specializes in accelerating adoption of leading sUAS industrial base.
commercial technology throughout the military and
growing the national security innovation base.
sUAS Parts Suppliers by Country

100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
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er
as
ks
es
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ay
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ar
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ys
ys
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Vietnam UK Switzerland Mexico Korea Germany Canada

USA Taiwan Netherlands Lithuania Japan China France
Figure 7.4: sUAS Parts Suppliers by Country

COVID-19 Impacts
Since the shutdowns in March 2020 caused by the outbreak of the coronavirus pandemic,
commercial airline demand has decreased significantly. In May 2020, the airline demand
declined by 91.3 percent from the previous year.11 The downturn in the commercial aircraft
market has placed numerous defense suppliers in financially difficult situations. The prime
defense contractors such as Boeing (reducing by 30,000 employees by the end of 2021),
Raytheon (by 20,000 employees), and GE (by 13,000 employees), have announced their plans
to lay off and/or furlough their workforce. The commercial workforce is impacted the most
by these actions, but there will likely be cascading impacts to the DoD, including an increase
in overhead cost and loss of engineering skills and knowledge.
The DoD has made several efforts to protect the critical defense industrial base, including
increasing progress payments, exercising option clauses in the current contracts, and
awarding DPA Title III contracts using CARES Act funds.
FY2020 Developments
Budgetary Impacts
Overall, the DoD aircraft procurement budget for A decline in procurement funding is anticipated
FY2020 - FY2024 is stable (Figure 7.5). after FY2029 due to a scheduled decline in
aircraft production and likely transition to the
A surge of funding is anticipated in FY2025-2027 development of 6th generation aircraft, cargo
due to the likelihood of the B-21 and the Future aircraft, and fighter drones.
Vertical Lift programs entering production and the
F-35 and the T-7A programs in peak procurement.
DoD Aircraft Sector Procurement Dollars

60
50
40
30
20
10
0
1999 2004 2009 2014 2019 2024
Fixed Wing Aircraft Rotary Wing Aircraft Aircraft Spares and Repair Parts Aircraft Supt Equipment & Facilities
Airlift Aircraft Combat Aircraft Modification of Aircraft Other Aircraft Special Operations Command Trainer Aircraft
Figure 7.5: DoD Aircraft Sector Procurement Budget by Year

The RDT&E investment from FY2019 to FY2024 The UAS sector will experience an anticipated
will decrease by approximately 45 percent due 64 percent decrease in the RDT&E budget from
to aircraft funding moving from development to FY2019 to FY2024 (Figure 7.7). However, the
production (Figure 7.6). In FY2025, the RDT&E budgets for Counter Unmanned Aircraft Systems
budget is forecasted to increase slightly above the programs are likely to grow in the next several
1999 level for programs such as 6th generation years.
tactical aircraft, unmanned fighter, and new cargo
aircraft.
DoD Aircraft Sector RDT&E Budget by Year

12
10
8
2020 $B
0
1999 2004 2009 2014 2019 2024
BA 2, Applied Research BA Subtotal BA 3, Advanced Technology Development BA Subtotal

BA 4, Advanced Component Development & Prototypes BA Subtotal BA 5, System Development & Demonstration BA Subtotal
BA 6, Management Support BA Subtotal BA 7, Operational Systems Development BA Subtotal
Figure 7.6: DoD Aircraft Sector RDT&E Budget by Year
DoD UAS Procurement & RDT&E Budget by Year
4
2020$B
0
1999 2004 2009 2014 2019 2024
Procurement RDT&E
Figure 7.7: DoD UAS Procurement & RDT&E Budget by Year

Mergers and Acquisitions (M&A) Aviation’s Recovery
The Aerospace and Defense sector experienced a The health of the aircraft defense industrial base
significant decline in deals, volume, and, value in will be inextricably linked to the recovery of the
FY2020. Three of the four biggest M&A transactions commercial aircraft industry. Many industry experts
in FY2020 (i.e. Raytheon/United Technologies anticipate it will take at least three to five years for
Corporation: $33.17 billion, Cobham/Advent the airline industry to return to pre-COVID global
International: $5.23 billion, and Collins/BAE: $1.9 passenger traffic.12 Due to the downturn of the
billion) were carry-overs from FY2019, and an commercial aviation industry, suppliers may choose
additional deal between Hexcel and Woodward to downsize their production capacity by closing
($7.74 billion) was mutually terminated after the facilities or not operating equipment and machines.
COVID-19 outbreak. This in turn can potentially create supply chain
bottlenecks, especially when airline passenger traffic
numbers improve and the aircraft original equipment
Sector Outlook
manufacturers start increasing order quantities again.
Emerging Technologies
The DoD continues to track emerging threats
and opportunities within the sector. Some of the
fastest growing, game-changing technologies,
including artificial intelligence, autonomy, additive
manufacturing, and advanced robotics, could
become key enablers for the sector and next
generation of fighters, including both manned
and unmanned systems. The U.S. Air Force has
launched programs such as Skyborg, to build an
artificial intelligence-enabled drone wingman, and
Agility Prime, to accelerate the commercial market
for advanced air mobility vehicles (i.e., flying cars).
The DoD also has on-going efforts to increase its
organic industrial base capabilities by integrating
additive manufacturing, automation, and advanced
robotics into depots.

Chemical, Biological, − Information systems that consist of integrated
early warning, hazard prediction models,
Radiological, Nuclear consequence management, and decision
Defense (CBRND) support tools,

− Rapid development and acquisition of crucial
Sector Overview CBRND technology for the survival and
unimpeded employment of special operations
The CBRND sector of the DIB integrates science,
forces in toxic environments.
engineering, testing, and logistics to field products
that provide protection from chemical, biological,
radiological, and nuclear (CBRN) threats and Major Risks and Issues
attacks. The 2017 NSS emphasized the importance
of this sector in implementing critical capabilities
to counter hostile states and terrorist groups
Risk Archetypes
increasingly trying to acquire CBRN weapons. − Erosion of U.S.-based infrastructure
The Department of Defense Chemical and Biological − Capacity-constrained supply
Defense Program’s (CBDP) mission is to enable the market
Warfighter and first responders to deter, prevent, − Single source
protect, mitigate, respond, and recover from CBRN
threats and attacks as part of a layered, integrated
defense. To support this mission, the CBDP The case studies below, covering a subset
industrial base sustains the capabilities needed to of CBRND products and organic industrial
support the three strategic readiness goals: capabilities, illustrate how a capacity-constrained
supply market and the erosion of U.S.-based
1. Equip the force to successfully conduct military infrastructure can potentially result in gaps within
operations to prevent, protect, and respond to the sector. These gaps may lead to limited or
CBRN threats. non-existent domestic industrial capabilities
necessary to protect the Warfighter and achieve
2. Develop new capabilities to counter emerging
NSS requirements. The case study summaries are
CBRN threats.
based on analyses conducted during FY2020.
3. Maintain industrial capabilities to achieve NSS
requirements.
Joint General Purpose Decontaminant for
The sector is composed of commercial and organic Hardened Military Equipment (JGPD-HME)
industries that support a niche market heavily JGPD-HME is an Acquisition Category III Joint
dependent upon DoD procurements for sustainability Services program military decontaminant
and new technology development. The sector is an kit. JGPD-HME consists of three powdered
aggregate of capabilities that are required to provide components packaged in individual pouches.
technical products in the areas of: There is currently one single qualified commercial
source of supply for JGPD-HME capable of
− Medical countermeasures to address CBRN and
producing all three components of the kit. Supply
emerging infectious diseases,
chain or manufacturing issues at the contractor
− Protection for the Warfighter through level can lead to a single point of failure for JGPD-
respirators, masks, decontamination kits, etc., HME procurement.
− Contamination avoidance through
development and use of sensors, monitors, The U.S. government has full technical data
and detectors, package rights and is standing up production
capability at Pine Bluff Arsenal (PBA). First

article samples for two of the three powdered Organic Industrial Base: DEVCOM
components are being tested in quarter one Chemical Biological Center (CBC)
of FY2021. PBA does not currently possess the
Edgewood Engineering Directorate Test
capability to produce the third component, and
Laboratories
has entered into a contract with the current
manufacturer for a two-year supply, with the DEVCOM CBC Edgewood Engineering Directorate
potential for additional sales beyond that Test Laboratories test chemical and biological
timeframe. PBA is developing a pilot scale defense products against a variety of dangerous
production process for the component, and chemical and biological agents and toxic
anticipates their production process to be qualified compounds. The Center performs testing on
within the two-year timeframe. Until PBA’s systems and products, such as individual and
production methods for all three components collective protection, contamination avoidance,
have been fully qualified, there will continue to be decontamination materials, and component and
a dependency on a single source of supply for part systems testing. After an initial shutdown period
of the kit. in March 2020 due to COVID-19, the majority of the
Engineering Directorate Laboratories developed
and implemented procedures allowing a return
Organic Industrial Base: Pine Bluff
to work with no lost test capabilities. For these
Arsenal CBRND Center of Industrial and capabilities, the biggest impact has been a slower
Technical Excellence (CITE) turnaround time due to lower workforce numbers
The PBA Arsenal directly supports numerous allowed on-site. Other factors affecting test
Joint Force readiness requirements by providing capabilities include travel restrictions, required
manufacturing, depot repair, and stock direct personnel contact, and concerns of health
management of CBRND equipment and materials. risks associated with large chamber operations.
Fluctuations and inconsistencies in CBRND Efforts are underway to continue to analyze and
workload and demand projections degrade the determine the COVID-19 risks associated with
ability to sustain current capabilities and capacities, these operations.
and develop capabilities for future requirements.
This niche sector is also highly dependent on single
Fluctuating demand is caused by various factors,
and sole source manufacturers, which is common
including infrequent or inconsistent government
in the smaller, highly technical industrial base
purchases, which can cause production lines
sectors. In many scenarios, this constraint can be
to shut down or require supplemental backing
directly attributed to deleterious U.S. government
between orders. An example of this is a
procurement practices, inconsistent funding and
nerve agent antidote maintained with the DLA
demand signals, and eroding manufacturing
Warstopper program. The Department cannot
capabilities and the associated workforce. However,
afford to lose the capability, even if there are no
the primary constraint rests in DoD barriers
orders at this point in time. These fluctuating
that restrict entry into the industry and present
demands limit the ability to surge or respond
qualification challenges, limiting competition within
quickly to CBRND requirements. In response to
the base. When items are needed quickly, smaller
these fluctuating demands, PBA is in the process
companies (or those unfamiliar with the government
of restoring metalworking and welding capabilities,
procurement process) will struggle to compete.
as well as entering into a Public Private Partnership
Procurement lead times, which can span to 18
(PPP) with a contractor to strengthen the
months, discourage many small and non-traditional
production of the defense industrial base.
DoD businesses from entering into competition for
CBRND products. This is a challenge because CBRND
is a niche sector that depends on small businesses as
important suppliers.

FY2020 Developments contractor supplied metal frames and parts, with
normal PBA filter production workload continuing
During FY2020, there have been two policy
during the day shift to ensure filter availability for
and partnership developments within the
national defense.
CBRND Sector. First, the coronavirus pandemic
necessitated a redesign of the federal and
commercial CBRN testing laboratories certification Sector Outlook
process and policy. Second, PBA, in alignment with The coronavirus pandemic has impacted all sectors
the CBRND CITE core competency requirements, of the defense industrial base. For the CBRND
established a PPP with a contractor for onsite Sector, this has manifested in an increased global
production of CBRN large filters. demand and strain on supply chains for protective
equipment. CBRND manufacturers have risen to
Laboratory Certification Process Redesign the challenge and continued production in the
midst of these challenges, yet the sector continues
The Quality Assurance (QA) branch of DEVCOM
to find itself in a precarious position with a reliance
CBC is responsible for providing laboratory
on single and sole source providers for many
certification for both government and commercial
products. It is imperative that the DoD proactively
CBRN testing laboratories. The onset of the
continues to manage the critical asset of PBA in
coronavirus pandemic, and associated travel
order to provide improved capabilities to counter
and health condition restrictions, constrained
current and emerging CBRN threats.
the ability of the QA branch to perform onsite
laboratory certification. The affected customer
base encompassed the DoD Shelf Life Program,
Joint Program Executive Office Enterprise, and
the Tank and Automotive Command (TACOM)
Chemical Biological Directorate. The pandemic
restrictions required the QA branch to redesign
the process and policy. The QA branch, in
collaboration with the customer base, developed
a virtual laboratory certification process and
policy. The virtual process has enabled effective
risk management to ensure Warfighters and First
Responders are issued conforming products. The
versatility of the process has empowered the QA
branch to continue supporting the DoD’s CBRN
program and the security of the nation.
Pine Bluff Arsenal CBRND CITE – Public

Private Partnership
The organic industrial base CBRND CITE, PBA, has
increased its efforts to provide a rapid capability
response to any volatile supply chain challenges.
The newly established PPP between PBA and a
CBRN filter contractor leverages the technical
capabilities of PBA’s existing large filter production
line and skilled workforce. The PPP filter
production will occur during the night shift using

Cybersecurity for Major Risks & Issues
Manufacturing
Risk Archetypes
Sector Overview
− Foreign dependency
The cybersecurity for manufacturing sector
includes information and operational technology − Product security
within contractor factories and across defense
manufacturing supply chains.
Awareness and Wherewithal of Small
Defense manufacturing supply chain operations Defense Contractors to Implement
rely on an immeasurablenumber of touch points
Cybersecurity Protections
where information flows through a network – both
within and across the many manufacturers’ systems Both the public and private sectors recognize the
that constitute the supply chain. Every one of these importance of safeguarding informational and
supply chain touch points represents a potential operational assets from cyber risks. However,
vulnerability to the security of our nation’s defense cybersecurity has not become an ingrained
production. norm in manufacturing, especially in small and
medium-sized manufacturers. The Defense
According to data released in late 2019 by the Federal Acquisition Regulations Supplement
U.S. Census Bureau, approximately 291,000 (DFARS) clause 252.204-7012 required defense
manufacturing establishments operate in the United contractors and subcontractors to implement the
States.13 Nearly 99 percent of those establishments information security protections described in the
are small and medium-sized manufacturers (SMMs) National Institute of Standards and Technology
with fewer than 500 employees. Multiple data (NIST) Special Publication 800-171 Revision 1,
sources indicate that most SMMs are unprepared to “Protecting Unclassified Information in Nonfederal
deal with a cyber-attack. This problem is acute within Information Systems and Organizations” by
defense manufacturing supply chains, where SMMs— December 31, 2017. Interactions with several
often lacking basic cyber controls— constitute the thousand small manufacturers by the Department
bulk of the critical lower supply chain tiers.14 of Commerce (DoC) Manufacturing Extension
Partnership National Network since 2017 reveals
Most information that is generated, stored, and
a lack of awareness and understanding of the
exchanged in the DIB is not classified. The protection
DFARS cybersecurity requirement, and a deficiency
of such unclassified, covered defense information,
of financial and technical resources necessary to
or CDI (including controlled unclassified information
manage cyber security risks. Compliance with
(CUI)), presents an enormous and complex challenge.
the requirements by sub-tier suppliers, while
Thirty-five percent of all cyberespionage attacks in the
increasing, remains relatively low and is not
U.S. are targeted at the manufacturing sector.15 Most
pervasive throughout defense supply chains.
of the manufacturing data of interest to adversaries
is CUI, including 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). As such, cybersecurity for manufacturing
presents a persistent, widespread, and complex
challenge to the entire DIB.

Inadequate Focus on Manufacturing- The CMMC model consists of maturity processes
Specific Cybersecurity Needs and cybersecurity best practices from multiple
cybersecurity standards, frameworks, and other
Manufacturing is the second most heavily attacked
references, as well as inputs from the broader
sector in the economy (finance is the first), and the
cybersecurity community. The CMMC levels
DIB is subject to continuous, coordinated cyber-
and associated sets of processes and practices
attack campaigns by nation states. Unfortunately,
are cumulative. Furthermore, the CMMC model
most cybersecurity R&D is focused on information
includes an additional five processes and 61
systems, without specific emphasis on the unique
practices across Levels 2-5 that demonstrate a
needs and operational technology aspects of the
progression of cybersecurity maturity.
manufacturing sector.
If unaddressed, the industrial base faces a high Level Description

likelihood of serious and exploitable vulnerabilities,
1 Consists of the 15 basic safeguarding
while experiencing a reduction in the number of
requirements from Federal Acquisition
suppliers compliant with requirements and eligible
Regulation (FAR) clause 52.204-21.
to provide products and services to the DoD. This
combination of risks will impact both the resilience 2 Consists of 65 security requirements
of existing suppliers and the integrity of the supply from NIST SP 800-171 implemented
chain. via DFARS clause 252.204-7012, seven
CMMC practices, and two CMMC
FY2020 Developments processes. Intended as an optional
intermediary step for contractors as
DoD issued an interim rule to amend the DFARS
part of their progression to Level 3.
to implement a DoD Assessment Methodology
and Cybersecurity Maturity Model Certification 3 Consists of all 110 security
(CMMC) framework. This framework is intended to requirements from NIST SP 800-171,
assess contractor implementation of cybersecurity 20 CMMC practices, and three CMMC
requirements and enhance the protection of processes.
unclassified information within the DoD supply chain. 4 Consists of all 110 security
This interim rule is effective November 30, 2020. requirements from NIST SP 800-171,
Building upon the NIST SP 800-171 DoD 46 CMMC practices, and four CMMC
Assessment Methodology, the CMMC framework processes.
adds a comprehensive and scalable certification 5 Consists of all 110 security
element to verify the implementation of processes requirements from NIST SP 800-171,
and practices associated with the achievement 61 CMMC practices, and five CMMC
of a cybersecurity maturity level. The CMMC is processes.
designed to provide increased assurance to the
Department that a DIB contractor can adequately Figure 7.8
protect sensitive unclassified information, such

as CUI and Federal Contract Information, at a DoD is implementing a phased rollout of CMMC.
level commensurate with risk, accounting for Until September 30, 2025, DFARS clause 252.204-
information flow down to subcontractors in a 7021, Cybersecurity Maturity Model Certification
multi-tier supply chain. A DIB contractor can Requirements, is prescribed for use in solicitations
achieve a specific CMMC level for its entire and contracts. To implement the phased rollout
enterprise network or for particular segments, of CMMC, inclusion of a CMMC requirement in
depending on where the protected information is a solicitation during this time period must be
processed, stored, or transmitted. approved by USD(A&S).

CMMC will apply to all DoD solicitations and Sector Outlook
contracts, including those for the acquisition of
Gaps in cybersecurity protections among defense
commercial items (except exclusively commercial
manufacturers can lead to widespread and
off-the-shelf items) above the micro-purchase
persistent vulnerabilities in the DIB, contributing
threshold, starting on or after October 1, 2025.
to the erosion of manufacturing, economic
Contracting officers will not make an award, or
competitiveness, and national security.
exercise an option on a contract, if the contractor
does not have current (i.e. not older than three Multiple approaches exist to manage cybersecurity
years) certification for the required CMMC level. risks within the industrial base, but not all are
Furthermore, CMMC certification requirements appropriate or even adequate to protect all levels
must be applied to subcontractors at all tiers, of controlled information, including CDI and
based on the sensitivity of the unclassified CUI. Three key issues – lack of uniform security
information at the subcontractor level. implementation; inconsistent implementation
of adequate security by defense suppliers; and
reliance on self-attestation as indicated by current
DFARS requirements – expose the manufacturing
sector to cybersecurity risks. Further, the
implementation of emerging technological
systems in the DIB will exacerbate challenges to
cybersecurity, and increase the stakes of malign
technology transfer in the future.

Electronics generations ahead of Intel Inc., the United States
leader in semiconductor technology.
Sector Overview
Counterfeited Electronic Components
The electronics sector manufactures products
for a wide variety of end user markets, including The U.S. Navy studied counterfeit trends based on
consumer electronics, computers, automotive, information provided by ERAI, an electronic part
industrial equipment, medical equipment, reporting and dispute resolution organization;
telecommunications, aerospace, and defense. their study consisted of 9,009 part reports and
Electronic systems and components are ubiquitous 2,593 company complaints. The study confirmed
throughout all DoD weapons systems, but global that integrated circuits (ICs) continue to be
military production represents only one percent of the most commonly counterfeited electronic
a market dominated by commercial devices. components, identified in over 60 percent of all
ERAI reports from 2018 through mid-2020. Multi-
layer ceramic capacitors, a relatively simple part,
Major Risks & Issues are the second most-counterfeited part, making up
approximately 15 percent of the reported suspect
parts since 2018.16
Risk Archetypes
DoD organizations continue to develop
− Foreign dependency requirements to mitigate the counterfeit
− DMSMS microelectronics risk. For example, U.S. Naval
Sea Systems Command (NAVSEA) released
NAVSEAINST 4855.40, Counterfeit Materiel
Decline of Domestic Semiconductor Prevention in April 2019, with compliance becoming
Manufacturing a part of NAVSEA Inspector General audits starting
in October 2020. In November 2019, the Federal
Currently, the United States only holds a 12
Acquisition Regulatory Council also issued a new
percent market share in the global semiconductor
regulation, FAR 52.246-26, which requires federal
manufacturing market. The dependence on foreign
contractors to report any counterfeit or suspect
sources for semiconductor products continues
counterfeit parts to the Contracting Officer and
to represent a serious threat to the economic
the Government Industry Data Exchange Program
prosperity and national security of the U.S., as
within 60 days of the finding.17
much of the critical infrastructure is dependent on
microelectronic devices. This threat will become
more pronounced as emergent technology sectors, Decline of U.S. Printed Circuit Board
such as Internet of Things (IoT) and AI, require (PrCB) Manufacturing
commodity quantities of advanced semiconductor
U.S. PrCB and PrCB assembly (PrCBA)
components.
manufacturers have sufficient technical capability
In addition, the diminished focus on domestic to meet DoD’s current advanced manufacturing
semiconductor manufacturing has contributed technology needs, excluding organic IC substrates.
to the erosion of U.S. technological supremacy However, this could change with a few acquisitions
in advanced semiconductor manufacturing. or closures.
The current industry leaders introducing new
The number of small and medium PrCB
semiconductor technology nodes are Taiwan
manufacturers supplying the DoD continued
Semiconductor Manufacturing Company (TSMC),
to diminish in 2020, falling by 16.3 percent and
Ltd. (Taiwan) and Samsung Group (South
25.6 percent in the last five years, respectively.18
Korea). These companies are several technology
The DoD is at risk of losing capability due to the

mergers and acquisitions of small domestic PrCB Obsolete Technology
manufacturing companies that are purchased by
DoD’s acquisition and sustainment systems use
larger companies. The small companies’ niche
microelectronic technology that is generations
products and services necessary for national
behind commercial technology. Due to the high
defense systems may not provide sufficient revenue
cost of redesign, test, and requalification, most
or opportunity for growth for their new, larger
systems do not undergo technology refreshes,
owners. This growth will further edge out the small
which would allow the insertion of new technology
PrCB manufacturers who provide essential products
parts. This leads to obsolescence issues because
and services for national defense systems.
the microelectronics industry does not have
Fortunately, the DoD Executive Agent for Printed sufficient demand to continue producing these
Circuit Board and Interconnect Technology (PrCB parts. DoD alone cannot sustain production.
EA) is developing and promoting DoD policies Therefore, many parts become obsolete, and
and regulations that encourage trusted domestic programs are forced to do costly lifetime buys, or
PrCB manufacturing and reshoring, which could expensive redesign/requalification efforts to utilize
help alleviate this concern. In addition, DoD is a different part. These are usually not budgeted
investing in trusted domestic PrCB manufacturing for by the programs, which makes it very difficult
by leveraging economic stimulus funding and the to address these issues.
DPA Title III program.
A production line utilized by many DoD programs,
including anti-tamper, missiles, platforms, space
Limited Domestic Capacity for Organic systems, and potential future strategic systems
IC Substrate Manufacturing recently went end-of-life, requiring just such
costly efforts. Better tracking of microelectronic
Taiwan, South Korea, Japan, and China collectively
parts by the Department, and better planning and
produced over 90 percent of the $8 billion organic
budgeting by programs to insert new technologies,
IC substrate production in 2018; the United
would allow DoD to respond to these issues in a
States produced less than 0.1 percent that year.19
more proactive way versus the costlier reactive
Organic IC substrates are the most advanced PrCB
efforts it usually undertakes.
interconnect technology in the market today and
will enable next-generation technology. Substrate-
like PrCBs (SLPs), essentially equivalent to organic Congressional Action
IC substrate constructions, are becoming more Congress has included a number of pieces of
common as the feature sizes in cell phone PrCBs legislation in the draft FY2021 NDAA to address
continue to shrink. some of the issues noted in this report, including
The U.S. PrCB industry has not developed a on-shoring microelectronics manufacturing
significant capability to deliver production capability, increasing funding for research
capacities of organic IC substrates due to and development of new microelectronics
high labor costs and the hyper-competitive technologies, and requiring use of domestic PCBs
environment created by Asia. However, a in DoD systems. If the final legislation is targeted
number of U.S. companies are starting to invest to the right risk areas, and appropriations are also
in this capability.20, 21 Domestic and future DoD provided, this could start to resolve some of the
investments are crucial as Japan, a previously vital major issues outlined here.
source for U.S. organic IC substrate supply, has
recently announced it will not support production
requirements for defense-unique microelectronics.

FY2020 Developments commercial and DoD applications. This merger
would give AMD a significant competitive
Mergers & Acquisitions advantage over Intel, particularly in emerging
markets such as IoT and large data applications.
In the aerospace and defense sector, electronic
equipment contributed 23 percent of total deal The most substantial bare PrCB manufacturer
value in the first half of 2020 ($15.4 billion). acquisition in 2020 was the Summit Interconnect
The most noteworthy of these mergers and Inc. acquisition of Integrated Technology Ltd. in
acquisitions were the BAE Systems Inc. acquisition Canada.23 Summit Interconnect now has four
of Collins Aerospace-Military – Military Global facilities, three in the United States and one in
Positioning System business, and the Teledyne Canada. With annual total estimated sales of over
Technologies Inc. acquisition of Photonics $120 million, Summit Interconnect moved into the
Technologies SAS.22 top four U.S. bare PrCB facilities.24
In the microelectronics sector, two substantial

mergers were announced that will have significant
impact in their respective market segments:
− February 2020: Dialog Semiconductor (United

Kingdom) announced the acquisition of Adesto
(United States), a provider of analog and mixed
signal application-specific semi-conductors
and embedded systems for the Industrial
IoT, for $500 million. According to Dialog, the
acquisition will enhance Dialog’s position in
the Industrial IoT. Adesto is based in Santa
Clara, California, employs 270 people, made
approximately $118 million in 2019, and has
a portfolio of solutions for smart building
automation in the industrial, con-sumer,
medical and communications markets.
− September 2020: NVIDIA, Inc. announced
plans to acquire ARM Holdings from Softbank
(Japan) for $40 billion. ARM technology is
used in approximately 90 percent of all mobile
applications and in many gaming platforms.
NVIDIA has announced their plan to use ARM
technology to accelerate next-generation
data center technology, placing them in direct
competition with Intel.
− October 2020: Advanced Micro Devices (AMD)
announced plans to acquire Xilinx, Inc. for
$35 billion. AMD is a direct competitor of
Intel, engaged in the development of Central
Processor Units, the core component in
modern computers. Xilinx Inc. produces a
class of semiconductor devices known as Field
Programmable Gate Arrays that have extensive

New Programs/Initiatives
COVID-19 Impacts
The PrCB EA facilitates access to reliable, trusted,
and affordable PrCB fabrication, assembly
The coronavirus pandemic has significantly
products and technologies that meet the DoD
impacted the U.S. electronics sector’s
quality, performance, and security requirements.
ability to provide timely support and supply
The PrCB EA supports collaboration within and
for national defense systems. The U.S.
across DoD to conduct research, development, and
electronics sector has experienced:
sustainment efforts targeting Component-unique
− Heightened awareness of the sector’s requirements.
foreign dependency overall, but
The PrCB EA continued research and development
especially China.
activities in FY2020, focusing specifically on
− Product launch delays and cancellations technologies that could enhance national defense
(53 percent) and component cost systems. This research and development
increases (37 percent); 25 includes: performance and reliability assessments
− Onboarding new suppliers without of additive manufacturing based electronics;
approved vendor qualification processes manufacturing processes, patterning techniques,
in order to quicken access to critical material sets, and equipment requirements that
inventory (31 percent).26 support PrCBs with less than ten micrometers
line and space features; solder replacement
− Extending certifications and licenses for
technologies; reliability assessments on enabling
as long as six months, and delaying new
technologies for 2.5D and 3D packaging; direct
certifi-cations (e.g., International Traffic in
write substrates, and printed devices, including
Arms Regulations, NADCAP, AS9100); and
batteries, sensors, transistors, and energetics.
− Decreasing 2020 capital expenditures in
facility upgrades and new technology (26 DoD is also investing in heterogeneous packaging
per-cent), according to an IPC survey.27 through the State-of-the-Art Heterogeneous
Integration Prototype (SHIP) Program, which
The microelectronics industry, however, is driving advanced microelectronic packaging
reported a more minimal impact. During an technology.28
Industrial Base Council meeting on October
2, 2020, four commercial microelectronics There have been several new budgetary
companies (representing small, medium, and developments within DoD in the electronics sector:
large microelectronics producers) provided − The JIBWG collected, evaluated, and vetted
their perspectives, discussing COVID-19 critical electronics sector needs resulting
impacts to the commercial industry and their from the coronavirus pandemic, and made
companies, and initiatives the U.S. government recommendations to the IBC on CARES Act
could take to help the microelectronics funding allocations. Roughly $80 million
industry. The overall COVID-19 impacts has been allocated to the electronics sector
described by the microelectronics companies through the CARES Act.
were minimal.
− In June 2020, the bipartisan Creating Helpful
Incentives to Produce Semiconductors (CHIPS)
for America Act was introduced in the Senate
and the House. This bill will provide significant
federal investments to U.S. semiconductor
companies to give them a technological
edge in semiconductor materials, process

technology, architectures, design, and Additionally, section 224 of the FY2020 NDAA
advanced packaging to help restore U.S. requires defense microelectronics products
leadership in semiconductor technology and services to meet trusted supply chain and
essential to national security. operational security. A strategy is currently under
− In October 2020, DoD awarded over development and will require implementation by
$197 million to advance microelectronics January 2023.
technology and strengthen the U.S.
microelectronics industrial base, which Strategic Competition
will underpin the development of other
“While we still design components and printed
DoD technology priorities such as AI, 5G
circuit cards in the U.S., the majority of fabrication,
communications, quantum computing, and
packaging, testing, etc., is done offshore,”
autonomous vehicles. Nearly $200 million will
USD(A&S) Ellen M. Lord said at the Electronics
be issued through two DoD programs: The
Resurgence Initiative Summit. She offered some
Rapid Assured Microelectronics Prototypes
hope, adding that through public and private
(RAMP) using the Advanced Commercial
partnerships, the government can provide capital
Capabilities Project Phase 1 Other Transaction
and a demand signal to encourage manufacturers
Award, and the SHIP Program Phase 2 Other
to bring microelectronic production back to the
Transaction Award.
U.S.29
− The Presidential Determination authorizing
the use of DPA Title III authorities to While the global PrCB market continues to grow
strengthen the domestic industrial base and – from $30 billion in 200030 to over $65 billion in
supply chain for rare earth elements and 2018,31 the number of PrCB companies in North
to correct the industrial base shortfall for America has continued to decline, from over 1500
radiation-hardened electronics. in 2000 to around 199.32 While consolidations
in the U.S. have strengthened some of the
larger manufacturers, they have created a more
Sector Outlook challenging market for small PrCB manufacturers.
Trusted Certifications PrCBA manufacturing is often outsourced to

electronic manufacturing service (EMS) providers.
To establish more comprehensive trust assurance
Of the top 20 EMS providers in 2019, four are based
within the U.S. PrCB industrial base, DoD in
in the United States and eight in Taiwan.33 Taiwan
partnership with Institute for Printed Circuits
dominates the EMS market, leading in both revenue
(IPC) created IPC-1791 Trusted Electronic Designer,
and number of facilities.34 The current United States
Fabricator and Assembler Requirements. The
-China trade war has also prompted EMS providers
initiative aimed to develop a competitive network
to build plants outside of China, benefitting
of trusted PrCB and interconnect technology
manufacturers in Vietnam and Malaysia.35 An
providers. Efforts to keep IPC-1791 current
increase in EMS providers outside of China has
continue: Revision A includes provisions for
provided the United States with considerable
the certification of non-U.S. PrCB designers,
access to PrCBA manufacturing capability.36
fabricators, and assemblers that are sponsored
by U.S. prime contractors; Revision B is currently The U.S. maintains a 45-50 percent combined
under review and will expand requirements to market share in electronic design sectors such
include cable and wire harness assemblers, SLPs, as electronic design automation and intellectual
and complementary Cybersecurity Maturity Model property core development. However, the U.S.
Certification requirements. market share of semiconductor manufacturing has
declined from 37 percent in 1990, to 12 percent

in 2020. Despite this trend, the U.S. currently Emerging Trends/Technologies
maintains a combined 30 percent market share in
Finally, these emerging and foundational
the optoelectronic, analog, and discrete electronic
technologies will require the electronics sector to
component sectors. The U.S. manufacturing
advance standard manufacturing processes, often
decline in semiconductor fabrication has benefitted
necessitating investments, new processes, and
large fabrication facilities in Taiwan, and more
new materials (Table 7.9).
recently, China.37 Global IC semiconductor sales in
2019 were $412.3 billion.38
The domestic semiconductor industry relies

heavily on outsourced semiconductor assembly
and test (OSAT) corporations to package and
test semiconductor products. Currently, over
75 percent of electronic component packages
and 98 percent of the testing performed by the
OSAT sector occurs in Asian facilities.39 This
trend is expected to continue as leading edge
semiconductor manufacturers, such as TSMC, are
now engaged in the OSAT market.
Copper Improved Size,

Interconnect/ Thermal Weight, Power/ Advances in
New Business
Technology Solder Joint Management Finer Circuit PrCB and PrCB
Materials Impacts
Advances, Advances Traces/ Smaller Manufacturing
Ruggedization Vias
Hypersonics X X X
Directed Energy X X X
Advanced X X
Communications
Space Offense X X
and Defense
Unmanned X X X X
Aerial Systems/
Autonomy
Advanced X X X X X
Robotics/AI
Table 7.9: Advances Required for Emerging and Foundational Technologies

Ground Systems service support. The ground vehicle sector of
the DIB has seen a drastic contraction of players
in recent decades into what is now a small set
Sector Overview of prime suppliers that design and manufacture
Ground systems provide defense-unique products, Combat Vehicles (CV) and Tactical Wheeled
integrating the functions of mobility, firepower, Vehicles (TWV).
survivability, and communications into vehicle
systems primarily for the U.S. Army and Marine
Corps. These encompass tracked and wheeled
vehicles for combat, combat support, and combat
1990 Prime Contractors 1990s 2000s 2010s 2020s 2020 Prime Contractors
Harsco BMY
FMC UDLP - Carlyle UDI
Steward Stevenson Armor Holdings
BAE Systems
BAE Systems GS Europe - Rheinmetall AG
Alvis
Haglunds
Vickers
Freightliner
General Motors (TWV)
Force Protection Industries
General Dynamics
Mowag - GM Canada
Santa Barbara
General Motors DD
Steyr-Daimler-Puch AG
Martin Marietta - AV Technology
Martin Marietta
Flyer Defense LLC
International Harvester
Iveco SPA
Mack Truck
Oshkosh Corporation
O'Gara-Hess & Eisenhardt Armoring Co LLC
Polaris Industries
LTV Steel - Renco Group (AM General)
Millenworks
Textron Marine Systems
Textron Cadillac Gage Systems
Figure 7.10 Contraction in Ground Vehicles Sector Primes

Source: DCMA IAG
*Note: companies in the matrix have had production, development, or major vehicle modification contracts
in the past decade

Combat Vehicles (CVs) Single Source
CVs are typically heavily armored and integrated The ground vehicles sector has evolved into a
with complex weapon systems, fire control, and number of single source suppliers. The cyclical
sensors. This class of military ground vehicles nature of shifting demand, declining budgets, and
tends to require defense-unique components ever-changing requirements has driven market
with little commercial commonality. Although consolidation. As a result, DoD has only one
an assortment of other defense firms such as qualified supplier for many of the platforms. Due
Lockheed Martin, SAIC, and Textron occasionally to commonality of products across both defense
compete for selected CV programs as a prime and commercial product lines, the firms in the TWV
or major partner, BAE Systems and GDLS largely market are not as segmented as those in the CV
dominate the combat vehicle subsector. market.
Tactical Wheeled Vehicles (TWVs) Fragile Market

While also designed to accommodate use in The ground vehicles sector is a fragile market due
demanding military environments and missions, to the economic challenges created by the cyclic
TWVs are usually platforms modified from nature of demand, budgets, and requirements.
commercial variants. As such, this class benefits Over the last few decades, budget reductions
from a shared industrial base supporting this and uncertainty have resulted in delays and
subsector and the U.S. automotive market through cancellations in new ground vehicle programs.
complex supply chains, research and development This hinders both R&D and manufacturing
operations, and shared assembly and production technology supplier investment as well as the
systems for component manufacturing. As a ability to incentivize new entrants.
result, there is the equivalent of “warm basing”
in the TWV market, where firms can maintain the
Capacity Constrained Market
expertise and product line capability to ramp up
production of TWVs with minimal U.S. government The segments of the ground vehicles sector
or DoD involvement. Although current production remain capacity-constrained. Lack of continuous
of TWVs is dominated by two domestic suppliers, demand drives private industry to reduce excess
AM General and Oshkosh, there are multiple manufacturing capacity and investments in DoD
qualified vendors for the repair, refurbishment, production lines. This issue is particularly acute
and modifications business. in CV production where one U.S. manufacturer
is responsible for producing approximately 80
percent of the U.S. Army’s Armored Brigade
Major Risks and Issues Combat Team Vehicles as well as the Marine Corps’
The primary risks in this sector fall into many of the Amphibious Combat Vehicle. Rapid increases in
risk archetypes developed in the EO 13806 report. demand for multiple new products continues to
The overall risk to this segment is moderate. stress production capabilities at this manufacturing
site, leading to program delays and quality control
issues in multiple programs.
Risk Archetypes:
− Single source U.S.-Based Human Capital
− Fragile market The ground vehicles sector requires a steady flow
− Capacity-constrained supply market of critical engineering and manufacturing skill
− Gap in U.S.-based human capital sets to meet present and projected needs. Both
CV and TWV markets require a new generation
− Erosion of U.S.-based infrastructure
of skilled technicians, particularly in welding and

machining, to meet future demands. These two management. The U.S. Army recently invested in
critical skills are in short supply across all sectors new modern equipment for the arsenal. The DoD
of the DIB. The pipeline of trade schools and must continue to modernize the organic industrial
reputable technical education programs that once base to ensure its fitness to sustain current
educated the older generations of the workforce programs and meet future surge requirements.
is fragmented. If the eroding technical skill base is
not addressed, the ground vehicle sector will not
FY2020 Developments
be able to maintain the workforce needed to keep
up with demand. The CV market also requires
unique engineering skills such as weapons systems The coronavirus pandemic had a major impact on
engineers that are not needed in the commercial all DIB sectors to varying degrees. A summary of
ground systems arena. These skills need to be the impact on the ground sector is below:
nurtured by a suitable RDT&E base to support
A number of program delays resulted in
training the specialty engineers.
production backlogs and program cost increases.
Prime contractors have refined their production
Erosion of U.S.-Based Infrastructure operations to continue to work, making up the
Erosion of U.S. based infrastructure continues to backlogs. The two key arsenals that support
impair the ability to maintain current capacity and this sector are in the early stages of a five-year
prepare for future needs in the organic industrial performance improvement plan, including process
base. By law, the DoD is required to manufacture improvements and equipment upgrades to better
large-caliber gun barrels at one organic arsenal. support the needs of this sector.
Much like the private sector, fluctuating DoD
demand has resulted in higher operational costs,
aging infrastructure, inability to retain human
capital, and inconsistent production
Ground Vehicle Sector COVID-19 Impacts Count
Number of Affected Ground Vehicle Programs 40

Number of Reported Facility Closures for Affected Programs 31
Additional Program and Facility Impacts:
• Travel restrictions delayed program reviews

• Supplier disruptions impacting production schedules
• Employee absenteeism limiting production
• Test range non-availability
• A s of October 13, 2020 there have been 118 ground vehicle sector industrial facility impacts and 301 temporary
DIB closures due to the coronavirus pandemic with 1 current facility closure
Figure 7.11, Source: DCMA IAG

Sector Outlook
The U.S. Army and Marine Corps have published
long-term vehicle modernization strategies
to align ground vehicle priorities with ground
vehicle procurement profiles. In support of these
strategies, new technology development is ongoing
in support of increased lethality, supportability,
and mobility.
Lethality Survivability Mobility
• 3rd Generation Improved • Advanced materials/structural • H ybrid electric and full electric
Forward-Looking Infrared (U.S. fiber (U.S. Industry) propulsion (U.S. Industry)
Industry) • Active protection systems/ • Artificial intelligence for
• 30mm cannon upgrades for the countermeasures (e.g., Trophy) self-driving and situational
Stryker (Raphael-Israel) awareness
• 40mm Cased Telescoping • New electronic warfare (EW) • Biofuels (DARPA)
Armament System (UK/France) systems to jam incoming • Fuel optimization (Army
• Directed energy systems missiles Research Lab)
• Ground X-Vehicle Technology
(DARPA)
Figure 7.12, Source: DCMA IAG

room for improvement to ensure the TWV industry
is better able to leverage and rapidly employ
During the upcoming FYDP period there is
innovative products and processes and critical
expected to be a decline in sector RDT&E that will
skills between defense and commercial markets.
require a greater focus on selective investment.
Increased prototyping efforts can increase
opportunities to practice critical design skills
and capabilities for CVs and TWVs. The Army’s
Optionally Manned Fighting Vehicle program
and the Marine Corps’ Light Armored Vehicle
replacement program will provide development
opportunities for industry.
Across the FYDP, the CV production market is

expected to grow as the modernization programs
of the U.S. Army and U.S. Marine Corps mature
and new platforms move into production.
The TWV market remains relatively stable and

healthy due to its foundation in the commercial
truck manufacturing sector. However, there is

Machine Tools
Sector Overview FY2019 Top 20 Machine Tool Consumers
A machine tool is a power-driven China $22.30

USA $9.70
machine that shapes or forms parts Germany $7.90
made of metal or other materials Japan $6.00
(e.g., plastics, composites) through Italy $4.40
South Korea $3.20
processes including: turning, grinding, India $2.60
milling, stamping, drilling, forming, Mexico $2.50
Brazil $2.00
extrusion, injection molding, composite Russia $1.80
deposition, and additive manufacturing Taiwan $1.70
France
techniques. Modern machine tools $1.50
Canada $1.40
leverage sophisticated industrial control Vietnam $1.20
systems, process parameter monitoring Switzerland $1.20
Thailand $1.20
systems, and networked sensors. Poland $0.90
They incorporate advanced materials Turkey $0.90
Austria
and precision components, as well as $0.90
$- $5 $10 $15 $20 $25
advanced lubricants, bearings, sensors,
Real Consumption ($B)
and coatings.
Figure 7.13: Global Machine Tool
Producing Nations by Value 40
Machine tools provide the factory floor
the foundation for leveraging advances
in robotics, high precision automation,
specialty materials, precision
components, and additive, subtractive, FY2019 Top 20 Machine Tool Producers
and hybrid machining. Because
China $19.42
machine tools support both prototyping Germany $14.00
and production operations for virtually Japan $12.99
Italy $6.51
all manufactured products, every USA $6.00
South Korea $4.47
commercial and defense manufacturer
Taiwan $3.95
is a stakeholder in this sector. Switzerland $3.21
Brazil $1.62
Spain $1.23
The global machine tool sector is Austria $1.20
mature, but involves continuous India $1.18
France $0.96
innovation of new capabilities and UK $0.69
features that drive competition. As Canada $0.67
Turkey $0.66
Figures 7.13 and 7.14 show, in FY2019, Russia $0.64
Czech Republic $0.64
China was the largest producer and $0.57
Thailand
consumer of machine tools. China Singapore $0.54
designs, builds, and sells large volumes $- $5 $10 $15 $20 $25
of relatively low-cost machine tools $B
for consumption in the global market, Figure 7.14: Global Machine Tool
and imports high-end machines from Consuming Nations by Value 41
more advanced regions (notably Japan,

Europe, and the United States).

“Thus at the heart of the industrial health of The risks detailed in the FY2019 version of this
any nation is its machine tool industry. It is no report still apply to the machine tools sector.
coincidence that the erosion of the machine
The playing field is still not level. In addition to
tool industry parallels the decline of domestic
widely documented and adversarial economic
manufacturing”42
tradecraft, China’s application of economic
pressure on machine tool producing countries,
Major Risks & Issues especially in Asia, have steered products toward
China. As Figure 7.15 shows, the U.S. has by
far the worst machine tool trade balance in the
Risk Archetypes: list. Note that many countries with positive
− Foreign dependency trade balances – such as Japan, Germany, Italy,
Switzerland, South Korea, Spain, and Austria – are
− DMSMS
hardly low wage markets. However, all benefit
− Gap in U.S.-based human capital from substantial national government support for
machine tool sector R&D.
FY2019 Largest Trade Balances
Japan
Germany
Taiwan
Italy
Switzerland
South Korea
Spain
Austria
Signapore
Hong Kong
France
Poland
Thailand
Canada
Russia
Vietnam
India
Mexico
China
USA
($6.00) ($4.00) ($2.00) $0.00 $2.00 $4.00 $6.00 $8.00
Billions ($)
Figure 7.15: Trade Balances for Machine Tool Sector Nations 43

The U.S. machine tool sector continues to FY2020 Developments
lose diversity and capacity to international
In March 2020, the IBAS Program and the
competition, industry consolidation, and business
Manufacturing Demonstration Facility at the
failure. The economic impacts of the coronavirus
Department of Energy’s (DOE) Oak Ridge National
pandemic have made the situation much worse for
Laboratory jointly launched “America’s Cutting
the thousands of small “job shops” upon which the
Edge” (ACE). ACE is the first in a nationwide
U.S. machine tool industry and the defense primes
network of regionally focused machine tool
rely. Often, consolidations and failures have been
hubs. ACE has already made notable progress
the result of increased offshoring to low-cost
on three initial strategic research thrusts:
providers to control costs and gain other tactical
develop technologies to increase productivity
advantages. Offshoring can provide short-term
and efficiency of current machine tools; develop
benefits, but,
novel processes and control algorithms to enable
“in such cases, corporate strategies often hybrid manufacturing; and establish new machine
diverge from national interest, where better tool metrology, designs, and controls for large
information on the effect of such decisions components. In response to the coronavirus
on the supply chain may lead to more mutually pandemic, ACE has also provided rapid tooling
beneficial proactive decisions. It is also prudent development for high-volume Personal Protective
to develop an ability to rapidly standup Equipment production, which provided key insights
manufacturing capability in sectors that have into control requirements for hybrid (additive plus
been downsized in the U.S. or to develop new subtractive) manufacturing.
flexible manufacturing capabilities so that
In August 2020, the IBAS program awarded
rapid reconfigurations can be realized.”44
a National Imperative for Industrial Skills
The U.S. still lacks a nationwide machine tool workforce development agreement to IACMI -
workforce development ecosystem operating at The Composites Institute. This effort, which has
scale and velocity. This ecosystem is needed the potential to impact all DoD manufacturing
to replenish a shrinking, aging manufacturing supply chains, operates in close partnership with
workforce. Scale up of the current innovation ACE. It will implement a novel training experience
ecosystem is required to revitalize our that surpasses current computer-aided design/
manufacturing base and attract talent through computer-aided manufacturing capabilities at the
education programs that highlight the possibilities root of manufacturing.
of machining careers. DoD and national efforts to
overcome this weakness must address: Sector Outlook
1. The cost of machine tool research in terms of The coronavirus pandemic is leading to
equipment, space, and risk; decreases in machine tools sales and production.
Factory shutdowns worldwide amidst the
2. The fact that machine tool research is time-
novel coronavirus pandemic led to months of
consuming but produces fewer publications—
abnormality in the manufacturing technology
in journals with low impact factors;
sector. As a result, the U.S. is seeing some of
3. Many university leaders view the machine tool the lowest machine tool order numbers in the
sector as “old technology” and prefer to focus past decade. According to the Association for
resources in “new” areas. Manufacturing Technology (AMT), April and May
2020 produced the lowest monthly manufacturing
Supply chain impact, economic competitiveness, technology order totals since May 2010. Table 7.16
national security, and support and expansion of below shows the described decline in FY2020 due
the innovation ecosystem are rarely considerations to the coronavirus pandemic.
in university-sponsored research decisions.

U.S. Manufacturing Technology Orders
Net New Orders for U.S. Consumption: Total National Orders ($ Thousands)
Metal Forming and
Total Orders Metal Cutting Machines
Fabricating Machines
Date Units Value Units Value Units Value

Aug-19 2,129 $380,406 2,077 $ 375,507 52 $ 4,898
Sep-19 2,269 $385,863 2,209 $ 376,460 60 $ 9,403
Oct-19 2,073 $391,208 2,009 $ 378,423 64 $ 12,785
Nov-19 1,970 $325,363 1,913 $ 311,072 57 $ 14,291
Dec-19 2,322 $387,583 2,255 $ 381,552 67 $ 6,031
Jan-20 1,729 $289,030 1,680 $ 282,453 49 $ 6,578
Feb-20 1,617 $283,167 1,593 $ 274,865 24 $ 8,302
Mar-20 1,754 $312,367 1,725 $ 309,088 29 $ 3,280
Apr-20 1,494 $235,062 1,467 $ 228,358 27 $ 6,704
May-20 1,602 $224,671 1,570 $ 217,941 32 $ 6,730
Jun-20 2,122 $343,158 2,088 $ 338,607 34 $ 4,550
Jul-20 1,840 $336,400 1,811 $ 331,806 29 $ 4,594
Aug-20 1,698 $297,769 1,679 $ 289,417 19 $ 8,351
Average 1,894 $322,465 1,852 $ 315,042 42 $ 7,423
Table 7.16: Net Orders for U.S. Consumption of Manufacturing Technology45
Indicators show that the industry is now improving coronavirus pandemic supported that lesson in
as factories reopen. In May 2020, Oxford stark terms. The inability to rapidly obtain tooling
Economics analysts had predicted that the industry to produce the PPE and medicines required to
would be down 50 percent for FY2020 due to keep American workers on the job crippled not
the uncertainty in the return to work across the only health care but all segments of the economy.
country and worldwide. Instead, the expected The lack of a robust innovation ecosystem
loss is now half of that prediction. It is reasonable exacerbates the problem. The costs are measured
to expect that China’s centrally planned and not only in lost sales and production delays on
controlled economy and robust government major weapon systems, but also in the loss of the
support will afford it a significant short-term workers and firms that produce the products we
advantage in this area. need to prevail and thrive.
Last year’s report emphasized the importance of

the linkage between the ability to conceive, design,
develop and manufacture advanced machine tools
and national self-determination. FY2020’s

Technology Trends and Developments
For the next ten years, metal cutting tools (as
opposed to metal forming or fabricating machine
products), which accounted for over 97 percent of
U.S. manufacturing technology orders in FY2020,
are also expected to be a major product line due
to the expected demand from industries such as
automobiles and construction. Computerized
Numerical Control tools will drive the machine
tools market due to increased automation and
digitalization across industries. They improve
reliability and precision, and shorten production
times. New COVID-19 inspired guidelines and
regulations affecting worker spacing have
made these capabilities even more attractive to
customers and, hence, developers.

Materials conflict. The Department also highlighted three
risk categories:
Sector Overview 1. consolidation of supply chains in ownership,

The materials sector is among the most diverse geography, and market access;
sectors that the DoD assesses. It includes all 2. under-execution or lack of due diligence; and
elements of the periodic table in their natural and
3. lack of resilience.
synthetic forms, as well as products throughout
the materials supply chain through value-added
These three risk factors remain in force, and the
processing, trading, and manufacturing into
following new factors, accentuated by mobilization
semi-finished products. The breadth of product
for COVID-19 response, have hampered the
coverage, global trade flows, and associated
Department’s ability to address them.
technical disciplines within the sector compels
DoD to collaborate with non-defense agencies and
private industry, both domestic and foreign, to Acute Personnel Shortages
ensure that the Materials Sector can support the Upon the declaration of a National Emergency
requirements of the NDS. with respect to COVID-19, the Department
mobilized substantial portions of its workforce
The DoD largely relies on commercial markets and
to support HHS and FEMA. Within the OUSD (IP),
logistics networks to meet material demand. Since
this reorientation reflects the many additional
the end of the Cold War, U.S. reliance on foreign
duties performed by its personnel, particularly
sources and globalized processing operations has
for DPA Title I and Title III. Similarly, the National
accelerated. In general, this trend has decreased
Defense Stockpile (NDS) program repurposed its
the cost of materials and opened new sources
supply chain monitoring tools so the inter-agency
to U.S. manufacturers, with concomitant growth
could anticipate vulnerabilities in the Materials
in U.S. import reliance and offshoring across the
Sector as COVID-19 outbreaks progressed globally.
sector.
Unfortunately, the NDS program was unable to
make new hires or onboard newly-hired personnel
Major Risks and Issues in the COVID-19 telework environment, distributing
current work and COVID-response tasks across
a dwindling staff. As a result of these combined
Risk Archetypes: workforce constraints, DoD cancelled, deferred, or
− Foreign dependency reduced its activities in the Materials Sector during
FY2020, summarized in Figure 7.17.
In last year’s report, the Department observed that

the fundamental risk within the Materials Sector
flows from the U.S. private sector capability gap
between current, globalized supply chains and (A)
current threats below the level of armed conflict
and (B) serious threats in the event of armed
Note: In House Report 116-442, the House Committee on Armed Services directed the Secretary of Defense to include a supply
chain and vulnerability assessment for rare earth elements, tungsten, neodymium-iron-boron magnets, niobium, indium, gallium,
germanium, and tin in this report, along with recommendations for stockpiling action for those materials and any other relevant
materials. The Department has satisfied this reporting requirement with the submission of the Strategic and Critical Materials 2021
Report on Stockpile Requirements, in accordance with 50 U.S.C. 98h–5. However, the Department cautions that this report will be
the last report of its type to Congress, pursuant to section 1061 of Public Law 114-328 (see Sector Outlook).

Cancelled Activities Deferred Activities Reduced Activities
− M
eeting of the Strategic − T
ime-Study for release of − M
eetings and reports
Materials Protection Board materials from the NDS for National Science &
(10 U.S.C. 187) under simulated National Technology Council action
Emergency conditions (50 on critical minerals under
U.S.C. 98f) Executive Order 13817
− M
obilization exercise for − M
eetings and reports for
release of NDS materials the Federal Consortium for
under simulated National Advanced Batteries
Emergency conditions (50 − M
eetings and collaboration
U.S.C. 98f) with foreign allies under
− Joint research and critical minerals Action Plans
development activities with − A
cquisition policy and
foreign allies under critical legislative proposal
minerals Action Plans development
Table 7.17: Reduction in DoD Materials Sector Activities
As the Department returns to a normal work

Significant Requirements Growth
environment, many of these activities will be re-
without Resourcing
started, but the lack of workforce resilience is a
significant risk in a future supply chain disruption In last year’s report, the Department observed
event. that Congress directed the NDS program to divert
approximately 89.8 percent of the proceeds from
its sales to other programs (see 7.18). Though
Congress has halted these funding transfers,
the NDS program remains undercapitalized, as
described in reports under 50 U.S.C. 98h-5. The
Department will deliver the final iteration of
this report to Congress in early 2021 (see Sector
Outlook).

Average
Total Amount
Annual
Distribution Type (FY2003–FY2018) Sample Activities / Accts.
Cash Flow
(Real $2018)
(Real $2018)
To National Defense $ 417.3M $ 26.0M − Material acquisitions

Stockpile Transaction − Qualification of new sources
Fund
− Metallurgical R&D
To Non-Defense ($998.6M) ($62.4M) − General Treasury Acct.
Accts. − American Battle Monuments
Commission (World War II Memorial)
− Hospital Insurance Trust Fund
− Federal Supplementary Medical Trust
Fund
To Other Defense ($2,701.5M) ($168.8M) − Foreign Military Sales Treasury Acct.
Accts. − Reclamation purchases of
electromagnetic spectrum
− Defense Health Program
− Military Service Operations &
Maintenance accts.
Net Cash Flow to ($3,282.8M) ($205.1M)
National Defense
Stockpile Transaction
Fund
Figure 7.18: National Defense Stockpile Transaction Fund Distributions
Note: Total does not add due to rounding
Furthermore, as DoD and inter-agency supply the post-Cold War sell-off, and to the extent possible
chain assessments identify Materials Sector risk, within existing resources, the NDS program is
the U.S. government routinely turns to the NDS for increasing its stocks of these materials by reclaiming
acquisition options. In addition to the previously- them from end-of-life weapon systems. Similarly,
noted inadequacy of funding, the Department the NDS formerly contained approximately 14,000
also observes that the NDS formerly held many of tonnes of rare earth materials, equivalent to seven
these at-risk materials. percent of today’s global market. The Department
submitted a legislative request to acquire rare
For example, the Department of Commerce is earth materials for the NDS, but Congress has not
investigating titanium sponge and vanadium under adopted this provision for the FY2021 NDAA.
section 232 of The Trade Expansion Act of 1962. The
NDS liquidated stocks of both materials during

FY2020 Developments Sector Outlook
The DPA Title III program issued multiple awards Funding and personnel constraints shape the
under Presidential Determinations related to Department’s actions in the Materials Sector.
neodymium-iron-boron (NdFeB) permanent Consequently, DoD’s approach remains an exercise
magnet manufacture and strategic inventory in economy of force, deploying against only the
demonstration. The DPA Title III program also highest-risk materials with minimum levels of
issued one award using CARES Act funds to a funding and time. Key activities in the Materials
domestic NdFeB manufacturer, whose critical Sector are described below.
manufacturing skills were at risk due to the onset
of COVID-19:
Defense Production Act (Title III) and
− Urban Mining Company ($28.8 million), the National Defense Stockpile
related to NdFeB magnet manufacture and In the FY2021 President’s Budget Request, the
maintaining critical workforce skills impacted President recommended a significant increase
by COVID-19 to the base budget of the DPA Title III program.
− TDA Magnetics LLC ($3.4 million) and Urban This funding increase aligns closely with pre-
Mining Company ($1.7 million), related to the sequestration projections for the program
demonstration of a domestic NdFeB magnet ($185.8M forecast, versus $178.6 million
supply chain and strategic inventory requested, adjusted for inflation) (see Figure 7.19).
The IBAS program also issued awards to the

following vendors through its Cornerstone Other
Transaction Agreement (OTA): Lynas Corporation
($0.65 million) and MP Materials ($0.66 million),
for heavy rare earth separation technical
development.
Chart Title
$200,000,000.00
$180,000,000.00
$160,000,000.00
$140,000,000.00
$120,000,000.00
$100,000,000.00
$80,000,000.00
$60,000,000.00
$40,000,000.00
$20,000,000.00
$-
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Appropriated (03-12) Appropriated (13-21)

Figure 7.19: Defense Production Act Purchases Funding (Real $2019)

This resource influx will enable the DPA Title III The Department maintains valuable partnerships
program to execute against current Presidential with the Departments of State, Commerce,
Determinations far more effectively. However, Interior, and Energy, as well as the U.S. Trade
the Department cautions that the FYDP for the Representative, the DFC, and the Executive Office
Defense Production Act Purchases account in the of the President, as well as our longstanding
FY2021 President’s Budget Request returns to partnerships with NTIB members and other allies.
recent program lows, $45.9 million in FY2022 to
$49.0 million in FY2025.
Modernization of Statutory Authorities
As noted in a prior section, the NDS program for Materials Sector Mitigation
would like to re-acquire certain rare earth Major industrial base mitigation authorities for
materials. The Department submitted a legislative the DoD generally date to the Korean War-era or
proposal for the FY2021 National Defense earlier. Some of these authorities are regularly
Authorization Act to purchase (1) dysprosium, re-authorized, but others have not undergone
(2) neodymium-praseodymium (i.e., didymium) a meaningful reassessment since the 1970s.
oxide, (3) NdFeB magnet block, (4) yttrium, DoD is preparing legislative proposals for the
and (5) samarium-cobalt alloy. Congress has modernization of many of these statutes, including
not included this provision in legislation, and the Defense Production Act and the Strategic and
so, the Department is preparing follow-on Critical Materials Stock Piling Act, and will seek
legislative proposals to address this and other appropriate stakeholder input to advance them for
unmitigated Materials Sector shortfalls. Similarly, Congress’ consideration.
the Department notes the Strategic and Critical
Materials 2021 Report on Stockpile Requirements (ref:
50 U.S.C. 98h-5) will be the last report of its type to
Congress, pursuant to section 1061 of Public Law
114-328. This sunset provision notwithstanding,
the Department will continue estimating Materials
Sector shortfalls every two years, consistent with
available funding and human capital.
U.S. Interagency and Allied

Collaboration
The Department continues to leverage the
partnerships forged in the execution of EO 13806
and E.O. 13817 to implement joint solutions,
including:
− Sharing modeling best-practices, data, and

data analytics approaches
− Pooling research and development funding to
address common risks
− Enabling of defense and non-defense agencies
in domestic and international fora

Missiles and Munitions specialty chemicals, some from “non-friendly”
sources. This presents a risk that supply could
be disrupted during conflict, severely impacting
Sector Overview our ability to produce munitions. OUSD (IP) is
The missiles and munitions industrial base is tracking development of advanced manufacturing
comprised of both government-owned facilities technologies and scale-up efforts that could
(referred to as the ‘organic’ industrial base) eliminate the need for foreign sources. Several
and private sector companies engaged in the DPA Title III efforts are scheduled for award
production of “smart” and “dumb” bombs. during FY2021 to establish or evaluate domestic
manufacturing capability for chemicals used in
− “Smart” bombs include tactical (cruise, air-to-
munitions. DoD investment in a series of flexible
air, air-to-ground, surface-to-air, torpedoes,
Pilot Scale Plants would also provide the capacity
mines, etc.) missiles, missile defense, strategic
to address multiple critical obsolescent energetic
missiles, and has expanded to include
materials within the organic industrial base,
hypersonic weapons.
guaranteeing availability of these legacy materials
− “Dumb” bombs include ammunition, mortars, as needed. These Pilot-Scale Plants would also
artillery, tank rounds, naval gun/cannon provide a stable pipeline for rapid scale-up of
rounds, etc. next generational energetic materials for RDT&E.
However, fully mitigating foreign dependency on
However, the missiles and munitions sector specialty chemicals will require large investments
definition could broaden through the 2020s due to (see Materials Sector Assessment).
changing technologies. Directed energy and cyber
could enhance this sector by substituting non-
kinetic weapons and effects for traditional missiles Visibility into Sub-Tier Suppliers
and munitions. Diminishing manufacturing sources and material
suppliers (DMSMS), including obsolescence and
The sector is primarily defense unique and
single point failures: Due to the relatively low
largely subject to wartime needs—meaning
procurements of missiles, DoD relies on single
that procurement ramps up during wartime
source suppliers for many specialty materials,
and declines when conflict ends. The market is
components, and end items, and obsolescence
defined and hampered by this conflict-reliant
continues to be a major issue. These sole source
pattern, creating significant management and
components are critical pieces of the munition
viability challenges for suppliers and their sub-tier
that are sometimes only available at government-
suppliers.
owned facilities as manufacturers of last resort.
Frequently, a component is too far down in
Major Risks & Issues the supply chain for DoD to have any visibility.
Competitor nations are aggressively attempting to
acquire critical sub-tier suppliers, either directly or
Risk Archetypes:
through the higher-level ownership chain of the
− DMSMS company, with limited visibility from DoD.
− Gap in U.S.-based human capital

Loss of Design and Production;
Obsolescence & Lack of Redundant Aging Workforce
Capability Hypersonics: Development and production of
the many specialty materials and subsystems
Specialty Chemicals from Foreign Sources: DoD
required for hypersonics is a niche area. The
relies on multiple non-domestic sources for many
majority of the industrial base consists of small

businesses that have focused their efforts on Infrastructure: Manufacturing &
proving their technology and producing a handful Test Equipment, Test Ranges &
of demonstration vehicles and glide bodies. Most
Instrumentation
of the workforce knowledge resides in these
small companies. The traditional DoD industrial Hypersonics and Nuclear Modernization: Due to
base is limited in production capability, resulting the decades-long lapse in hypersonic and nuclear
in large risks for cost, efficiency, and production. weapon development and production, facilities
The industrial base is willing to self-invest in these and infrastructure (including unique production
capabilities, but a lack of definitive demand from equipment) require reconstitution, major
DoD prevents them from justifying the business modernization, and increases in capacity. Test
case necessary to do so. ranges and instrumentation also require significant
capacity increases and/or modernization.
Nuclear Modernization: Development and Investment in both industry and organic DoD
production of missiles as part of the Department’s facilities is needed to achieve required capability
nuclear modernization efforts requires re- and capacity.
invigoration of certain industrial capabilities, which
includes reconstituting a workforce that hasn’t
produced nuclear weapons in many decades.
FY2020 Developments
Design and Manufacturing of Missiles and

Munitions: Promising STEM and trade-skill COVID-19 Impacts
oriented personnel are leaving the sector industry
COVID-19 has impacted the missiles and
for other occupations. Individuals with these
munitions sector less than other DIB
skills are becoming harder to recruit and retain
sectors because it is nearly 100 percent
due to barriers of pay, location, and cyclical
DoD unique, unlike other areas which have
sector demand. Increased engagement with
been suffering due to the loss of commercial
the U.S, Manufacturing Institutes will support
demand (e.g. Aircraft). There has been no
implementation of advanced manufacturing
decrease in the demand for missiles and
technologies, as needed, and strengthen and
munitions; this steady demand has kept
expand the capabilities of the US manufacturing
the sector industrial base relatively healthy.
workforce in key DoD technology areas.
In the spring and summer of 2020, some
missile sector industrial facilities temporarily
Resilient Industrial Base: Surge and closed; however, all facilities reopened by
Gap Planning September and remain open. Some impacts
Consistent Demand Signal: Conflict-driven continue to be felt in program schedules
procurements for missiles, munitions, and and production deliveries, but the sector is
supporting energetic components make it difficult better positioned should outbreaks increase
to maintain consistent and steady production again.
demand. Steady demand enables industry to
better plan for longer term stable production,
negating the risk of the production line “going cold” Ammonium Perchlorate (AP) Production
(impacting readiness) and enabling greater surge Ammonium Perchlorate is a critical energetic
capacity. However, U.S. government goals do not oxidizer with a decades-long history of use in
always align with industry goals. rocket propellants, including space launch. Former
suppliers have left the industry due to limited
and inconsistent demand, which significantly
reduced when the Space Shuttle program ended.

To address the AP supply issue, OUSD (IP) issued Production Capacity
a Request for Information in 2017 seeking
DoD has conducted munitions war rooms to
information about domestic AP sourcing. A
identify opportunities to accelerate munitions
business analysis was conducted for AP production
deliveries by either increasing production capacity
on a GOCO plant and found not cost effective.
or shortening lead times. These deep dives into
One industry partner is developing a capability
each munition’s industrial suppliers have been
(online in late 2020) to produce AP from domestic
critical to identify and address capacity constraints
materials, which will provide competition, supply
and/or production bottlenecks. These efforts
stability, and reduce cost.
are labor and data intensive, which limits the
Department’s ability to execute war rooms to the
Energetic Materials highest risk items.
In addition to AP, the Department must address
other critical energetic materials, such as Butarez, Sector Outlook
Potassium Nitrate, Zirconium, and Aluminum. A
Missile budgets are expected to decline over the
third of DoD’s energetic material is produced
next few years, and then remain relatively stable
overseas, and many materials have direct
through the next decade. The market for missiles
dependencies on China. Industry often chooses
and munitions has recovered from a decline in the
not to use domestic or allied sources of these
early 2010s (in the wake of the 2008 recession) and
chemicals even when available due to pricing.
the precision guided munitions market expanded
The Critical Energetic Materials Working Group by over 50 percent from 2014-2020.
(CEMWG) executes a coordinated Department-wide
Planned efforts in hypersonics and nuclear
approach to identify energetic materials and their
modernization will tap into new areas of the
ingredients that are at risk of becoming unavailable
industrial base, but will also tax some of the
to the DoD. In 2019, CEMWG released a survey
existing base, particularly elements that support
to government and industry to identify at-risk
conventional missile production within the sub-tier
chemicals. The CEMWG found that the industrial
supplier base. U.S. industry is willing to invest in
base for chemicals was fragile, vulnerable to supply
production capacity and capability for hypersonics,
chain disruptions, dependent on foreign nations for
but many suppliers are waiting on clear U.S.
a significant number of sole-source chemicals used
government plans and forecasts to justify the
in the majority of the DoD’s munitions, reliant on
business case for these investments. A more
obsolete specifications, and impacted by increasing
detailed overview of the hypersonics industrial
environmental regulatory pressure within the U.S.
base is addressed in the Emerging and Critical
and abroad. In January 2019, the President signed
Technologies section of this report.
four Presidential Determinations to allow the use
of DPA Title III funding to mitigate risk for critical The E.O. 13806 report, the CEMWG, and the war
chemicals for munitions. room process have improved visibility into the
health of the missiles and munitions sector, and
Large Solid-Rocket Motors (LSRM) directed mitigation actions in several high-risk
areas. The Department will continue to assess and
To address the LSRM risk, Aerojet Rocketdyne (AR) mitigate higher-risk areas to improve the health
is reconstituting LSRM manufacturing capability at of the industrial base, and continue to advocate
its Camden, Arkansas facility. Northrop Grumman for the strategic assessment, modernization, and
has announced its intent to include AR as part expansion of U.S. and allied production capacity.
of its national team for ground-based strategic
deterrent (GBSD), which should continue to
provide DoD with two suppliers.

Nuclear Matter Warheads Clearable Workforce
The U.S. faces a diminishing supply of clearable
Sector Overview labor with the advanced education and training
necessary for designing, producing, and
The Nuclear Matter Warheads Sector consists of
stewarding nuclear weapons. The primary source
U.S. government-owned, contractor-operated
of that labor, U.S. colleges and universities,
(GOCO) sites, and U.S. government furnished
generate insufficient U.S. citizen graduates in
equipment used in the design, building, and
STEM areas relevant to the nuclear enterprise.
testing of our nation’s nuclear warheads. The U.S.
The U.S. also lacks labor with important trade
nuclear deterrent is a lynchpin in defense planning
skills, including welders. Additional challenges
and that of U.S. allies and adversaries. Nuclear
due to clearance requirements greatly reduce the
weapons are designed and produced to meet an
available pool of labor.
“Always/Never” standard:
1. They must always work when authorized by Microelectronics/Electronic

proper authority, and
Components
2. They must never work in any situation Nuclear warheads depend on trusted sources
or environment (normal, abnormal, or of microelectronics and electronics. However,
adversarial) without authorization by proper due to diminishing U.S.-based microelectronic
authority. and electronic manufacturing capability, it is
challenging to ensure that finished assemblies,
Supply chain availability and integrity are crucial
systems, and subsystems exclusively leverage
to achieving the “Always/Never” standard, but an
trusted, discrete components.
increasing set of risks threaten the integrity of
the enterprise. Some of the associated research,
development, production equipment, and software Critical Materials
are designed and produced in-house by the DoD’s Various sole source materials, addressed through
organic industrial base. However, the majority is the Nuclear Posture Review, are unavailable
procured from outside vendors. through trusted sources in sufficient quantities
to ensure a robust and independent nuclear
Major Risks & Issues capability throughout a weapon’s lifecycle.
The problem is exacerbated by policies and
requirements that limit or place restrictions on
Risk Archetypes: procurement options (e.g. life of program buys).
− DMSMS
− Product security Software Systems/Applications
Lack of trusted sources of software design tools,
data management systems, manufacturing
Macro forces driving risk to the Nuclear Matter execution, and facility controls introduces risk to
Warheads Sector are a reflection of the same the nuclear weapons engineering environment.
forces driving risks to other sectors upon which the This problem is exacerbated by poor cybersecurity
nuclear matter warheads sector is dependent (e.g. practices of many key software vendors.
machine tools, electronics, and materials). Chief
among those macro forces is the globalization
of supply chains for software, materials, and Analytical and Test Equipment
equipment. Given current nuclear weapons test restrictions,
specialized analytical and test equipment is

essential to ensure the “Always/Never” standard.
Components, subsystems, and systems must COVID-19
be tested to unique qualification standards, but
the test equipment supplier base is increasingly In 2020, the COVID-19 crisis presented a
globalized and not trusted, leading to uncertainty series of truly unprecedented challenges
in testing. for the nuclear security enterprise and
its workforce. The health and safety of
our employees is and will continue to be
FY2020 Developments the Department’s main focus. Due to our
The Department of Energy (DoE)/National Nuclear critical national security missions, the
Security Administration (NNSA) has several NNSA could not and cannot temporarily
warhead modernization efforts underway and cease operations until the crisis is over.
managing the supply availability and integrity is
key for the successful completion of these efforts. NNSA adopted a policy of maximum
telework and social distancing to safeguard
The B61-12 Life Extension Program (LEP) will the health and welfare of the workforce,
integrate DOE efforts to extend the service life while also identifying a number of
of the warhead with DoD efforts to develop a mission-critical activities that could not
guided Tail Kit Assembly (TKA) required to maintain be performed remotely and needed to
current B61 mission characteristics. Programmatic continue on-site. NNSA worked with its
integration of the Air Force-led, joint DoD-DOE sites to set priorities and relied on them to
program is accomplished through the B61 LEP make decisions based on the local situation
Project Officers Group and its subgroups. The and regulations to protect the workforce.
U.S. Air Force is responsible for development,
acquisition, and delivery of a guided TKA and At the outset of the pandemic, NNSA
for All Up Round technical integration, system directed the management and operating
qualification and fielding of the B61-12 variant on teams to continue production of the
multiple platforms. The production effort for the essential components and assemblies
B61 TKA includes the production and delivery of required to maintain critical missions.
TKAs, accessories, spares, ancillary equipment, NNSA leadership is currently evaluating
trainers, lot acceptance test assets, and support. options to manage future impacts based on
The program received the signed Acquisition additional periods of COVID-19 limitations.
Decision Memorandum authorizing the B61 Mod
12 LEP TKA program to enter into the Production
and Deployment phase on October 26, 2018. Sector Outlook
The NNSA, in coordination with the DoD, is also The Nuclear Matter Warheads Sector is
extending the life of the W80-1 warhead as part increasingly challenged by reliance on foreign
of the W80-4 Life Extension Program. The W80-4 vendors for the supply and maintenance of
will be used on the Long-Range Standoff weapon advanced machine tools, and dependent on
which is expected to replace the legacy Air globalized complex supply chains for materials and
Launched Cruise Missile in mid-2020. components. Recent and ongoing life extension
programs provide opportunities to address some
of these vulnerabilities as new contracts and
supply chains are developed.

Organic Defense Industrial The OIB is comprised of resource providers,
acquisition and sustainment planners, and
Base manufacturing and maintenance performers
in depots, shipyards, manufacturing arsenals,
Sector Overview and ammunition plants. Collectively, the OIB
provides maintenance and manufacturing services
The Organic Industrial Base (OIB) includes
to sustain approximately 339,290 vehicles, 280
government-owned government-operated (GOGO)
combatant ships and submarines, and over 15,340
and government-owned contractor operated
aircraft and supporting critical safety items.
(GOCO) facilities that provide specific goods
Roughly $92 billion of DoD’s total FY2019 $687.8
and services for the Department of Defense.
billion expenditure was applied to maintenance
Organic Manufacturing Arsenals, Major Depot Maintenance Facilities, and Ammunition Plants
Army Navy
− Anniston Army Depot, Anniston, AL − Fleet Readiness Center East, MCAS Cherry
− Corpus Christi Army Depot, Corpus Christi, TX Point, NC
− Letterkenny Army Depot, Chambersburg, PA − Fleet Readiness Center Southeast, NAS

Jacksonville, FL
− Red River Army Depot, Texarkana, TX
− Fleet Readiness Center Southwest, NAS
− Tobyhanna Army Depot, Tobyhanna, PA
North Island, CA
− Rock Island Arsenal, Joint Manufacturing and
− Portsmouth Naval Shipyard, Portsmouth, ME
− Technology Center, Rock Island, IL
− Norfolk Naval Shipyard, Portsmouth, VA
− Watervliet Arsenal, Watervliet, NY
− Puget Sound Naval Shipyard and
− Pine Bluff Arsenal, Pine Bluff, AR Intermediate Maintenance Facility,
− Crane Army Ammunition Activity, Crane, IN Bremerton, WA
− Holston Army Ammunition Plant, Kingsport, TN − Naval Surface Warfare Center Indian Head
Division, Indian Head, MD
− Iowa Army Ammunition Plant, Middletown, IA
− Pearl Harbor Naval Shipyard and
− Lake City Army Ammunition Plant, Independence,
Intermediate Maintenance Facility, Pearl
MO
Harbor, HI
− McAlester Army Ammunition Plant, McAlester, OK
− Milan Army Ammunition Plant, Milan, TN
− Radford Army Ammunition Plant, Radford, VA
− Scranton Army Ammunition Plant, Scranton, PN
− Quad Cities Cartridge Case Facility, Rock Island, IL
Air Force Marine Corps
− Ogden Air Logistics Complex, Hill AFB, UT − Marine Depot Maintenance Command,
− Oklahoma City Air Logistics Complex, Tinker AFB, OK Albany Production Plant, MCLB Albany, GA
− Warner Robins Air Logistics Complex, Robbins AFB, − Marine Depot Maintenance Command,
GA Barstow Production Plant, MCLB Barstow, CA
Figure 7.20

activities and services. DoD currently operates 17 Erosion of U.S.-Based Infrastructure: The condition
major organic depot maintenance facilities and of the OIB continues to be encumbered by dated
three manufacturing arsenals. Services provided infrastructure, driven by longstanding investment
within the OIB range in intricacy from daily system trade-offs resulting in resourcing shortfalls. DoD
inspection and maintenance to Pilot Plant Scale-up, is working to address both near and long-term
comprehensive depot-level overhaul, or rebuilding OIB capability gaps through initiatives expected to
of engines and major weapon systems. improve strategy, policy, performance, resource
advocacy, and outcomes. However, given the
From a broader national security perspective, the resources committed to infrastructure investment in
OIB acts as an insurance policy to ensure a ready DoD’s OIB, operational drivers have strained the OIB
and controlled source of technical competence more than the budget allows. The erosion of organic
and resources. In doing so, the OIB executes infrastructure continues to impact turnaround time
sizeable legislatively and administratively directed and repair costs of both legacy and new weapon
production and maintenance workloads. Congress systems, decreasing operational readiness and
has developed an extensive framework of statutes impacting future deployment schedules. To address
that govern the establishment and workloading of this risk, DoD is developing a congressionally
core organic industrial capabilities, maximum yearly mandated comprehensive OIB infrastructure
private sector industrial workload allocation, initial improvement strategy that will drive increases in
depot source of repair assignments, and subsequent Joint Force readiness and materiel availability.46 By
movement of critical weapon system, engine, and introducing innovative process improvement and
component workloads. The OIB is positioned to organizational solutions to be overseen by DoD-
provide the capacity and capability to support the level governance, OIB infrastructure needs will
readiness and materiel availability goals of current receive greater visibility, increasing the likelihood
and future DoD weapon systems. However, FY2020
of attaining required resourcing. Additionally, the
presented the OIB with both unforeseen and introduction of a series of new state-of-the-Art Pilot-
overarching, endemic risks and issues. Scale Plants with flexible products & capacities would
be an infrastructure solution to provide right-sized
Major Risks and Issues production capability for multiple legacy & emerging
energetic materials with minimum facility investment
by DoD.
Risk Archetypes
Reliance on Sole Source Providers: The OIB
− Erosion of U.S.-based infrastructure supports the nation’s defense industrial base
− Sole source manufacturing capability to provide operationally
− Gaps in U.S.-based human capital. available scenario-tasked weapon systems. It
is therefore imperative to ensure continuity of
operational readiness of these facilities in order
Three primary macro forces and three key “risk to meet both peacetime and surge requirements.
archetypes,” as categorized by the EO 13806 OIB installations have been challenged in FY2020
report, face the OIB. The macro forces include and have experienced significant cost and schedule
sequestration and uncertainty of U.S. government disruptions, resulting in both near and long term
spending, the decline of U.S. manufacturing base materiel readiness impacts for weapon systems
capabilities and capacity, and diminishing U.S. across the Military Services. Due primarily to
STEM and trade skills. Three corresponding major operational impacts of COVID-19, the viability of
risk types confront the OIB: 1) erosion of U.S.- significant portions of sole source OIB capability has
based infrastructure; 2) reliance on sole source been threatened. To address this risk, the OIB must
providers; and 3) gaps in U.S.-based human capital. recover financial losses and pre-COVID military
readiness rates.

Gaps in U.S. - Based Human Capital: The OIB First, new technologies and processes continually
confronts workforce skill gap risk throughout impact the strength and resilience of the OIB.
the sector. The emergence of new weapons Therefore, the OIB must continually refresh
system technologies, coupled with legacy system and modernize tools and processes used to
retirements, has driven a substantial disparity retain materiel readiness. Within OSD, the
between skill requirements and workforce Office of the Deputy Assistant Secretary of
capabilities. Recruitment and retention of critical Defense for Materiel Readiness leads a broad
skill sets is also a primary OIB concern, mainly set of maintenance technology and innovation
because of strong competition for skilled labor from initiatives in partnership with OUSD(R&E), the
the private sector and a lack of defense-specific Military Departments, and industry partners.
skills. To mitigate this risk, several ongoing and These initiatives focus on cross-cutting industrial
interrelated mitigation strategies and initiatives base capabilities that enable the OIB to generate
are underway. For example, each of the Military materiel availability at lowest cost, enable reduced
Departments has implemented the direct hire repair cycle times, and provide higher reliability
authority provided by Congress to hire required OIB more safely. Examples of OIB innovations and
personnel. Innovative training approaches have technology development and insertion that will
been introduced to improve the OIB’s recruitment impact the future viability and effectiveness of the
of trained artisans that can provide significant and OIB include additive manufacturing, predictive
immediate impacts on productivity and readiness. maintenance, big data analytics, robotics and
automation, non-destructive inspection, and
advanced electronics diagnostics. A specific
FY2020 Developments
example of innovative OIB technology insertion
is Intermittent Fault Detection Technology.
Sector Outlook Additionally, to address OIB obsolescence issues,
The OIB, like most sectors of DoD’s industrial base, the Department has developed a series of Pilot-
faces considerable challenges. The OIB outlook, Scaled energetic material facilities that could offer
however, is that sound progress is possible and flexibility in the production of multiple products at
underway, driven by an unyielding focus upon varied scales.
National Defense Strategy imperatives. This
section highlights three elements central to the way
forward for the OIB.
COVID-19 Impacts
COVID-19 had major operational and budgetary impact on the OIB in FY2020. Reduced operational
exercises, force training cancellations, and mission adjustments resulted in reduced production
output throughout the OIB. COVID-19 workforce non-availability also decreased operations,
both internal to the OIB and throughout its supply chains. Reduced demands/sales impacted
the OIB’s financing mechanism, the Working Capital Fund, by diminishing the fund’s corpus and
thereby increasing the cost of goods sold, while concurrently hampering annual throughput. Most
installations have returned to pre-COVID production levels, and each Military Service war fighting
domain, except for Navy (Air), expects to “carryover” some portion of their workload into FY2021.
With delays in depot repair schedules, waivers may be required due to the carryover limits in the
Financial Management Regulation. U.S. Navy ship maintenance is especially affected and may be
unable to fully recover its schedule due primarily to physical shipyard constraints. To ensure the
OIB returns to pre-COVID production rates, it is estimated that a fiscal solution that addresses
approximately ten percent of the FY2019 total spend on DoD depot maintenance is required.

The second key emerging trend related to the Finally, the OIB will be significantly shaped by
OIB’s outlook is that near-peer focused warfighting investment choices, particularly in key elements of
activities, particularly those related to posture, OIB infrastructure. This issue has been called into
is becoming gradually more interlinked with OIB sharp focus with concern about possible shorting
capability and capacity. In this contested logistics amounts of funding required for capital equipment
environment, weapon systems sustainment, and purchases and the requirement of “heel-toe-
maintaining and building contingency bases and funding,” with many projects precisely timed.
connected infrastructure is increasingly important. These require projects and regular maintenance to
While progress is being made to improve OIB be executed and funded on schedule throughout
resilience in a near-peer contested logistics the OIB.
environment, the OIB must be postured with a new
and constantly evolving set of decision support
systems, supply chains, resourcing, and capability
provision tools.

Radar and Electronic dominate the domestic radar market and four
domestic suppliers dominate electronic warfare
Warfare systems. An emerging area of investment and
interest is directed energy capability. Both laser
Sector Overview and high power microwave systems are in the
research and development phase, and these
Military radars and electronic warfare systems
technologies and industrial base areas often align
play a significant role in meeting our national
with the radar and electronic warfare industrial
security objectives. Radar is essential to detecting
base risks.
the presence, direction, distance, and speed of
targets such as aircraft, ships, and weapons,
and for controlling flight and weaponry. Radar Major Risks & Issues
achieves detection by transmitting electromagnetic
waves that reflect off objects and return to the
Risk Archetypes
receiver to enable detection. Required to operate
in the harshest environments to support combat − Single source
operations, military radar system requirements
− DMSMS
are often more stringent than those imposed on
commercial systems. Radar systems have many − Foreign dependency
applications and can be used to detect slight
changes to surfaces over time—allowing, for The Radar and Electronic Warfare Working
example, the detection of footprints of shallow Group, which contributed to the September 2018
depth. Interagency Task Force response to Presidential
Electronic warfare (EW) systems continue to Executive Order E.O. 13806, identified several
become a more integral element of military weapon forces driving risk to DoD.47 The working group
systems. EW refers to military action involving the identified five prioritized risks that drove mitigation
use of electromagnetic energy and directed energy efforts moving forward. In FY2020, three risks
to control the electromagnetic spectrum or to attack were paramount.
the enemy. The purpose is to deny the opponent
the advantage of, and ensure friendly unimpeded Availability of Electronic Components
access to, the electromagnetic spectrum. This
This risk is driven by aging DoD systems which
includes capabilities for electronic attack, electronic
lead to obsolescence of available components, the
support, and electronic protection. EW systems
fluidity of commercial technology, and decreasing
are dependent upon technologies similar to
U.S. industrial and manufacturing infrastructure.
those found in radar systems, including receivers
and transmitters. They include countermeasure
technologies such as chaff and flares, which can Availability of Vacuum Electronic
target humans, communications, radar, or other Device Materials, Components, and
assets. Manufacturing Sources
DoD has roughly 100 radar systems in This risk is driven by requirements to leverage
development, production, or sustainment with multiple sole and single source material suppliers
a similar portfolio of electronic warfare systems. both internal and external to the U.S., market
These systems provide critical mission capabilities fragility with the growth of the Gallium Nitride
and perform functions in four operational (GaN) Solid State based systems, and decreasing
domains; land, air, space, and sea. There are a industrial and manufacturing infrastructure. Two
total of 23 firms that produce or have produced high visibility material issues include: rare earth
radars for the DoD. Three domestic suppliers magnets that rely on raw material and metal

oxides provided from China; and the lack of U.S. The radio frequency and optoelectronic (RF/OE)
sources for high quality tungsten rhenium and technical execution area (TEA) of the MINSEC
thoriated tungsten wire. program develops and demonstrates secure
access to SOTA foundries, designs, and intellectual
property (IP). RF/OE investments enable next
Reduced Competition and Innovation
generation DoD programs with advanced sensors
for Tactical Radar and EW Systems
and communications, and bolster the underlying
One example of this risk is the F/A-18 Actively DIB. The RF/OE Community of Interest guiding
Electronically Scanned Array (AESA). Similar AESA these investments comprises over 60 subject
radars are being produced for other applications, matter experts, who gather at semi-annual TEA
but once the F/A-18 production ends, only a single workshops to ensure alignment across services
qualified source remains. and industry.
To mitigate risk areas impacting the vacuum

FY2020 Developments electron tube industry, multiple efforts were
The onset of the coronavirus pandemic has undertaken in FY2020. Perhaps the widest
negatively impacted the radar and EW sector, reaching effort was President Trump’s July 2019
as well as the entire commercial and military use of DPA projects to mitigate the reliance
industrial base; however, considerable work has on foreign sources for rare earth elements.
been accomplished this fiscal year. Multiple Presidential Determination letters were signed to
programs across DoD have supported risk enable risk mitigation in five focus areas:
mitigation activities in the Radar and EW sector in
1. Light Rare Earth Element Separation and
FY2020.
Processing,
Two programs of note that are focusing heavily
2. Heavy Rare Earth Element Separation and
on Gallium Nitride (GaN) technology (a significant
Processing,
enabler for AESA-based radar and EW systems) are
the ManTech and Microelectronics Innovation for 3. Rare Earth Metals and Alloys,
National Security and Economic Competitiveness 4. Samarium Cobalt Magnets, and
(MINSEC) programs. Both of these programs are
funding efforts related to GaN manufacturing. In 5. Neodymium Iron Boron Magnets.
one ManTech project, BAE Systems is partnering
A DoD-wide technical working group led by
with the Air Force Research Laboratory (AFRL) to
the DPA Title III office is currently developing
develop and mature an open-foundry 140 nm
the required technical data packages to allow
GaN Monolithic Microwave Integrated Circuits
solicitation of these projects. In FY2020, two of the
(MMIC) technology, with a focus on efficient power
five topic areas were released for bids and have
amplification at frequencies ranging from DC to
closed. Efforts are currently underway to finalize
50 GHz, and a 90 nm technology targeted towards
and announce the awards. Rare earth magnets
higher frequency applications.
and materials are required not only to support the
vacuum electronics industrial base and the radar
and EW community, but are required to support
precision guided munitions, laser systems, sensors
and actuators on airborne platforms, and future
electronic propulsion systems.

Additional projects are currently being worked The IBAS program formed a Joint Radar Industrial
in FY20 to develop new sources and materials Base Working Group (JRIBWG) to support the
to mitigate the use of foreign-sourced thoriated development of the RSRP by researching core
tungsten and tungsten rhenium wire that is issues and identifying key leveraging opportunities.
required for use in the vacuum electronics The RSRP identifies five radar sector challenges
industry. The DLA and the DPA Title III program and five strategies to offset those challenges. It
are supporting those respective efforts, which are also identifies proposed projects to bolster the
scheduled to continue into FY2021. radar and EW industrial base and address risk
areas identified in the Interagency Task Force
response to EO 13806. As discussed in the RSRP,
Sector Outlook
successful execution of the plan is dependent
The NSS and NDS emphasize the need for a strong, upon long-term fiscal comments required for the
resilient defense industrial base and the E.O. JRIBWG to strengthen and sustain the U.S. radar
13806 report identified macro forces that have DIB.
disrupted and deteriorated the U.S. radar and
EW industrial base. In FY2020, the IBAS Program
developed a Radar Supplier Resiliency Plan (RSRP),
which was signed by USD(A&S) Ellen Lord, and
delivered to the House and Senate Armed Services
Committees.

Shipbuilding The major risks in the shipbuilding industrial base
remained constant in FY2020. The diminishing
domestic commercial shipbuilding sector
Sector Overview continues to magnify these risks.
The shipbuilding industrial base is responsible
for every aspect of shipbuilding, from design to
Capacity Constrained Supply Market
decommissioning of aircraft carriers, submarines,
surface ships, and their weapons and command The increase in ship construction to reach a U.S.
and control (C2) systems. Over the past five Navy fleet of 355 ships by 2035, and even greater
decades, the industrial base has experienced growth beyond that, will strain the current U.S.
significant consolidation. Fourteen defense- shipbuilding sector. The resulting additional
related new-construction shipyards have closed, workload is a significant increase from current
three have left the defense industry, and one new production levels and will challenge shipyards and
shipyard has opened. their suppliers as they expand and adjust to meet
larger production volumes. A new mix of vessels
The sector includes shipyards – fixed facilities with in the fleet will likely force incumbent shipyards to
dry docks and fabrication equipment – as well as modify their business plans and facilities to meet
manufacturing and other facilities that provide these new demands. Shipyards and suppliers that
parts and services for shipbuilding activities. don’t currently participate in U.S. Navy shipbuilding
Today, the U.S. Navy contracts primarily with seven will see new opportunities, particularly in small and
private new-construction shipyards, owned by four unmanned vessels.
prime contractors, to build its future Battle Force,
representing significantly less capacity than the
leading shipbuilding nations.
Sole Source Suppliers
The number of domestic suppliers at the lower tiers
There are also a number of smaller private-sector of the supply chain continues to decline. Due to
shipyards and facilities building non-battle force macroeconomic forces, the Navy expects this trend
and unmanned vessels. Repair and maintenance to continue. The limited availability of suppliers
is conducted at large and small private yards in requires the U.S. Navy to consider the workload and
addition to four public naval shipyards. financial health of the supply chain when making
The shipbuilding industrial base can be further procurement decisions. Low demand volumes
segmented by ship type: aircraft carriers, in certain market spaces result in the selection of
submarines, surface combatants, amphibious single or sole sources of supply for critical products,
warfare, combat logistics force, and command and either out of necessity, or sometimes to promote
support vessels. resiliency during low production periods.
Major Risks & Issues Fragile Markets

There are currently four prime contractors
producing nearly all of the U.S. Navy’s ships, and
Risk Archetypes: two that comprise the vast majority of shipbuilding
sales. A limited number of yards, and the size
− Capacity constrained supply market
and complexity of operations, makes it difficult
− Sole source for new businesses to enter the market. Only one
− Fragile market shipbuilder is currently producing aircraft carriers,
and only two are producing submarines, after a
− Gap in U.S.-based human capital
decision by the Navy to divide new work between
Electric Boat and Newport News.

Unstable Demand FY2020 Developments
Fluctuation in planned modernization and
procurement is also a long-term challenge, as New Programs or Initiatives
changes in ship procurement plans impact the The Navy awarded the detail design and
shipyards and lower-tier suppliers’ workload. construction of the first Constellation Class
Battle Force 2045, discussed below, is an example guided missile frigate with options for up to nine
of the Navy’s changing requirements. This more ships to the Marinette Marine Corporation.
instability is necessary for the Navy to respond Another contract contains options for the design
to emerging threats, but it results in financial risk and construction of the first two Columbia
to the industrial base as companies struggle to Class ballistic missile submarines. Lead ship
align their business decisions. The timing of ship construction awards will occur in FY2021.
procurements is also critical to achieve the stable
workload required to support the viability of the In October 2020, the Secretary of Defense unveiled
shipbuilding industrial base and to sustaining a Battle Force 2045. Derived from the Future Naval
skilled workforce. Advanced procurement for long Force Study, which is still in process, it calls for
lead time material and economic order quantities, a more balanced Navy of over 500 manned and
as well as multi-program material purchases, unmanned ships. It retains the goal of reaching
continue to be used to ensure stability in the 355 traditional Battle Force ships by 2035.
industrial base. Highlights regarding shipbuilding include:
− A larger and more capable attack submarine

Gaps in U.S.-based Human Capital force
In addition to the challenges found in other − A potential reduction of nuclear powered
manufacturing sectors throughout the U.S., aircraft carriers with an increased role for light
shipbuilding has unique challenges, such as too carriers
few replacements for retiring workers, insufficient − The addition of 140 to 240 unmanned and
labor mobility, the perception of unattractive optionally manned vessels to perform a wide
physical working conditions, and the cyclical nature range of missions
of shipbuilding.
− An increased number of small surface
Shipbuilders and suppliers are stepping up combatants
recruiting efforts in response to these market − Enhanced sealift capacity
realities. They are supported in many different
ways by a multitude of entities including the In his remarks, the Secretary of Defense
OSD, the U.S. Navy, other federal agencies, committed to increasing funding to shipbuilding
state and local governments, and local and accounts by harvesting reform efforts throughout
regional economic development initiatives. U.S. the rest of the DoD. The end result will be a larger,
government support efforts typically include more lethal, survivable, adaptable, sustainable,
funding for capital investments to improve working and modern force than we have seen in many
conditions, training grants, and tax relief in years.
exchange for meeting employment targets.

COVID-19
All U.S. Navy shipbuilders and most suppliers have continued operations since the beginning of the
coronavirus pandemic. There have been challenges in staffing to optimal levels throughout the sector,
which resulted in delays and supply disruptions. The Navy is working with shipbuilders and their
suppliers to minimize these disruptions. Companies are focused on maintaining strong cash balances
and liquidity through a variety of strategies as a buffer to continuing fiscal challenges. The Navy has
accelerated payments on its contracts, and in many cases the prime contractors have flowed these
funds into their supply chains. The Navy is monitoring COVID-19 impacts to over 600 suppliers, and has
provided additional funds to some of the most critical suppliers experiencing financial distress. While
staffing levels and efficiencies have improved since the beginning of the outbreak, it is expected that the
sector will remain staffed at approximately 80 percent of pre-COVID-19 levels for the foreseeable future.
This is primarily due to enhanced safety programs, quarantine requirements, school closures, and
employees with high risk health factors. The Navy expects these challenges to result in schedule delays
and cost increases on many programs, but the magnitude of these is unknown.
Industry Changes In FY2020, the Navy awarded a multi-year contract

for nine Virginia Class submarines (SSN 802-810)
The U.S. Navy continually monitors its industrial
through FY2023 with an option for an additional
base, focusing on critical suppliers to ensure
ship. All but one of these ships will have the
the supply of material and components for
Virginia Payload Module. The Navy awarded the
shipbuilding programs. There are constant
first of its new Constellation Class guided missile
changes in an industrial base with thousands of
frigates (FFG 62) with options for nine additional
suppliers, but the health of the industrial base
ships. One San Antonio Class amphibious
remained steady in 2020. The Navy is closely
transport dock (LPD 31) along with two Navajo
monitoring the purchase of AK Steel Corporation
Class towing, salvage, and rescue ships (T-ATS 9
and ArcelorMittal USA by Cleveland-Cliffs Inc.,
and 10) were also awarded in FY2020. Contract
which has traditionally been a mining company;
options were exercised for one John Lewis Class
and the purchase of Fairbanks Morse Engines, a
fleet replenishment oiler (T-AO 210) and one
critical supplier of medium speed diesel engines
Arleigh Burke Class destroyer (DDG 135).
for the Navy, by Arcline Investments, a private
equity firm.
Sector Outlook
Ship Awards and Deliveries
Strategic Competition
Despite the COVID-19 disruptions, the shipbuilding
sector continued to deliver ships. Ten ships were China has the largest navy in the world with a
delivered in 2020: two Virginia Class submarines battle force of approximately 350 vessels, including
(SSN 791 and 792), one America Class amphibious major surface combatants, submarines, ocean-
assault ship (LHA 7), one Arleigh Burke Class going amphibious ships, mine warfare ships,
destroyer (DDG 119), three littoral combat aircraft carriers, and fleet auxiliaries. China’s
ships (LCS 19, 22, and 24), one Lewis B Puller 2019 defense white paper described the People’s
Class expeditionary sea base (T-ESB 5) and two Liberation Army Navy (PLAN) as speeding up the
Spearhead Class expeditionary fast transports transition of its tasks from “defense on the near
(T-EPF 11 and 12). seas” to “protection missions on the far seas.”
The PLAN is an increasingly modern and flexible
force that has focused on replacing its previous

generations of platforms in favor of larger, modern The largest contributing factor of declining U.S.
multi-role combatants. This modernization aligns competitiveness in global shipbuilding has been
with China’s growing emphasis on the maritime state intervention from competitor countries.
domain and increasing demands for the PLAN China’s shipbuilding industry benefits from a
to operate at greater distances from mainland robust domestic industrial economy that provides
China.48 raw material and components to shipbuilders. It
is China’s long-term goal to have an entirely self-
The shipbuilding sector of the DIB is perhaps reliant defense industrial sector, and they have
unique in that the U.S. is not a major contributor established market leading positions in many
to the global commercial market. The U.S. heavy industries that support shipbuilding. As
accounts for less than one percent of commercial an example, China is the world’s largest steel
shipbuilding by tonnage. China is the world’s producer and user by a large margin.
leader with South Korea and Japan rounding
out the top three shipbuilding countries. Major Given current macroeconomic conditions, China
changes to the current relative production levels of is expected to continue to out-build the United
today’s major shipbuilding countries is unlikely. States in terms of ship quantities. The U.S. Navy
will continue to use its technological advantages to
maintain superiority in the maritime domain.
Top Crude Steel Producers FY2019 Apparent Steel Use FY2018 (Finished Steel Products)
China
China
United States
India
India
Japan
Japan
United States
South Korea
Russia
Russia
South Korea
Germany
Germany Turkey
Turkey Italy
Brazil Mexico
Iran Vietnam
Italy Brazil
Taiwan Iran
Ukraine Thailand
Vietnam Taiwan, China
Mexico Poland
France Canada
Spain Indonesia
Canada France
Others Spain
Poland - 200,000 400,000 600,000 800,000
- 200,000 400,000 600,000 800,000 1,000,000 Thousands of Tonnes
Thousands of Tonnes
Figure 7.21: FY2019 Top Crude Steel Producers 49 Figure 7.22: FY2018 Top Steel Users (Finished Products) 50

Software Engineering changing environments with mounting cyber
threats, software engineering for software-
Sector Overview intensive systems should utilize agile software
development methodologies and development,
Software engineering is the application of a
security and operations (DevSecOps) processes,
systematic, disciplined, quantifiable approach to
and apply contracting practices capable of rapidly
the development, operation, and maintenance
delivering incremental and iterative changes to the
of software. Software engineering capability
end-user. Efficiencies gained with the widespread
includes the processes, resources, infrastructure,
adoption of these processes will help to alleviate
and workforce competencies to enable systems
the shortfall of qualified software professionals
to meet operational mission requirements
within the DIB as addressed in the following
and evolving threats. Challenges within this
section.
sector have evolved significantly over the last
several decades as the demand for engineering
professionals and the DoD policy and processes Major Risks & Issues
for software failed to keep pace with the current
and future digital transformation of the modern
battlefield. Risk Archetypes:
Software is in virtually every piece of electronics − Gap in U.S.-based human capital

in the form of firmware, operating systems, and − Foreign Dependency
applications. This includes DoD weapon systems,
mission support systems, maintenance systems,
Since software is pervasive throughout military
and business systems. Today’s modern weapon
systems and technologies, the impacts within the
systems rely heavily on software to provide
software engineering industrial base manifest
functionality. For example, the F-35 is estimated
themselves across the traditional sectors. The
to rely on software for 90 percent of its avionics
Software Engineering Working Group, which
specification requirements. This has grown
contributed to the September 2018 Interagency
significantly over the last four decades when the
Task Force response to EO 13806, assessed
F-15A had just 35 percent software reliance in 1975.
impacts across sectors; as such, software risks are
Unlike physical hardware, software can be included in each of the sectors’ inputs.51,52
delivered and modified remotely, facilitating rapid
Diminishing U.S. STEM skills, and U.S. government
adaptation to changes in threats, technology,
business practices and policies are both driving risk
mission priorities, and other aspects of the
within the software engineering industrial base.
operating environment.
Government Practices & Policies

Software for many weapon systems
is being sustained with processes Policy, roles, and responsibilities for software
engineering at the DoD level are not clearly
developed decades ago for hardware-
established to effectively represent software
centric systems.
equities at the acquisition policy and program
Unfortunately, software for many weapon systems levels. The DoD lacks a unified software
is being sustained with processes developed engineering policy, which has produced
decades ago. In addition, much of DoD policy inconsistency in practices and policy
remains hardware-centric, despite software implementation across the services. Despite its
providing an increasingly larger percentage prevalence, engineering sustainability of software-
of system functionality. In today’s fast-paced, intensive systems during the requirements, design,

and development processes has also received systems, electronic warfare, weapons, and
limited focus and priority. Collectively, these space systems). The intersection of these
factors have negatively impacted the successful disciplines creates a specialization that results in
development and sustainment of software across a limited resource pool when compared to the
the Department. requirements of commercial software application
developers. Between 2014 and 2024, job openings
The DoD has also struggled to track and manage are projected to exceed one million for computer
its inventory of software, which is immense and occupations and half-a-million for engineers.54
continually growing. There is limited visibility
and understanding at the enterprise level of the The STEM shortage is even more challenging
total size, complexity, and characteristics of the for the DIB, which requires most employees to
inventory, which may exceed one billion lines obtain security clearances, necessitating U.S.
of custom developed software code. A unified citizenship. Students on temporary visas in the
source of clear software engineering policy U.S. have consistently earned 4-5 percent of
would aid in a unilateral implementation of bachelor’s level STEM degrees awarded in U.S.
appropriate practices across the industrial base. colleges and universities. In 2015, these students
earned a substantially larger share (11-13 percent)
of bachelor’s degrees in industrial, electrical,
STEM Workforce
and chemical engineering. The number of STEM
Exacerbating the need to strengthen organic bachelor’s degrees awarded to students on
software expertise is the national STEM shortage. temporary visas increased from about 15,000 in
Today’s education pipeline is not providing the 2000 to almost 33,000 by 2015.55
necessary software engineering resources to fully
meet the demand from commercial and defense The U.S. is also graduating fewer students with
sectors, and resources required to meet future STEM degrees as a percentage of population
demands continue to grow. compared to China, and the trend continues to
worsen. The population of China is four times
STEM covers a diverse array of professions, from that of the U.S., but is producing eight times the
electrical engineers to researchers within the number of STEM graduates. The U.S. no longer
medical field, and includes a range of degree has the most STEM graduates worldwide and is
levels from bachelor’s to PhD. Seven out of ten being rapidly outpaced by China. In 2016, the U.S.
STEM occupations were related to computers and had the third most STEM graduates worldwide with
information systems, with nearly 750,000 of them 67.4 million graduates compared to China with
being software developers. Demand across all 78.0 million.
STEM sectors is not consistent; there is a surplus of
PhDs seeking positions as professors in academia, The software engineering crisis in the DIB will
while there is a shortage of individuals with not be corrected until significant effort is placed
electrical engineering PhDs who are U.S. citizens.53 on updating software policy and processes, and
more importantly, placing significant investment
The development and sustainment of increasingly in software engineering education and retention
complex software-intensive weapon systems initiatives. Greater attention must be paid to
requires skills from both the engineering and workforce concerns in the Software Engineering
computer science fields. The STEM shortage sector to maintain and develop the intellectual
cannot be addressed solely by hiring more capital necessary to create and sustain war-
computer programmers. Modern software- winning weapon systems for the modern
intensive systems rely a great deal on skilled battlefield.
software system engineers with in-depth
knowledge of the systems and environments
in which the software operates (e.g., avionics

FY2020 Developments a growing acknowledgment of the significance
and prominence of software throughout the
In May 2019, the Defense Innovation Board
Department.
released a report, “Software is Never Done:
Refactoring the Acquisition Code for Competitive The coronavirus pandemic exposed the
Advantage,” resulting from the Software Acquisition importance of a robust infrastructure to
and Practices (SWAP) study.56 The congressionally enable remote work. At the onset of the crisis,
mandated study (Section 872 of the FY2018 NDAA) tremendous efforts were made to shore up the
outlines the importance and pervasiveness of gap in capability to effectively support the mission.
software in modern DoD systems and emphasizes The software sector quickly adapted to the sudden
the need to decrease cycle time and develop shift in culture and applied significant resources
digital talent and the enduring qualities of software toward improving the resilience of the new normal.
that differentiate it from the hardware paradigm. While challenges remain, the urgent requirements
Implementation of the lines of effort recommended driven by the pandemic acted as a forcing function
by this study is currently underway. to address a necessary shortfall in capability.
In a memorandum released in October 2019, The DoD Enterprise DevSecOps Initiative, a

USD(A&S) Ellen Lord, released interim policy and joint program with the OUSD (A&S), DoD’s Chief
guidance on establishing direction, responsibilities, Information Officer (CIO), Defense Information
and procedures for the management of the Systems Agency (DISA), and the Military Services
Software Acquisition Pathway (Recommendation established teams (i.e., CloudOne, PlatformOne
A1 from the SWAP study).57 As actions are by LevelUp) focused on deploying hardened
undertaken to implement the recommendations software factories for both existing and new
from this study, such as the issuance of DoD environments within days instead of years (see
Instruction (DoDI) 5000.87, “Operation of the Figure 7.23). These initiatives pulled together top
Software Acquisition Pathway,” in October 2020, talent from across the DoD, tasked with enabling
the implications cast a wide net over the policy the infrastructure and associated tools needed
status quo. The impacts on software engineering by modern software engineers to rapidly deliver
in the DoD promulgated by these actions reflect software capability for the warfighter.
Figure 7.23, Source: DoD Enterprise DevSecOps Initiative (DSOP) 58

Software Engineering organizations across in modern environments, is not keeping up with
the services continue to focus on growing the demand. As of 2017, American students make up
workforce. Notably, the Software Engineering barely 21 percent of the computer science student
Groups of the Air Force Sustainment Center grew body and 19 percent of electrical engineering
the organic workforce by eight percent in 2019, to majors among our nation’s universities (see
a total workforce of 4500+ software engineers and Figures 7.24 and 7.25).59 Emphasis must be
computer scientists supporting over 250 distinct directed toward inspiring the next generation
software projects. to pursue STEM careers, especially in software
engineering.
Sector Outlook This issue directly threatens U.S. national self-

From the perspective of the warfighter, adaptation determination in commerce and geopolitics. The
at the speed of relevance is a matter of necessity STEM shortage in the DIB is quickly approaching
to stay ahead of the ever-increasing pace of crisis status. As stated by Arthur Herman, “We are
deployment practiced by our near-peer adversaries fast approaching another Sputnik moment, we
while maintaining compliance with applicable can’t afford to ignore.”60 The U.S. must create a
statutes. As the software engineering profession state-of-the-art STEM education strategy to cope
embraces cloud-based development environments with this reality.
with increasingly automated pipelines (enabling
vastly shorter delivery cycles), policies must be
updated to reflect this paradigm shift.
Along with the change in technologies and

methods that the software engineering community
is adapting by, comes a requirement for a
workforce with the necessary talents to effectively
employ these enablers. The production of
engineers and scientists with U.S. citizenship, and
the skills necessary to successfully develop and
sustain the software required by the DoD

70,000
60,000
50,000
Students
40,000
30,000
20,000
10,000
0
19 5
19 6
19 7
19 8
20 9
20 0
20 1
20 2
20 3
20 4
20 5
20 6
20 7
20 8
20 9
20 0
20 1
20 2
20 3
20 4
15
9
9
9
9
9
0
0
0
0
0
0
0
0
0
0
1
1
1
1
1
19
U.S. Students International Students
Source: National Science Foundation, Survey of Graduate Students and Postdoctorates,

NFAP calculations. U.S. students include lawful permanent residents
Figure 7.24, Source: National Science Foundation, Survey of Graduate Students and Postdoctorates,
NFAP calculation. U.S. students include lawful permanent residents.
45,000
40,000
35,000
30,000
Students
25,000
20,000
15,000
10,000
5,000
0
19 5
19 6
19 7
19 8
20 9
20 0
20 1
20 2
20 3
20 4
20 5
20 6
20 7
20 8
20 9
20 0
20 1
20 2
20 3
20 4
15
9
9
9
9
9
0
0
0
0
0
0
0
0
0
0
1
1
1
1
1
19
U.S. Students International Students
Source: National Science Foundation, Survey of Graduate Students and Postdoctorates,

NFAP calculations. U.S. students include lawful permanent residents.
Figure 7.25, Source: National Science Foundation, Survey of Graduate Students and Postdoctorates,
NFAP calculation.61 U.S. students include lawful permanent residents.

Soldier Systems Industrial capability gaps in the Soldier Systems
sector reduce assurance that the warfighter is
prepared to successfully execute defense missions
Sector Overview in any operating environment. Risks include single
Soldier systems are the diverse products necessary sources of supply, capacity constraints, foreign
to maximize the warfighter’s survivability, lethality, dependency, market fragility, and diminishing
sustainability, mobility, combat effectiveness, and manufacturing sources and material suppliers.
field quality of life by considering the warfighter as The case studies below illustrate risks that may
a system. This sector includes the weapons, body warrant government action.
armor, clothing, footwear, radios, sensors, power
supply, shelters, food, and other items essential to
Erosion of the U.S. Textile Industry
executing U.S. military missions—from snipers to
tankers to airmen to divers. Textiles are an integral component of many
defense systems. In addition to uniforms, tents,
Most soldier systems have significant commercial parachutes, and backpacks, textile applications
overlap. The commercial market provides also include composite and non-woven structures
stabilizing revenue for existing defense contractors such as Kevlar body armor, fiberglass in drones,
and opportunities for new players to modify and carbon fiber in advanced aircraft. Between
commercial gear for the defense market. 1995 and 2009, the U.S. textile industry suffered
Companies in the sector navigate a variety of a historic contraction, and Asian markets now
challenges, including: dominate global textile supply.
− technical advancement at funding levels DoD is reliant on single and foreign sources of
typically well below major defense programs; supply, and competes with global commercial
− stringent quality control and affordability demand for adequate production capacity.
challenges in high volume production; However, U.S. manufacturers face a competitive
disadvantage in workforce and raw material costs
− legislation and regulation promoting
and availability. DoD has relied on a sole source
domestic sourcing and restricting technology
for Service Dress Uniform fabrics for a number
proliferation;
of years, as well as sources of fibers that protect
− unique defense requirements that can rapidly against flame and ballistic threats, and many other
evolve with a wartime threat; and essential components. As a result of DMSMS from
− defense demand volatility that varies domestic suppliers, DLA has considered seeking
proportionally with operational tempo. a Domestic Non-Availability Determination for
Service Dress Uniforms.
The advanced designs and novel industrial
capabilities needed to preserve U.S. warfighter
tactical advantage require a skilled workforce and
Erosion of U.S. Rechargeable and Non-
modernized factories. Rechargeable Battery Industry
Military-unique battery requirements can differ
Major Risks & Issues from commercial demands in size, quality,
safety, power density, weight, and environmental
Risk Archetypes: ruggedness. Lack of stable production orders,
inadequate research and development investment,
− DMSMS
and disjointed acquisition strategies have resulted
− Single source in lost capability and capacity, increased surge lead
− Sole source times, workforce erosion, and inhibited private
investment.
− Foreign Dependency

Surge capacity-limiting constraints occur at display alternatives may exist, there is only one
several points along the value chain, from raw known domestic source of OLED microdisplays.
material to final battery assembly. Most battery The DoD has made investments to manage the
configurations are produced by single sources risk, is actively engaged with suppliers, and is
of supply. The rechargeable battery market is monitoring the niche industry closely.
dominated by commercial demand and primarily
foreign sourced. Domestic rechargeable battery
Government Business Practices
producers cannot compete in production volume,
labor availability, or cost.62 Commercial items modified to meet military
specifications may still require unique-enough
Most domestic lithium ion cell packagers rely industrial capabilities to oppose market dynamics
on foreign suppliers. Rapid expansion of the and fuel industrial base risk. The military
electronic vehicle market is likely to exacerbate specifications qualification processes can cause
these risks, especially if designs deviate barriers to entry and source of production
significantly from military requirements, foreign technical risks. Where significant differences
markets drive adoption, or foreign competitors exist between commercial solutions and defense
lead the way in manufacturing infrastructure products, the government is left to sustain the
investment. capability and capacity needed for production.
While this is necessary in some cases, it is costly
Erosion of U.S. Photonics and Optics and impractical across the broad soldier systems
portfolio.
Industries
Photonics and optics are technology drivers for In a few cases of high-volume soldier systems
warfighter sensing and laser systems. Sensing (e.g. body armor, uniforms, batteries, etc.), a
technologies and applications have expanded small industrial base is further divided by contract
exponentially over the last few decades and awards to produce Service-specific variants of
are increasingly integrated into every facet of comparable products. Disjointed acquisition
warfighting. Unfortunately, U.S. value-added strategies can unknowingly create single sources,
manufacturing has eroded over the last 20 years, decrease demand signal strength and visibility,
threatening assured access to new optics and increase logistics burden, and create industrial
photonics. base risk. As part of the planned risk management
actions in the sector, DoD will evaluate joint
Competitor nations are investing in key requirements and acquisition strategies with an
manufacturing infrastructure and have lower- objective to create a more cohesive demand signal
cost human capital, which provides a competitive to industry and to adjust requirements to better
advantage. Human capital gaps in skilled blue- align with market-stable solutions as appropriate.
collar workers, and clearable U.S. nationals
with advanced degrees in optics and photonics,
constrain the domestic defense industry. FY2020 Developments
Additionally, rapid technology proliferation brings
a risk of parity with competitor nations in the Operational Transition
market. The result is U.S. reliance on foreign The soldier systems sector is emerging from
sources for key technologies for defense systems a long-term sustainment effort focused on
like night vision. immediate warfighter needs. Many programs
have met or are approaching their acquisition
Future advancements in flexible displays, OLEDs,
objectives, which triggers a natural peacetime cycle
and quantum mechanics offer opportunities to
of decreased defense spending/demand. In the
regain international competitive leadership in both
past, periods of decreased defense spending have
technical innovation and manufacturing. While

led to industry consolidation, reduction in capacity, China’s industrial policies and national priorities
loss of capability, reduced capital investment, and are focused on advancement in areas that will
a transition toward commercial investments in enhance its soldier systems capabilities; quantum
order for industry to remain viable. communications and computing; innovative
electronics and software; automation and robotics;
Peacetime industrial readiness losses have specialty materials; nanotechnology; batteries,
historically been recovered or replaced by power, and alternative energy; and neuroscience,
alternatives as the U.S. enters other large-scale neural research, and artificial intelligence.67
military engagements. Future soldier systems
objectives include lightening the soldiers’ load,
developing modular/flexible/agile materiel Commercial Demand Dominance
solutions, and taking advantage of advancements DoD competition with commercial demand
in sensor technology and materials engineering. continues to impact textiles, batteries, and night
vision technologies, and other industry subsectors.
Sector Outlook Although commercial demand can provide
stabilizing revenue to industry during periods
of reduced DoD demand, it also reduces the
Strategic Competition
DoD’s influence on the market and ability to drive
U.S. competitors continue to modernize their investment in the development of next generation
capabilities to challenge U.S. technological technology.
leadership and interests across a broad industrial
spectrum. Russia has been modernizing its soldier When military and commercial requirements
systems ensemble in a coordinated, modular, differ substantially, or if shared resources are
and evolutionary program called “Ratnik” - or scarce, commercial market dominance can
“Warrior” - reported over the last five years. The directly impact lead time, surge capacity, and the
program integrates and upgrades all aspects of sustainment or development of defense-unique
soldier systems. The latest generation integrates industrial capabilities. Often DoD is left to adapt to
exoskeletons, advanced sensing, and unmanned commercial market-driven changes, and only when
systems, paralleling the U.S. Special Operations unacceptable levels of industrial base risk arise
Command’s Tactical Assault Light Operator Suit.63,64 may DoD intervene to sustain critical industrial
Since 2010, Russia has significantly modernized its capabilities.
ground forces and ground troop tactics.65
China’s PLA Army (PLAA) is the world’s largest

standing ground force, with approximately 915,000
active-duty personnel in combat units. Recent
structural changes to PLAA organization and tactics
aim to develop more mobile and modular units.
To assist in the transformation, the PLAA is also
modernizing command, control, communications,
computers, and intelligence systems to enhance
its forces’ interoperability. PLAA forces stress the
importance of ISR and leveraging information to
enable future combat.66

Space and critical skills, and threaten future access
to space qualified domestic industrial sources.
Sector Overview However, due to capital intensive requirements,
individual programs are reluctant to invest in, and
The space industrial base includes the satellites, qualify, new technology and sources. This creates
launch services, ground systems, satellite a need to sustain fragile domestic sources and to
components and subsystems, networks, qualify new technologies and sources for next-
engineering services, payloads, propulsion, and generation systems.
electronics that support National Security Space
(NSS) missions and operations. These systems
provide an emergent capability and strategic Major Risks & Issues
advantage to U.S. forces.
Risk Archetypes
Demand for space capabilities and services—and
resulting capability development— is increasingly − Foreign dependency
driven by foreign and domestic commercial − Erosion of U.S.-based infrastructure
markets.
− Product security
− Fragile suppliers
“Rapid increases in commercial and
− Gaps in U.S.-based human capital
international space activities worldwide add
to the complexity of the space environment.
Commercial space activities provide national The Space Industrial Base Working Group
and homeland security benefits with new (SIBWG) assesses risks within the space industrial
technologies and services and create new base, develops mitigation plans, and promotes
economic opportunities in established and management and procurement practices across
emerging markets. The same activities, the DoD and the intelligence community (IC) to
however, also create challenges in protecting ensure access to technologies critical to the NSS
critical technology, ensuring operational community. SIBWG members—government
security, and maintaining strategic advantages.” and industry stakeholders— identify and pursue
risk mitigation efforts to protect the U.S. space
– 2020 Defense Space Strategy industrial base through cost-sharing contracts
between the government and private industry.
Certain NSS performance requirements and
The SIBWG currently tracks 119 essential space
capabilities are also particularly stringent or
capabilities with identified supply chain risks.
unique, and require support outside of the
The following technologies exhibit specific risks
growing commercial/civilian space ecosystem.
impacting the space industrial base:
The DoD space industrial base remains a niche
market with very specialized and capital-intensive
requirements that are not efficiently managed Precision Gyroscopes
through individual program investments. Many Precision Gyroscopes are a critical component
current and planned systems also rely on dated of the attitude determination, stabilization, and
technology and practices, as well as fragile or inertial navigation system on spacecraft, launch
foreign sources. vehicles, and missiles. Three types of gyroscopes
(ring laser, hemispherical resonating, and fiber
Reliance on foreign sources for critical
optic) are commonly employed in space systems.
technologies, competition from subsidized lower-
cost imports, and erratic demand from the NSS
enterprise will erode essential space capabilities

− Hemispherical resonating gyroscopes are an competitive products and pricing. Having a strong
older technology mainly used on non-agile domestic source would reduce dependence on
satellites and only one domestic provider the foreign source and ensure availability of NSS
remains— with limited production capacity. specific TWTAs.
− Fiber optic gyroscopes are employed in high
performance agile spacecraft and missile FY2020 Developments
applications. Although there are three
domestic suppliers of fiber optic gyroscopes,
they rely on key components (integrated COVID-19 Impacts
optics chips and laser diodes) experiencing
supply issues that threaten the viability of The long-term impacts of the coronavirus
domestic product lines. pandemic are still unclear, but the DoD will
monitor the sector closely. Potential areas
of concern include a slowdown in capital
Space Qualified Solar Cells expenditures and more rapid industry
Space qualified solar cells are optimized for consolidation than originally anticipated.
specific environments required for NSS and For example, the Organization for Economic
National Aeronautics and Space Administration Co-operation and Development (OECD) has
(NASA) missions, which hinders the transfer of expressed concern that COVID-19 could
technology to terrestrial applications and often disproportionally affect space start-ups. The
prevents providers from diversifying to reduce uncertainty associated with COVID-19 could
risk and burden. The space industrial base is cause constraints in the ability of start-ups to
developing advanced cells to provide weight raise the capital required to bring innovation
savings, decrease stowage footprint, and enable to the market. This could open a window of
higher-power missions. However, foreign opportunity for the rapidly growing Chinese
suppliers are also developing high efficiency cells, commercial sector to weaken the U.S.’s
while marketing internationally at lower costs. position as a commercial space leader.
U.S. providers are dependent on NSS procurement

funding, whose batched orders are generally Sector Outlook
low volume, low margin, and with inconsistent
demand. As a result, they have struggled to
Defense Space Strategy
remain competitive. During the coronavirus
pandemic, the DPA Title III team made critical The June 2020 Defense Space Strategy identifies
investments in the domestic space qualified solar four lines of effort (LOE) for the development of a
cell market to maintain production capacity. “secure, stable, and accessible space domain”:
1. Build a comprehensive military advantage in

Traveling Wave Tube Amplifiers space;
Traveling Wave Tube Amplifiers (TWTAs) improve 2. Integrate space into national, joint, and
radio frequency spectrum access and increase combined operations;
bandwidth in military satellites. Recent commercial
3. Shape the strategic environment; and
market downturns have resulted in layoffs and
skills gaps in the space TWTA workforce. A sole 4. Cooperate with allies, partners, industry, and
domestic supplier competes with a single foreign other U.S. Government departments and
source for production of all space qualified TWTAs. agencies.68
Although some U.S. programs are required to use
a domestic source, the foreign source offers more

The December 2019 establishment of the U.S. Commercial Space
Space Force as a separate Service branch may
The commercial space sector will continue to play
bring attention to the risks facing the space
an increasing and critical role in NSS, including
industrial base and establish a more strategic
space launch. The United States is an overall
investment and development approach. The
world leader in commercial space, but near peer
SIBWG will continue to play a critical role in the
competitors such as China are rapidly expanding
Space Strategy and the fourth LOE in particular.
their commercial space industrial bases.69 The
Whereas investment by individual programs
DoD, in coordination with other Federal Agencies
tends to result in program specific architectures,
such as the DoC and NASA will continue to
cooperation across government and industry is
leverage, support, and promote the commercial
necessary to:
space industry, where appropriate. There are
− Identify and support cross-cutting potential areas of support where the DoD and
technologies and priorities; partner agencies can positively help the U.S.
commercial space industry. For example, recent
− Invest in areas and technologies where
economic analysis by the U.S. Air Force Office
commercial demand is insufficient, or DoD-
of Commercial and Economic Analysis and the
unique components exist;
MITRE Corporation highlight that government
− Maintain or improve hard-to-reconstitute support of the launch industry, coupled with
manufacturing processes to avoid schedule commercial efforts to reduce space launch costs
and cost impacts associated with re- and increase reliability, is effective in helping
establishment; and U.S. commercial launch service providers gain
− Anticipate technology requirements to additional global market share. However, the
maximize investment across space programs. U.S. government should simultaneously be aware
of the likely oversaturation of launch service
A clear strategy will help inform investment and providers, especially small launch providers, when
policy priorities across the NSS enterprise and considering the foreseeable Total Addressable
guide the actions of the SIBWG in support of a Market for space launch.70
stronger space industrial base.

Workforce Major Risks & Issues
Sector Overview
Risk Archetypes:
The DIB relies on a force of skilled workers to
provide and support the products and services − Gap in U.S.-based human capital
required to meet the U.S. government’s national − Foreign dependency
security needs. This shrinking workforce
− DMSMS
comprises 1.1 million designers, engineers,
manufacturing and production workers and
maintainers, information technology developers,
Domestic manufacturing output grew in 2019
and members of DoD’s organic industrial
and early 2020, but the DIB’s overall capacity to
base. It is a key element of the nation’s critical
prevail against strategic competitors was still
infrastructure.
uncertain even before the coronavirus pandemic.
In the last several years, changing economic The pandemic highlighted long standing critical
and national security policies have sharpened risks and issues related to the supply chain for
executive and legislative branch focus on the workers and materials. Many of these issues are
state of the DIB workforce. The combination of the result of economic realities that favored off-
Presidential Executive Orders seeking to re-shore shoring over the use of domestic supply chains
manufacturing and of ambitious production goals for materials and workers, and investments in
such as the Navy’s 530-ship fleet initiative have services rather than manufacturing; despite some
given industry reasons to consider sizable new marginal changes, policy incentives largely failed to
investments in manufacturing operations, shorter overcome these issues.
and more reliable supply chains, and advanced
The DIB workforce still suffers from the persistent
production technologies.
issues highlighted in the 2019 version of this
Such efforts require marked increases in the DIB’s report. Candidate pools of potential workers
capacity and resilience. In turn, those objectives are shrinking due to adverse demographics and
require producing more workers trained in the persistent biases against industrial trades careers
skilled trades or in STEM. Unfortunately, many among parents and educators. Meanwhile, the
young Americans have developed unfavorable mismatch between 1) technological knowledge
impressions of careers in manufacturing and the and skills required by evolving manufacturing
trades. These impressions have been reinforced sectors and 2) suitable training programs is
by educational policies that steer students toward growing. Decades of neglect have left the robust
four-year college programs. Meanwhile, STEM- system of technical schools the nation once relied
focused programs at American universities, “are upon for industrial training badly weakened.
confronting a dearth in American talent generation Finally, the existing workforce is rapidly aging out,
and retention, and much of that shortfall is filled taking irreplaceable tacit knowledge with them.
with foreign students, a large share of them from Programmatic responses to education and training
China.”71 needs still largely focus on four-year STEM-based
programs rather than digital industrial skills on the
factory floor.

FY2020 Developments A&S Initiatives
In the short run, DoD’s COVID-driven As previewed in the FY2019 Industrial Capabilities
reinforcement of the DIB’s critical infrastructure Report, the IBAS program formally launched its
status helped limit, but could not eliminate, ‘National Imperative for Industrial Skills’ initiative
production losses and schedule delays in in FY 2020, making ten awards for prototyping
major defense programs. The coronavirus agreements across the nation (approximately $30
pandemic caused “demand crash,” affecting million in total federal funding), testing various
commercial manufacturers and their suppliers, segments of the Industrial Skills Workforce
had pronounced adverse effects on the small, Development Ecosystem Model (see Figure 7.26).
medium, and large defense suppliers that rely on Several of these awards are the result of direct
commercial work to maintain economic viability partnerships with the military departments. The
over time. The coronavirus pandemic also initiative is the Department’s effort to reawaken
highlighted the adverse impacts of dependence the nation’s commitment to the manufacturing
upon foreign sources of low cost labor and and industrial skills needed to build next-
materials, especially China. Defense executives generation weapons and platforms. The effort
recognized the long-term threat of adversary aims to promote the prestige of manufacturing
influence on critical supply lines. and associated careers, accelerate the delivery of
workers into and through training and education
The COVID-19 effects notwithstanding, the pipelines, and elevate U.S. manufacturing to a
USD(A&S)’s Office of Economic Adjustment (OEA) world-leading status. Through it, the Department
and IBAS programs executed key efforts to mitigate consciously recognizes the nation’s workforce
DIB workforce risks. development pipelines as vital supply chains.
The National Imperative is a logical outgrowth of

Service-Level Efforts
‘ProjectMFG,’ a highly successful and continuing
In keeping with priorities articulated by executives, series of competitive events intended to generate
workforce-related efforts undertaken by the U.S. interest in manufacturing and industrial skills
Services due to the coronavirus pandemic focused and associated careers (described in last year’s
on retaining rather than growing or enhancing report). In FY2020, the IBAS program conducted
the industrial workforce. In a few cases, these ProjectMFG events in Alabama, New York,
efforts supported the movement of workers from California, Tennessee, and Virginia. Additional
crippled commercial-side efforts to explicit defense planned events in Texas, Ohio, and the National
work. Most other Service-level investments tied Finals in Illinois were cancelled due to COVID-19.
to DIB workforce development requirements ProjectMFG has been refined to support
are in individual weapon system acquisition and competition using virtual arenas.
sustainment programs versus broad, defense-wide
strategic workforce development efforts.

OSD’s OEA is designed to support long-term Sector Outlook
community investments that strengthen national
The Department will continue to assess the
security innovation and expand the capabilities
immediate and long-term DIB workforce
of the defense industrial ecosystem. The OEA
impacts from the coronavirus pandemic, while
awarded six Defense Manufacturing Communities
also addressing more long-term and systemic
Support Program grants (totaling $25 million in
shortfalls in the workforce development pipelines
federal funding) to entities in Pennsylvania, West
that supply and sustain these vital resources.
Virginia, Ohio, Utah, California, Alabama, and
Shortages of skilled labor and its impact to the
Connecticut, each of which helps to advance that
production schedule and cost of major weapons
community’s local and regional defense industrial
and platforms will continue to be a source of
workforce development ecosystem in unique
concern to both the DIB and the Department.
ways.72 Each awardee was required to provide
Dependent upon access to sufficient financial
substantial cost share.
resources, in FY2021, the IBAS program office
will expand the National Imperative for Industrial
Skills initiative by making additional awards
and funding optional tasks on already-awarded
agreements. IBAS will continue to seek and
leverage partnerships across the Services through
the ‘Cornerstone’ OTA membership consortium.
Figure 7.26: Graphic representation of the “Industrial Skills Workforce Development Ecosystem” as
envisioned by the National Imperative for Industrial Skills.

SECTION 8
CRITICAL AND
EMERGING
TECHNOLOGIES
CRITICAL AND EMERGING TECHNOLOGIES
Introduction to translate technology requirements into

manufacturing and industrial base requirements.
The Technology, Manufacturing, and Industrial Figure 8.1 outlines the assessment methodology
Base (TMIB) Office within OUSD(R&E) is responsible employed by TMIB to provide a full overview of the
for creating strategies within the industrial base technology from a manufacturing and industrial
to develop, manufacture, and sustain current and base point of view and create technology and
emerging technologies to retain U.S. advantage. industrial base protection and promotion strategies.
TMIB uses emerging technology assessments
Technology Development & Testing Future State of

Characterization Technology
− Assess government and industry
− Determine laboratories and engineering centers − Assess future
military advantage, state of
• Identify requirements for
assess technical technologies,
workforce skills, engineering tools,
maturity, and capabilities, and
facilities, technical challenges
understand interdependencies
challenges • Identify test requirements-
− Identify economic
infrastructure, skills, tools
− Understand strategies/
near-peer Production & Supply Chain investments,
& adversary scalability of
− Assess industry production
perspectives, emerging
capabilities & supply chain capacities
strategies, technologies,
investments − Identify critical companies and and maintain
expertise, existing relationships, technological
mergers and acquisitions advantage
Figure 8.1: Types of Technology and Manufacturing Studies

These strategies protect and promote the DIB by by providing point-of-need manufacturing. The
mitigating risks, exploiting opportunities identified mastery of this emerging technology will have an
in emergent technology assessments, and providing outsized impact on national security. It is critical
support for the development and execution of that the United States and its allies prevail in the
technology modernization activities and priorities. race for biotech, as China has publicly stated
that it intends to “win” the bio-revolution and
The following section of the report includes an signaled willingness to use biotechnology against
overview of the critical and emergent technologies their adversaries without respect for protocols,
currently in the research and development phase, conventions, or human rights.
including current and future initiatives to promote
and protect the technology innovation base. The DoD Biotechnology modernization strategy
identifies initial key areas to develop to create
Biotechnology a pipeline to rapidly transition science and

technology (S&T) toward fieldable products and
Biotechnology, or biotech, refers to the engineering capabilities, as shown in Figure 8.2.
of biological systems and processes to produce
a wide range of products, as well as utilizing A deliberate shift toward bioindustrial
biological data to enable technological advances. manufacturing could reduce DoD dependence on
DoD investments in biotechnology will result in sole source and foreign suppliers through the use
enhancements to warfighting materiel and systems, of engineered organisms as factories to produce
warfighter health and performance, military a wide range of downstream products, including
medicine, and chemical and biological defense. For materials that cannot be manufactured using
example, biotechnology can enable the Department alternative approaches. However, DoD efforts
to: source mission-critical materials without have focused largely on developing capability at
relying on fragile supply chains; develop materials the laboratory level, and commercial applications
with novel properties to enhance performance of engineering biology are still in early stages of
in systems ranging from hypersonics to ships market expansion. A clear limitation in growth of
and submarines; and greatly reduce logistical this technology segment relates to facilities and
timelines andDoD
burden for deployment know-how for scaling biomanufacturing from the
and resupply is focused
biotechnology modernization on developing the pipeline to
field biotechnology-enabled products and capabilities
Fundamental, cross- Biotech-enabled products

Biotech
cutting S&T and capabilities
Pipeline
Foundation
Critical capacity & Data as a strategic Workforce development

infrastructure operational resource
Robust DoD/domestic Biotech data accessible Military and civilian

biotech infrastructure for via common platform that personnel trained in
design, development, and is secure and maintains biotech fields to analyze,
manufacturing privacy protections develop, and field novel
biotech capabilities
Figure 8.2 1
UNCLASSIFIED

laboratory to commercial production; a valley-of- technology by adversaries. The coronavirus
death exists for most companies between federally pandemic further underscores U.S. and global
funded proof-of-concept work and demonstration, vulnerabilities to biological threats. The DoD can
scale-up, and production. play a key role in contributing to national and
international standards for responsible use of
To mitigate this challenge, the DoD Manufacturing biotechnology, and ensuring that the technology is
Technology Office, along with the Principal Director broadly available, safe, and secure by developing
for Biotechnology within OUSD (R&E), awarded a innovative approaches to address biosafety,
7-year Cooperative Agreement worth $87 million to biosecurity, and biocontainment.
BioMADE to develop a Manufacturing Innovation
Institute dedicated to biomanufacturing for non- To support Biotechnology development,
biomedical applications. Focus areas for BioMADE OUSD(R&E) TMIB is leading two assessments to
will include: 1) the development of better tools for quantify: 1) domestic bioindustrial manufacturing
scale-up manufacturing, 2) improvements in down- capacity, and 2) the current and future
stream processing techniques, and 3) the ability to biotechnology workforce. These assessments
rapidly assess and characterize biomanufactured aim to develop an understanding of gaps
products. Collectively, these efforts will reduce the and needs, and create recommendations for
cost and time to achieve robust biomanufacturing, mitigation measures necessary to ensure a robust
with a focus on fostering and sustaining a globally bioindustrial manufacturing base and advance the
competitive U.S. manufacturing base. broader U.S. bioeconomy.
As biotechnology continues to develop, the DoD

faces several key risks related to gaps in domestic
workforce, national and international standards,
and robust biosecurity to prevent misuse of the

Fully Networked against threats that are increasing in pervasiveness
and effectiveness. OUSD(R&E) will mature and
Command, Control, and transition the overall FNC3 architecture and
Communications associated technologies via a strategy that fosters

distinct but inter-related R&D efforts across the
physical, network, and application layers. The
Fully Networked Command, Control, and DoD FNC3 strategy will result in a resilient DoD-
Communications (FNC3) technology encompasses wide command, control, and communications (C3)
the capability to acquire, process, and disseminate system, while also enabling interoperability and
information across force elements.73 The DoD connectivity between every system and platform.74
requires reliable interconnection of diverse
platforms and systems across all domains and
operating environments as defined in the NDS.
Existing capabilities require sufficient protection
Figure 8.3: FNC3 Strategy75

The existing C3 innovation and industrial bases DoD will continue to collaborate with industry
are healthy. However, while commercial products stakeholders to identify and implement C3
benefit from the use of open architectures, industrial base vulnerability mitigation efforts,
common interfaces, and fixed infrastructure, leveraging investment programs such as Defense-
DoD C3 systems require unique, military-specific Wide Manufacturing Science & Technology
applications to be effective. Today’s military (DMS&T), ManTech, IBAS, and DPA Title III to
C3 systems were designed and developed with protect the FNC3 industrial base from challenges,
incompatible requirements and are unable to and to bridge the gap between S&T and
efficiently exchange information.76 DoD will production.
leverage existing commercial technologies
In FY2020, OUSD(R&E) TMIB initiated a multi-
and best practices to solve the two biggest
phased industrial base assessment focused on
challenges facing the DoD’s existing C3 systems:
discovering commercial trends that support
interoperability and resilience in highly contested
the FNC3 strategy; determining capabilities
environments. The FNC3 strategy takes advantage
and vulnerabilities related to delivering the
of all available link diversity to provide resilience
technologies required; identifying risks and
while also promoting interoperability and
opportunities; and making recommendations
connectivity between every system and platform.77
to enhance the existing C3 supplier base. Initial
To transition capabilities to the warfighter, FNC3 is findings include actionable approaches to
coordinating with key DoD stakeholders, including achieving interoperability across DoD-wide
the OUSD(A&S), DoD CIO, the Joint Staff, Space platforms (including legacy) using analytics,
Development Agency, and the Services to guide network management techniques, modular
the transition of FNC3 capabilities into appropriate approaches to interoperable architectures,
acquisition programs, standards, and operational and data management strategies. The FY2021
architectures. The Joint All-Domain Command assessment outcomes will identify DoD and
and Control (JADC2) Cross-Functional Team commercial technology development investment
chartered by the Deputy Secretary of Defense trends, and will provide recommendations on how
has adopted the FNC3 strategy as its long-term to improve the DoD FCN3 strategy by leveraging
technological baseline. JADC2 will also provide the what industry has already invested in, and by
ability to connect distributed sensors, intelligence, focusing next on military-unique capabilities that
information, data, and effects from all domains to must be incentivized.
tactical and strategic decision makers; JADC2 will
provide this capability at the scale, tempo, and
timing required to accomplish the commander’s
intent, agnostic to domains, platforms, or
functional lanes.78

Hypersonics The Department is identifying issues, risks, and
opportunities to advance hypersonics capabilities
Hypersonic weapons achieve sustained flight with the objective of creating near- and long-term
within the atmosphere with speeds near, or above, investments strategies. DoD’s ability to develop
five times the speed of sound. There is a focus on and field hypersonic capabilities requires a robust
the tactical capability that these types of weapons industrial base positioned to design and test
bring to theater or regional conflicts. These hypersonic systems. IB capability must also sustain
weapons provide quick response and high speed, the anticipated U.S. production demand in support
are highly maneuverable, and difficult to find, of the DoD strategy for accelerated development
track, and kill. DoD is modernizing our offensive and fielding of hypersonic strike weapons as
and defensive force structure to both utilize and shown in Figure 8.5.
deter this capability. Example programs for the
U.S. investment in hypersonics strike systems are
shown in Table 8.4.
Hypersonic Development Program Service/Agency Capability
Long Range Hypersonic Weapon US Army Intermediate Range Strike

Conventional Prompt Strike US Navy Intermediate Range Strike
Air Launched Rapid Response US Air Force/DARPA Medium Range Strike
Weapon(ARRW)/Tactical Boost Glide (TBG)
Hypersonic Air-breathing Weapon US Air Force/DARPA Medium Range Strike
Concept
STANDARD Missile-6 (SM-6 Blk1B) US Navy Medium Range Strike
Table 8.4: Hypersonics Programs
Accelerated Development and Fielding of Hypersonic Strike Weapons
Phase 1: Concept and Phase 2: Weapon Phase 3: Accelerated Phase 4: POR Fielding
Technology R&D System Rapid Fielding Plan Plan
Prototypes
Develop the enabling Field hypersonic strike Establish programs
technologies and Accelerate future weapon prototype of record to build
concepts necessary hypersonic weapon capabilities in warfighting inventory
to underpin future system prototype meaningful numbers and implement
hypersonic systems development capability phasing plans
Foundational S&T, Industrial Base and T&E Investment Plans
Table 8.5: Hypersonics Development and Transition Phases

In 2019, the Defense Contract Management and modeling and simulation methods. The OSD
Agency’s Industrial Analysis Group (DCMA IAG) ManTech office projects Manufacturing of Carbon-
and the Air Force’s Office of Commercial Economic Carbon Composites for Hypersonic Applications
Analysis performed studies focused on the will continue to advance methods and processes
capabilities, capacity, and financial health of the to more affordably and rapidly produce carbon-
hypersonics IB. Major findings of the reports carbon components for hypersonic systems.
included the need for immediate and continued These investments will greatly improve the ability
investments in infrastructure, development of the industrial base to design and test systems,
activities, manufacturing, and workforce and provide quantities needed for near-term
development to ensure a healthy and resilient demonstration and early operational capability
IB. Recent industrial base assessments have also milestones. They will also contribute to the ability
identified capabilities essential to achieve a robust to produce larger production quantities in the
hypersonics industrial base, including: future.
− Stable sources of critical materials such as In support of the Principal Director for
ceramic matrix composite material sources Hypersonics, the TMIB office within OUSD(R&E)
(fibers, pitch resin, etc.) and the OUSD(A&S) Industrial Policy office are
− Industry access to test facilities and broad working to develop an IB roadmap and conduct
access to test results assessments in support of the acceleration of
hypersonic strike capability described in the Figure
− An ability for multiple hypersonics programs
8.5. This effort will identify actions and investment
to compete for the same supply chain of
strategies necessary to meet the hypersonics
traditional weapons system prime and sub-
capability required to meet DoD’s goals. To
tier contractors
execute this, a Hypersonics War Room (HSWR)
− Access to proprietary processes in a small was established with members from OSD and the
number of critical small businesses Services. The HSWR conducts deep dives into the
− A robust technical workforce of weapon industrial base, especially at the sub-tier level, to
systems engineers and supporting skilled visualize the emerging results of the roadmap
trades workers development and mitigation activities. This effort
has and will continue to focus on the current
− Robust and resilient verified design tools and
supply chain to identify areas of opportunity.
techniques
Additional planned and future IB assessments
The development of the Hypersonics Science and will facilitate data gathering and analytics, and
Technology roadmap has also identified a short list support fact-based decisions on investments in
of immediate investment opportunities that are key areas of the hypersonics IB. Future work to
required to increase the capability and health of develop requirements and acquisition strategies
the hypersonics IB. for Programs of Record will be informed by the
HSWR to help accelerate delivery of operational
In July 2020, a Presidential Determination for capabilities to the warfighter.
use of DPA authorities for the industrial base
production of ultra-high and high temperature
composites for hypersonics, strategic missiles,
and space launch systems was signed to address
future capacity needs. Additionally, further
investment opportunities are being explored
and implemented to advance manufacturing
technologies for additive manufacturing of high
temperature metals, ceramic matrix composites,

Microelectronics In a recent DoD News article, “DoD Adopts ‘Zero
Trust’ Approach to Buying Microelectronics,”
Microelectronics is a subfield of electronics Dr. Lewis, the DoD’s Director of Research and
that relates to the study, manufacture, and Engineering for Modernization, stated that
microfabrication of electronic designs and microelectronics are in nearly everything, including
components with very small feature sizes. the complex weapons systems DoD buys, such
Typically, this refers to micrometer-scale to as the F-35 joint strike fighter. He further stated,
nanometer-scale products. These devices are “Our goal is to allow the Department of Defense to
typically made from semiconductor materials and purchase on the commercial curves…that will put
many components of normal electronic design us on...par with our strategic competitors.”80
are available in a scaled down microelectronic
equivalent. These include transistors, capacitors, Microelectronics are critical to advancement of
inductors, resistors, diodes, insulators, and emerging technologies like AI, 5G and quantum
conductors. computing, as well as critical components
in weapons systems. Commercial market
Microelectronics have evolved rapidly as forces continue to lead in the consumption of
the demand for inexpensive and lightweight microelectronics and therefore are driving the
equipment has increased; they have also been industry.
incorporated into countless DoD systems.
However, the DoD modernization ability is
jeopardized by foreign microelectronics (ME)
production, actions, and investments. To
mitigate this, DoD must develop and deliver
next generation microelectronic technologies to
enhance lethality, ensure critical infrastructure,
and achieve economic competitiveness.79
FY2019 Total Global Semiconductor Demand Share by End Use 81
Communications 33% Computer 28.5%
Consumer Products 13.3% Automotive 12.2%
Industrial 11.9% Government 1.3%
Figure 8.6

To respond to market forces, the microelectronics DoD relies on the Defense Microelectronics Activity
industry must always be state-of-the-art. Trusted Foundry Program to provide access to
Approximately every two years, the industry moves trusted microelectronics and services through
to the next technology node, bringing benefits their network of accredited suppliers. DoD plans
which generally include improved size, weight, to make use of chiplets and advanced packaging
speed, and power consumption. The current to fill the need in the short term, until there is
SOTA for microprocessors is five nanometers, and either a domestic source of SOTA microelectronics,
is reserved for the highest volume commercial or Quantifiable Assurance reaches sufficient
customers. Unfortunately, these improvements maturity to allow the use of any foundry. The
have resulted in increased costs, particularly in the Trusted and Assured Microelectronics program
area of design. is pursuing an effort to both define Data-
Driven Quantifiable Assurance and create the
The United States still leads in the design of SOTA methodology for a zero-trust risk-based approach
microelectronics, but Asia has nearly 80 percent for supply chain protection and assured access to
of the outsourced aspects of semiconductor SOTA microelectronics technology and electronic
production. This includes foundries, and assembly components.
and test functions. “The U.S. currently maintains
a stable chip manufacturing footprint, but the The Defense Advanced Research Projects
trend lines are concerning. There are commercial Agency (DARPA) Electronics Resurgence Initiative
fabs in 18 states, and semiconductors rank as our is attempting to forge collaborations among
nation’s fifth-largest export. However, significant commercial industry, the DIB, universities, and
semiconductor manufacturing incentives have the DoD to innovate a fourth wave of electronics
been put in place by other countries, and U.S. progress. The five year, up to $1.5 billion initiative,
semiconductor manufacturing growth lags behind to enable far-reaching improvements in electronics
these countries due largely to a lack of federal performance, is halfway to completion with much
incentives.”82 During FY2020, the microelectronics of the focus area in microelectronics.83
sector experienced an increase in the numbers of
DoD is continuing to collaborate to identify and
both CFIUS and export control cases. The majority
implement mitigation efforts. OUSD(A&S) and
of the cases were related to components for 5G.
OUSD(R&E) are leveraging several investment
The health of the U.S.-based microelectronics
programs such as DMS&T, ManTech, IBAS, and
industry is being balanced against policy changes
DPA Title III, to address microelectronics industrial
to protect the technology.
base challenges and bridge the gap between
S&T and production. The OUSD(R&E) TMIB
will assist in creating strategies to promote the
health of the industrial base, advance technology
maturation, monitor supply chain risks, and
identify issues, risks, and opportunities related to
the development, manufacturing, and sustainment
of related manufacturing technologies.

Machine Learning/
Artificial Intelligence (AI) The DoD AI strategy identifies initial key areas to
develop to maintain a competitive advantage in AI,
Artificial intelligence refers to the theory and including AI capabilities, determining a common
development of systems able to perform tasks foundation, cultivating the AI workforce, engaging
that normally require human intelligence, in partnerships, and leading in AI assurance. In
including perception, learning and reasoning, particular, a common foundation across DoD with
human-robot interaction, and other major a joint AI development platform and DoD shared
processing and reasoning tasks, with the aim data, AI evaluations, and AI solutions will enable
to improve efficiency and effectiveness across the rapid transition of AI research breakthroughs
DoD.84,85 Machine learning (ML) refers to the field to edge developers.
of computer science concerned with creating
programs that “learn” from data using a large and As AI/ML technology continues to grow in terms
evolving set of techniques grounded in statistics of development and strategic importance, the
and mathematical optimization. AI uses machine DoD AI/ML industrial base faces several key risks:
learning technologies to enable a multitude of gaps in U.S.-based human capital, variable ease
capabilities.86 DoD is currently developing AI for of adaptability of commercial AI technology, and
various military applications, such as intelligence, potential product security issues. Product security
surveillance, and reconnaissance, logistics, is one of the main risks for AI/ML systems, as they
cyber operations, command and control, and are vulnerable to theft and exploitation due to
semiautonomous and autonomous vehicles. being primarily software-based. The U.S.-based
human capital gap is also a risk, with DoD and the
While military AI technology is still in a stage of defense industry facing challenges in recruiting
infancy, DoD is pursuing AI algorithms developed and retaining personnel with AI expertise
for ISR and for autonomous vehicles as two key compared with the commercial sector. In
AI capabilities, among others. The Army, Air addition, there has been a decline in the domestic
Force, DARPA, DISA, Navy, and OSD all have AI/ AI workforce due to the rise of international
ML development projects in progress to further graduates in U.S. research institutions and
mature AI technology. For example, the U.S. Air universities, who then frequently return to work
Force program Project Maven integrates AI into overseas or at companies in competition with U.S.
systems for insurgent target identification through AI/ML companies.91
the use of AI algorithms, computer vision, and
machine learning,87 with the goal of automating DoD also faces a challenge in leveraging
the processing, exploitation, and dissemination commercial technology for military applications, as
typically done by human analysts, thus increasing innovation in AI is currently dominated by private
efficiency.88 DARPA has AI/ML programs, such as companies that work with open-source, general
the Air Combat Evolution (ACE) program, which is purpose AI software libraries. There is a wide
developing an AI fighter pilot with human-machine variance in how easily commercial AI technology
teaming to reduce the cognitive load on the pilot can be adapted for DoD, with certain algorithms
during dogfights.89 The U.S. Army is researching requiring only minor data adjustments and others
reinforcement learning approaches to enable needing significant changes in order to be used
swarms of unmanned aerial and ground vehicles in complex military environments. In addition,
to accomplish various missions, minimizing existing DoD processes may be at odds with
performance uncertainty. The U.S. Army Research commercial companies’ safety and performance
Laboratory is also investigating deep recurrent standards and their acquisition processes.
neural networks to improve the learning and These factors can inhibit the smooth transfer of
prediction algorithm for optimal coordination of commercial AI technology to DoD.92,93
autonomous air and ground vehicles.90

DoD continues to identify and implement
mitigation strategies to support AI/ML
development and is leveraging ManTech
investment programs to further develop
technologies in the AI/ML investment area. TMIB
is leading an AI/ML industrial base assessment to
develop recommendations for the design of a DoD
AI/ML open-market model, based on feedback
from industry and other stakeholders. This
assessment has the goal of increasing competition
and reducing development cost to move more
viable capabilities into DoD.

Quantum networks are expected to profoundly impact a
number of DoD missions, including timing, sensing,
Quantum Information Science is the study of computation, and communications in the long-
how quantum physics can be exploited for the term, potentially delivering resource multiplying
collection, manipulation, storage, retrieval, effects for other quantum technologies to solve
analysis, movement, dissemination, and protection DoD’s challenging analytical problems.98
of information. DoD research indicates that
advancing capabilities of quantum technologies Some of these areas have reached higher
will benefit critical mission spaces.94 DoD is technology readiness levels (e.g., atomic clocks and
interested in military applications of quantum vapor cell magnetometers), while others are in the
information science that will provide technological earliest stages of proof-of-principle development
advantage over alternative approaches.95 (e.g., quantum computers and entangled quantum
Consequently, there is a push toward ultra- networks).99 For example, in the case of quantum
sensitive devices that increasingly rely on quantum sensor technologies, commercial companies
phenomena to achieve advances in precise are starting to make quantum products,
timing and navigation, sensing, computing, and and the technology is progressing towards
networking.96 military utility. Although atomic clocks and
magnetometers have been in use, other sensors
The Department is currently pursuing four key (e.g., gyros, accelerometers, and gravimeters)
technical areas: atomic clocks, quantum sensors, are still in development and not yet fieldable.
quantum computers, and quantum networks.97 Other quantum technologies such as quantum
Atomic clocks and quantum sensors will deliver computers and quantum networks are still in their
new and assured precision, position, navigation, infancy and exist primarily in labs.
and timing capabilities, as well as improved
intelligence, surveillance, and reconnaissance, Additionally, these quantum technologies differ in
allowing our forces to continue operations in the anticipated impact to the military. As Figure
GPS-denied theaters. Quantum computers are 8.7 depicts, technologies vary from low military
projected to provide high-performance computing, impact with low readiness level (e.g., entangled
solving hard mathematical problems that are sensor networks) to high military impact with high
intractable for a traditional computer. Quantum readiness levels (e.g., GPS atomic clocks).100
Military Impact Quantum Technologies,

Existential their readiness, and expected military impact.
The size of a circle represents uncertainty about where the technology
falls on this chart. Larger circle means more uncertainty.
Full-Scale GPS Atomic Clocks

Quantum Liter-Scale (ns error)
Computer Atomic Clock
High (ps error)
Quantum
Quantum Inertial Sensors
Gravity Sensors Chip Scale
Atomic Clock Quantum Vapor Cell
Entangled (ns error) Electromagnetic Magnetometers
Sensor Quantum Sensors Chip Scale
Networks Magnetometers Atomic Clock
Low Limited-Scale (ps error)
Quantum Computer
Quantum
Radar Quantum Key
Distribution
Impossible Ideas Lab Demonstrations Prototypes Fielded
Military Readiness
Figure 8.7 Quantum Technologies Military Readiness

To mature quantum technology, the OUSD(R&E) strategic competitor nations, and resulting in
Roadmap for Quantum Science highlights key the loss of intellectual property, equipment, and
long-term military challenges with technical goals, talent. DoD assesses that current elevated levels
including: of commercial investment are unsustainable,
given the limited commercial utility of quantum
− Synchronized timing in denied environments; computing. Existing levels are only sustainable if
− Precision targeting, positioning, and navigation there is a major breakthrough, and DoD continues
in denied environments; to monitor the situation to keep abreast of and
− Military advantage for intelligence, mitigate developments.
surveillance, and reconnaissance;
DoD is in a position to help the country weather a
− Access to high performance computing for “quantum winter” by maturing and transitioning
military applications; and practical applications for quantum technology,
− Survey cryptographic solutions for military thereby decreasing the perception gap. DoD will
communications. continue to issue realistic timelines for quantum
technology development. For example, industry
For example, the U.S. is reliant on precision time- claims that quantum desktops will be available
keeping and communications synchronization. in five years; these claims are unreasonable and
Atomic clocks provide a non-GPS alternative to DoD is in a position to clarify this information. As
position, navigation, and timing solutions in denied an additional measure, DoD is also tracking the
environments and offer size, weight, and power health of the quantum science industrial base and
improvements over currently available timing workforce.
solutions. Therefore, one key focus area is to
It is important for DoD to understand the current
mature atomic clocks with novel characteristics of
health of the quantum science industrial base
military relevance and reduced cost. To this end,
to mitigate risks. Quantum information science
the DoD is making substantial investments in the
is a relatively new technical focus area for
development of novel atomic clock technologies,
consumers, with an emerging supply chain. To
as well as low-cost, chip-scale atomic clocks.
gain this understanding, DoD is sponsoring a
Various actions the Department is taking to RAND Corporation assessment of the robustness
mitigate national security risks to quantum of the U.S. industrial base in quantum technology.
technology include: monitoring the development Potential focus areas for this assessment include:
of a potential “quantum winter”, actively promoting the robustness of supply chains; academic
realistic expectations of the maturity of the research activity; commercial deployment; strength
science, staying abreast of the health of the of international collaborations; technological
quantum science industrial base and workforce, breadth of investments; dedicated public funding
and continuing to partner with academia and (total investment and sustained level of funding
industry to develop quantum science. The term over time); academic, industry, and/or government
“quantum winter” has been coined to describe a integration; and prioritization by national
possible time period in which the public hype of leadership.102
the potential in quantum computing outpaces
the maturity of the applications. Gartner’s “hype
cycle” describes the effect of inflated expectations
and ensuing disillusionment, which has been seen
before in emerging technology areas.101 This may
cause U.S. investors to reduce their investments,
negatively affecting large companies and start-
ups, making them vulnerable to acquisition by

DoD’s legacy of more than twenty years of Since much of quantum technology is early in
quantum information science research, including its lifecycle, DoD has endeavored to balance
both internally at Service labs and by funding technology promotion efforts and technology
external talent, has created a wide breadth and protection efforts. A correct balance would allow
scope of expert-quality quantum workforce for the industrial base to have access to the best
nationally. Continuation of these efforts will allow talent available globally, while mitigating the risks
the pool of talent to encompass the full quantum of technology transfer to strategic competitor
product life-cycle. Figure 8.8 illustrates the nations. The DoD is in the process of assessing
generalized job ratio and role requirements of the and understanding what the future quantum
workforce necessary to support the product’s full workforce will comprise. The study will identify
life cycle. projected gaps in industry-level capabilities,
competencies, and occupations required to fulfill
In the coming decades, as technology matures mission objectives. This assessment will also make
and moves through its life-cycle from concept to recommendations for broad-based strategies to
commercialization, the challenge will lie in shaping mitigate those gaps.103
the workforce to address the specific needs that
will arise.
Researchers, scientists, and conceptual

One Worker
engineers creating new technological concepts
with Masters
Degree or Higher
Design and industrial-type

Two Workers with engineers who translate those
Undergraduate Degrees concepts to commercially viable
technology products
Technicians that
7 Workers with a One or manufacture, install,
Two-year Certificate or Degree and maintain the
technology products
Gray, K. & Herr, E. (2006). Other Ways to Win: Creating Alternatives for High School Graduates.
Third Edition. Thousand Oaks: Corwin Press
Figure 8.8: U.S. Job Ratio for the Product Life-Cycle Workforce

Directed Energy (DE) The U.S. Army, Navy, Air Force, Marines, Special
Operations Force, and other DoD Agencies have
Directed Energy is an umbrella term referring development programs underway to mature both
to technologies that produce concentrated HEL and HPM weapon systems.106 For instance,
electromagnetic (EM) energy and atomic or the Navy has installed Optical Dazzler Interdictor
subatomic particles. A directed energy weapon (ODIN) counter-sensor lasers aboard three Arleigh
(DEW) is a system using DE primarily as a means to Burke-class guided missile destroyers, the first of
incapacitate, damage, disable, or destroy enemy which was USS Dewey. Five additional installations
equipment, facilities, and/or personnel.104 will follow in the next couple of years.107 Multiple
DEWs, including the High Energy Laser (HELWS),
DoD is currently pursuing two key types of
High Power Microwave (PHASER), and Tactical High
DEWs: high energy lasers (HEL), which offer
Power Operational Responder (THOR), have also
precise laser beams that can reversibly dazzle
been recently deployed overseas for 12-month
or permanently burn and damage targets; and
field assessments in which Warfighters will
high power microwaves (HPM), which produce
evaluate their performance and benefit.108 Table
radio- and microwave-frequency beams that can
8.9 shows other operational experiments. Results
engage multiple targets at a time and disrupt
of these assessments will provide insight on the
their electronic systems. Both weapon systems
DE capability to counter UAS and shape the way
offer the distinct advantages of deep magazine,
forward for their use.
low cost-exchange ratio, and speed-of-light
engagement, and can be employed across
all warfighting domains to counter threats of
evolving quantity (e.g., swarms of unmanned
aerial systems or fast inshore attack craft), speed
(e.g., hypersonics), and lethality (e.g., highly
maneuverable cruise missiles and intercontinental
ballistic missiles).105
HELWS Raytheon HEL using invisible beams of light to neutralize hostile UAS; mounted on a
Polaris MRZR all-terrain vehicle
PHASER HPM developed by Raytheon that uses microwave energy to disrupt drone guidance
systems, with the capability to address UAS swarms; mounted on a shipping container-
like box
THOR Counter-swarm HPM developed by AFRL, intended for airbase defense; stores in a
20-foot transport container
Table 8.9: DEWs deployed for operational experimentation109

2030+ MW class
200-500 kW class
Strategic Missions
with advanced
Increasing Military Capability
2025-30 technology:
Ballistic and Hypersonic
Missile Defense
< 100 kW class Tactical Missions
with advanced technology:
2019-24 Counter Anti-Ship Cruise Missile
(C-ASCM), Counter Land Attack
Cruise Missile (C-LACM), Base Defense,
Aircraft Defense, Close-Combat
Tactical Missions
with current proven
technology:
DE Strike, Counter Unmanned Aerial
System (C-UAS), Counter Rolling Airframe
Missile (C-RAM), Counter Intelligence,
Surveillance, and Reconnaissance (C-ISR)
Figure 8.10: DoD HEL Roadmap112
Overall, DoD is focusing its near-term efforts Fabrication of many DE components necessitates
on fielding capabilities for tactical missions with a high degree of touch labor using highly
proven technologies. However, as Figure 8.10 specialized skills and equipment unsuitable
shows, the DE technology roadmap includes the for any level of quantity production due to the
development of advanced technologies extending significant cost and lead times involved.115 This is
into the next decade. Among the DoD roadmap further exacerbated by the many single and sole
efforts110 is the HEL Scaling Initiative which intends source suppliers currently providing critical DE
to increase HEL power levels from around 150 components. While these suppliers are adequate
kW, as is currently feasible, to around 300 kW, a for a number of demonstrator systems, there is
level at which cruise missiles could potentially be a risk that they will not be able to meet program
intercepted, with the potential to scale to 500+ needs as the Military Services ramp up DE system
kW.111 production rates.
To facilitate the implementation of these future Domestic manufacturing insufficiencies have

technologies, the roadmap also establishes a DE increased the U.S. dependency on foreign
reference architecture to identify components goods, such as raw substrate materials for
and subsystems around which DoD can optics and laser components, and tooling and
standardize. Such standards113 will enable a equipment required for manufacturing of DE
modular open systems approach and reduce components. Not only does this dependence
costs by allowing components to be bought and expose the supply chain to foreign influence, but
used by multiple programs.114 it also has the potential to impact component
and other downstream activity lead times, and
As the DoD demand for DEWs increases, it faces
the ability to meet necessary yield rates.
key industrial base risks related to supplier
financial health, specialized equipment and skills, Underlying a number of industrial base risks
production capacity, foreign dependence, and are shortfalls in the workforce. The U.S. faces
single source suppliers. The primary challenge a diminishing supply of clearable labor with
is adapting commercially available production the advanced education and training necessary
methods to meet DE-specific products, while for designing, producing, and stewarding
accomplishing high-rate, low cost production. DE systems. The DoD DE community faces

workforce skill gaps across the board, as the investment programs such as DMS&T, ManTech,
emergence of new weapon technologies, coupled IBAS, and DPA Title III, to apply towards DE
with retirements, has caused a significant industrial base challenges and bridge the gap
mismatch between skill requirements and between S&T and production. The TMIB office is
workforce capabilities. Recruitment and retention also leading a DE industrial base assessment to
of critical skill sets are concerns, partially because identify issues, risks, and opportunities related to
of sharp competition for labor with the private the development, manufacturing, and sustainment
sector. Training the new workforce is essential, of this technology. The assessment findings
and improving the organic industrial base’s will be used to create strategies to promote
opportunity to recruit already-trained artisans the innovation base and advance technology
would have significant and immediate impacts on maturation.
productivity and readiness.
DoD is continuing to collaborate to identify and

implement mitigation efforts, leveraging several

5th Generation (5G) DoD will adapt 5G and next generation
technologies to “operate through” congested and
The 5th generation (5G) of cellular networking contested spectrum, in spite of compromised
infrastructure will use a combination of networks, to ensure maximum readiness, lethality,
frequencies from multiple bands to maximize and partnering among allies. 5G prototyping and
throughput. In addition to traditional macro experimentation will be conducted in collaboration
cell towers, 5G will also use a large number of with the defense industry and commercial
much smaller micro cells for new millimeter wave suppliers to accelerate U.S. prominence in the 5G
spectrum bands to create a blanket of ultrahigh- global ecosystem.116
speed network coverage, providing significant
improvements in capacity and latency that will
enable connections to and control of many types
of devices, not just cellphones. 5G will bring
about wireless, ubiquitous connectivity across
humans, machines, and the Internet of Things.
Representative emerging and future applications
are listed in Tables 8.11 and 8.12. Some
commercial carriers have already started rolling
out 5G networks in the U.S.
Segment Drivers Enablers 5G Requirement
Education Remote delivery Video streaming Large bandwidth

Immersive experiences Augmented reality/ Low latency
Virtual reality
Manufacturing Industrial automation Massive IoT networks High connection density

Ultra reliability
Low power consumption
Healthcare Remote diagnosis and Video streaming Low power
Intervention Augmented reality/ High throughput
Long term monitoring Virtual reality Low latency
Embedded devices,
Advanced robotics
Smart Grid Intelligent demand/ IoT sensors and networks High reliability
supply control Broad coverage of
Powerline network
communication Low latency
Entertainment Immersive gaming and Video streaming Large bandwidth
media Augmented reality/ Low latency
Industry Virtual Reality
Multimedia experience at
4k, 8K res.
Table 8.11: Emerging applications and services enabled by 5G117

Segment Drivers Enablers 5G Requirement
Automotive / Collision avoidance Vehicle-to-vehicle (V2V) Large bandwidth and low

Autonomous Cars Intelligent navigation and Vehicle-to-infrastructure latencies (< 5 ms)
transportation systems (V2I) and other intelligent and high connection
transport systems (ITS) reliability (99.999%)
Smart Cities Connected utilities, Massive IoT networks Large bandwidth

Transportation, Automation High throughput
Healthcare, Cloud infrastructure High connection density
Education and all Artificial intelligence Low latencies
amenities
Table 8.12: Envisaged Future Applications118
To support the new 5G capabilities, more of the to enable complex flight operations that are safe
radio frequency spectrum must be made available. (e.g., avoiding collisions with buildings, airplanes,
The Federal Communications Commission is and each other). 5G enhancements will further
working to make additional spectrum available for enable this effort and disrupt many current
5G services and have prioritized auctioning high- business practices.119
band and mid-band spectrum.
Virtual/augmented reality — A new set of end-user
devices enabled with virtual-reality capabilities,
Commercial 5G augmented reality (with digital view on a physical
U.S. commercial carriers are rolling out 5G across view), and haptic feedback are becoming
the low-band, mid-band, and high-band ranges popular with education, gaming, and real-
of frequencies. However, the coverage is not world simulations. These devices are wirelessly
widespread, particularly in the high-band, and it connected and need low latency and high reliability
may not be available in all markets for a few more to enable real-time experiences.120
years. In addition, few devices are commercially
AI — Advances in deep learning have allowed for
available to take advantage of the new technology,
very complex algorithms being applied in everyday
although that is changing rapidly.
applications. The petabytes of data generated
There are several new technologies that are by networks and services on the internet and
becoming mainstream and enable the next otherwise have made this possible. AI will drive
generation of applications. Though many of these applications like autonomous cars, robotics,
enablers have been in industry for a while, there automation, and several intelligent applications
are new applications utilizing these technologies on mobile devices. AI will also be the key driver
and generating business value. Key enablers and for self-optimizing networks that will allow 5G
their impact on 5G are as follows: networks to respond to issues of congestion,
failures, and traffic spikes.121
Robotics and drones — Industrial automation
and healthcare will be two main areas where
advancements in robotics will play a major role.
In addition, an important use case for 5G will
be drones and autonomous aerial vehicles. For
example, future UAVs will deliver products and
perform surveillance, disaster relief, etc. Currently,
the ecosystem is exploring the use of 4G networks

Department of Defense
Recently, DoD announced the award of over
$600 million in contracts to 15 prime contractors
to perform testing and evaluation of 5G
technologies at five military installations across
the United States. Work on the test sites will
last approximately three years, with the sites
expected to be set up within the first year and
full-scale experimentation planned by year two.
The photograph in Figure 8.13 is the AN/FPS-117
engineering facility at Hill Air Force Base, Utah –
one of the 5G testing sites.122
Figure 8.13: The AN/FPS-117 engineering facility

at Hill Air Force Base, Utah, one of the DoD
5G testing sites123
There are three key thrust areas that the military

is pursuing in regards to 5G networking: Accelerate,
Operate Through, and Innovate. Accelerate includes
the hastening of DoD’s use of 5G technologies;
Operate Through ensures that DoD networks
are secure and will have the ability to operate
wherever and whenever the military goes; and
Innovate focuses on next generation technologies
(6G, 7G, etc.) to position the U.S. for the future.
5G technology is vital to maintaining the U.S.
military and is a transformational technology
critical to DoD modernization.124 The economic
advantages of 5G technology will be the advent
of ubiquitous connectivity, and the connectivity of
everything, everyone, everywhere through wireless
communications.

Autonomy industrial base risks, particularly related to
foreign dependencies and the gap in U.S.-based
“Autonomy” describes systems capable of human capital. Foreign dependencies exist on
performing assigned tasks without continuous the technologies needed to enable autonomy,
human control. Autonomous systems include a leading-edge graphics processing units (GPUs),
level of perception and decision-making that allows field-programmable gate arrays (FPGAs), and
them to adapt their performance to changing application-specific integrated circuits (ASICs) –
conditions, rather than completing procedural many of which have AI-specialized versions – as
tasks. These systems have limited human Taiwan and South Korea control a large percentage
guidance, though they are dependent on human of chip fabrication factories. However, even for
guidance at some level.125 U.S.-based semiconductor manufacturing, there
is a reliance on rare earth metal imports, which
The strategic goals for DoD’s autonomous system
can cause long lead times and high expenses in
portfolio include building a more lethal force,
the development and fabrication of autonomous
strengthening the operational pull for autonomy,
systems.129,130
and accelerating DoD adoption of autonomous
capabilities. To achieve these goals, DoD has DoD also faces a gap in human capital, due to
identified two key areas: Manned-Unmanned the displacement of U.S. students in autonomy
Teaming (MUM-T); and Machine-Machine Teaming at research institutions and universities by
(M2M). MUM-T is a systems architecture that international graduates. This gap is also caused
enables synchronized performance of the by the large proportion of international graduates
warfighter, manned and unmanned vehicles, who return overseas or work for foreign
robotics, and sensors to achieve enhanced companies that compete with U.S. companies.
situational understanding, greater lethality, and
improved survivability.126 Similarly, M2M involves In addition, one of the main risks the Autonomy
synchronizing machines, such as manned and sector faces are threats of intellectual and
unmanned vehicles, robots, and sensors. corporate theft. Autonomy relies heavily on
software, which is frequently threatened by theft
In the near-term, the DoD is focusing on the and exploitation due to network vulnerabilities.
development of autonomous robotic platforms, Both hardware and software components of
swarm agents, and autonomous ISR applications. autonomous systems face persistent, advanced
The Army, Air Force, DARPA, DISA, Defense Threat threats, network penetration, and forced
Reduction Agency, Navy, OSD, and USSOCOM technology transfer and theft.131
all have autonomy development and research
projects to further mature autonomy technology. DoD continues to identify and implement
For example, the U.S. Army began a research mitigation strategies aimed at enabling
project on ground robot autonomous systems with autonomy development, and leverages the
the ability to receive demonstration commands ManTech investment program to further
from a human, enabling increased human-machine develop technologies in the autonomy area,
teaming.127 The U.S. Army also has the Robotic particularly in human machine teaming and
Combat Vehicle program and with their Ground collaborative robotics. The Advanced Robotics for
Vehicle Systems Center, they have developed Manufacturing Institute (ARM) is a public-private
autonomous software for their unmanned vehicles partnership leading collaboration in robotics
to enable them to autonomously explore, follow a and workforce innovation that is working to
human-designated route, and adapt to unplanned accelerate U.S.-based autonomy development and
obstacles.128 manufacturing. DoD is also continuing to oversee
the health of the autonomy industrial base and
As DoD increases its demand for autonomous monitor supply chain risks.
systems, the Department faces several key

Cyber − Defensive options including design for
security, resilience, and survivability; training,
DoD defines cyberspace as a global domain awareness; and cyber hygiene. Design
within the information environment, consisting for resilience applies at all levels, from the
of: the interdependent network of information simplest components and their underlying
technology (IT) infrastructures and resident technologies to the most complex integrated
data, including the Internet; telecommunications system of systems, as well as all enabling
networks; computer systems; and embedded technologies that make them possible.
processors and controllers. All aspects of DoD
− Cybersecurity refers to the prevention of
joint operations rely in part on cyberspace, which
damage to, protection of, and restoration
is the domain within the information environment
of computers, electronic communications
that consists of the interdependent network of
systems/services, and wire communication,
IT infrastructures and resident data. It includes
including information contained therein, to
the Internet, telecommunications networks,
ensure its availability, integrity, authentication,
computer systems, and embedded processors and
confidentiality, and nonrepudiation (DoDI
controllers. Cyberspace operations (CO) refer to the
8500.01).
employment of cyberspace capabilities to achieve
objectives in or through cyberspace.132 The U.S. influence in cyberspace is linked to its
Cyber is a unique military operational domain with technological leadership. Accordingly, the U.S.
significant security challenges and potential leap- government is making a concerted effort to
ahead capabilities for military operations, requiring protect cutting-edge technologies, including from
enhanced command and control, situational theft by our adversaries, and to support those
awareness, and autonomous operations.133 The technologies’ maturation, and, where possible,
ability to gain and maintain the U.S. technological reduce U.S. companies’ barriers to market entry.136
edge in cyberspace in the face of rapid evolution DoD is focused on preventing cyber vulnerabilities
is essential to maintaining mission readiness. To within the cyber operations infrastructure,
ensure the country’s safety in the cyber era, priority the industrial base, enterprise IT and business
actions of the U.S. government include: identifying systems, and infrastructures required for
and prioritizing cyber risks; building defensible integration and testing. Other DoD objectives
government networks; deterring and disrupting include defending U.S. critical infrastructure,
malicious cyber actors; improving information sharing both DoD and non-DoD assets, and securing DoD
and sensing; deploying layered defenses; improving information and systems against malicious cyber
attribution, accountability, response, integration, and activity. The March 2020 U.S. Cyberspace Solarium
agility; and strengthening cyber workforce. Commission report advocates a strategic, “layered
cyber defense,” approach aimed at promoting
− Preserving U.S. overmatch in and through responsible behavior by U.S. personnel, enhancing
cyberspace is an explicit objective of the 2018 cyber resilience and security to deny benefits of
National Cyber Strategy.134 These actions are cyber-attacks, and imposing costs to adversary
categorized as offensive, defensive, and cyber attacks short of armed conflict.137 The report
security:135 also suggests continual assessment of cyber
− Offensive DoD Cyber Strategy focuses on vulnerabilities of all U.S. weapon systems, and
increasing force lethality through accelerated an overall force structure assessment in light of
capability development, innovation, agility, continuously increasing mission requirements and
automation, and analysis; deterrence; alliances expectations for cyber defense.138
and partnerships; organizational practices; and
workforce issues, including force structure,
training, and qualifications.

The United States must protect sensitive emerging technologies, such as autonomy, human-machine
technology R&D from adversaries who seek to interaction, and artificial intelligence. Key focus
acquire intellectual property and gain an unfair areas include acknowledging a need to address
advantage. To achieve this, DoD will invest in cyber defense with an “Always-On” 24/7/365
cyber defense, resilience, survivability, and the mentality. Continuing to add security controls
continued integration of cyber capabilities into the on top of security controls (e.g., multi-factor
full spectrum of military operations. Investments authentication) only provides limited symptomatic
will prioritize developing resilient, survivable, relief without addressing the need for people to
federated networks and information ecosystems change the way they think about being responsible
from the tactical level up to strategic planning. for security. The DoD is collaborating with the NSA
Investments will also prioritize capabilities to gain to develop curricula for learning and development,
and exploit information, deny competitors those laboratory and training exercises, research
same advantages, and enable the DoD to provide opportunities, and competitions, to provide the
attribution while defending against and holding future cyber workforce with relevant experiences
accountable state or non-state actors during in the practice and leadership of cyber security
cyberattacks. and resilience. These efforts will facilitate both the
growth and readiness of the DoD cyber workforce.
The present and future cyber workforce will
require, in addition to the basic cybersecurity and
software engineering knowledge, a much broader
and deeper understanding of analytics and key
SECTION 9
SUPPORTING ACTIONS
AND AUTHORITIES

Defense Priorities and Rating Determinations
Allocations System All prime contracts, subcontracts, or purchase
orders in support of an authorized program are
given a priority rating.
Program Objective
The purpose of the Defense Priorities and A DX rating is assigned to those programs of the
Allocations System (DPAS) is to assure the timely highest national priority. Per DoD 4400.1-M,
availability of industrial resources to meet current USD(A&S) has authority to validate the request for
national defense and emergency preparedness a DX rating. If deemed necessary, the USD (A&S)
program requirements, and to provide an will nominate the suggested program for a DX
operating system to support rapid industrial rating to the Secretary of Defense for approval.
response in day-to-day operations and national The DPAS team continues to educate the Services
emergencies. The Defense Production Act of 1950 and DoD agencies on DPAS authorities including
authorized the President to require preferential the differences and applicability of DO, DX, and
treatment of national defense programs. SPA. The Department strives to minimize the
DPAS establishes procedures for placement of use of DX ratings and SPAs because they can
priority ratings on contracts, defines industry’s be disruptive to the commercial and Defense
responsibilities under rated orders, and sets forth industrial base. Additionally, overuse of DX ratings
compliance procedures. will dilute the strength and effectiveness of the
priority and therefore negatively impact the ability
of the Department to surge in the event of a
National Emergency; if everything is a priority, then
nothing is a priority.
DO Rating DX Rating Special Priorities Assistance (SPA)
A DO priority rating gives Assigned to programs with the SPAs alleviate schedule delivery
the DoD preference over all highest national defense urgency conflicts during high demand
unrated orders periods where there are competing
Takes preference over DO rated requirements for the same
Because of DoD’s mission, orders and unrated orders with resources
all procurement contracts the same delivery dates
should contain a “DO” SPA requests should be timely for
priority rating DOES NOT move the order in the DoD or the Department of
front of orders with the same Commerce to effect a meaningful
DO rated orders have equal rating with earlier delivery dates problem resolution, and must
priority among other DO establish that:
rated orders, but have ONLY the Secretary or Deputy
priority over unrated orders Secretary of Defense can grant 1. There is an urgent need for the
a DX priority rating designation item; and
to systems or programs with the
2. The applicant has made a
highest national defense urgency
reasonable effort to resolve the
problem

Security of Supply Arrangements COVID-19 Actions
DPAS Ratings are only enforceable for companies In response to COVID-19, the Department of
subject to U.S. law. Since the U.S. DIB sources Defense, in conjunction with FEMA and HHS,
from a global market, the DoD enters into Security worked to prioritize production and construction
of Supply Arrangements (SOSAs) with several equipment using the DPAS authority. The DPAS
nations to ensure the mutual supply of defense team worked closely with the DPA Title III Office
goods and services. These bilateral arrangements to award and fund industrial expansion projects,
allow the DoD to request priority delivery for DoD and ensure the awardees were able to receive the
contracts, subcontracts, or orders from companies production and construction equipment needed
in these countries. Similarly, the arrangements to meet the demands of the nation. DPAS, or
allow the signatory nations to request priority DPA Title I, continues to support the whole-of-
delivery for their contracts and orders with U.S. government effort to combat the coronavirus
firms. The DoD currently holds nine SOSAs with pandemic.
U.S. allies and partners, and continues to evaluate
opportunities to expand SOSAs to other allied
countries. DPA TITLE I
INDPOL
NNSA DOC-BIS
FY2020 Accomplishments
In 2020, the DPAS program worked closely with
the DoD Services and industry partners to resolve DCMA
ARMY
HQDA ASA
a number of Industrial Base issues, resulting with DCMA-HQ
ALT
little to no impact to DoD programs. In 2020, a

Quarterly Meetings /
number of DoD programs experienced delivery PAIR Taskforce Support
date conflicts which were resolved amicably
between the DoD and its suppliers through JOINT
STAFF
AIR FORCE
USAD SAF-AQ
education, communication, and cooperation. This

outreach lead to the resolution of a potential
production shutdown impacting DoD, and Allied
MDA NAVY
readiness, and industry partners. USN
DLA
Established in 2019, the DPAS Enterprise Board
(EB) continues to work collaboratively to provide
a more responsive process to address national
security requirements, including an enterprise-
level approach to evaluate DX ratings, and
assigning resources to mitigate competing cross-
service requirements. The EB has added two
new Services members to increase visibility and
collaboration among OSD and the Services.

DPA Title III Overview
Legislative Authority: Title III of the Defense

Program Objective Production Act of 1950
The Office of Industrial Policy administers the DPA
Title III program, consistent with the Secretary of Established: 1950, reauthorized in 2018
Defense’s duties as the Fund Manager under 50
Oversight: A&S Industrial Policy
U.S.C. 4501 et seq. Title III provides the President
broad authority to ensure timely availability of
domestic industrial resources essential for the
program allocated $676 million to DIB mitigation,
execution of the U.S. National Security Strategy
$213 million to the healthcare sector, and $100
through the use of tailored economic incentives,
million to a Federal Credit Loan program, to make
including:
loans supporting the national response and
− Purchases/Purchase commitments, recovery to the COVID-19 outbreak or the resilience
of any relevant domestic supply chain.
− Developing production capabilities and
commercializing emerging technology,
− Loans/Loan guarantees, and
Presidential Actions
Under the program’s peace-time functions, the
− Installing Production Equipment in
President must issue a determination and notify
Government- or Privately-Owned Facilities.
Congress of an industrial base shortfall prior to
The Title III program predominantly executes initiating investment actions under Title III. In
against defense industrial base shortfalls. FY2020, the President issued one determination,
However, the program has a broader statutory related to high temperature materials for
mandate, authorizing non-defense agencies to hypersonic weapons.
mitigate their industrial shortfalls pertaining to
The President also issued a Proclamation declaring
homeland security and critical infrastructure, in
a national emergency with respect to the COVID-19
sectors defined by the Department of Homeland
disease. This declaration, combined with the Public
Security.
Law 116-136, authorized the use of extraordinary
Throughout FY2020 in response to the national authority under Title III for rapid, large-scale
emergency from COVID-19, the DPA Title III investments to prevent, prepare for, and respond
program executed at unprecedented scale and to COVID-19 (see 2020 Overview). The President
speed to mitigate industrial shortfalls within the DIB also declared a national emergency under the
and the healthcare sectors. Using supplemental International Emergency Economic Powers Act,
appropriations from the CARES Act, the DPA Title III concerning adversarial exports of critical minerals.
Commercialize R&D
Sustain Critical Protection Scale Emerging Technologies
Investments
“To create, maintain, protect, “From Government sponsored “For the increased use of
expand, or restore domestic research and development to emerging technologies in
industrial base capabilities commercial applications;” and security program applications
essential for the national “from commercial research and the rapid transition of
defense.” and development to national emerging technologies.”
defense.”

Investment Areas 5. Executive Order 13953: Addressing the Threat
to the Domestic Supply Chain from Reliance
DPA Title III projects address three broad priority
on Critical Minerals from Foreign Adversaries
areas, as defined in section 303(a) of the Defense
and Supporting the Domestic Mining and
Production Act:
Processing Industries
FY20 Presidential Actions:

2020 Overview
1. Presidential Proclamation 9994: Declaring a
National Emergency concerning the Novel − At end of FY2020, DPA Title III portfolio
Coronavirus Disease (COVID-19) Outbreak included 87 projects, leveraging over $2.1
billion in government and industry funding
2. Executive Order 13911: Delegating Authority to increase the lethality and readiness of
under the Defense Production Act with the nation by strengthening the DIB and
respect to Health and Medical Resources to responding to the coronavirus pandemic
respond to the spread of COVID-19
− In support of E.O. 13806, President issued one
3. Executive Order 13922: Delegating Authority Presidential Determination supporting the
under the Defense Production Act to the hypersonic industrial base
Chief Executive Officer of the United States
− New projects in FY2020 strengthening the
International Development Finance Corporation
domestic industrial base in key sectors,
to respond to the COVID-19 Outbreak
including rare earths, microelectronics,
4. Presidential Determination: Ultra ultra-high strategic materials, space, aircrafts, and power
and high temperature composites storage.
Appropriations on the DPA Fund Since FY2010, in Millions 139
Fiscal Year Law Appropriation Amount a. In FY2014, FY2015, and

FY2016, Congress also
2010 P.L. 111-118, 123 Stat. 3422 $150.7
authorized DOE to transfer
2011 P.L. 112-10, 125 Stat. 51 $34.3 up to $45 million to the
2012 P.L. 112-74, 125 Stat. 800 $170.0 DPA Fund from each FY
appropriation from the
2013 P.L. 113-6, 127 Stat. 291 $223.5
Energy Efficiency and
2014 P.L. 113-76, 128 Stat. 98 $60.1a Renewable Energy account.
These transfers were made
2015 P.L. 113-235, 128 Stat. 2246 $51.6a
by DOE, for a total of $135
2016 P.L. 114-113, 129 Stat. 2345 $76.7a million.
2017 P.L. 115-31, 131 Stat. 242 $64.1
2018 P.L. 115-141, 132 Stat. 458 $67.4
2019 P.L. 115-245, 132 Stat. 2995 $53.6
2020 P.L. 116-93 $64.4

Committee on Foreign Legislative Authority: § 721 of the
Investment in the United Defense Production Act of 1950
States Established: 1988
Oversight: Foreign Investment Review,

Objective
A&S INDPOL
The Committee on Foreign Investment in
the United States (CFIUS) is an interagency
committee authorized by statute to review certain
transactions, mergers, and acquisitions that either Within the Office of Industrial Policy, the Foreign
could result in foreign control of a U.S. business Investment Review (FIR) team serves as the DoD’s
or real estate property, or which are non-passive, CFIUS representative and acts as the principal
non-controlling investments in certain critical advisor to USD(A&S) on foreign investment in the
or emergent technology companies. In 1988, U.S. As the DoD CFIUS representative and central
Congress enacted the Exon-Florio amendment point of contact, FIR coordinates departmental
adding section 721 to the Defense Production Act participation across more than 30 DoD component
of 1950, which authorized the U.S. President to organizations (DoD stakeholders) to identify,
investigate the effect of certain foreign acquisitions review, investigate, mitigate, and monitor inbound
of U.S. companies on national security and to foreign direct investment in the U.S. FIR relies
suspend or prohibit acquisitions that might on DoD stakeholders for the technical expertise
threaten to impair national security. The President needed to analyze the threats, vulnerabilities, and
delegated this investigative authority to CFIUS. consequences associated with foreign investment
into the U.S.
CFIUS is comprised of nine voting member
agencies (the Department of the Treasury (CFIUS
Chair); the Departments of Commerce, Defense,
Energy, Homeland Security, Justice, and State; the
U.S. Trade Representative; and the White House
Office of Science and Technology Policy), two ex-
officio members, and five White House offices.
Review Process
IndPol serves as the focal Transactions can be
point for those reviews, approved as-is, with
CFIUS typically learns Committee has 45 days coordinating inputs on mitigation, or they are
of a transaction through to determine whether the national security risk and sent to POTUS with a
voluntary filings from transaction threatens recommendations on recommendation for
the Parties national security behalf of the DoD block or for divestment
Treasury determines More than 30 stakeholders Transaction is approved Once approved, the
whether it is a covered within DoD, as well as other and cleared OR an Parties are granted
transaction and therefore government agencies review additional 45-day safe harbor for the
whether CFIUS has each transaction for national investigation is initiated transaction from
jurisdiction security concerns further USG action

FIRRMA 3. Sensitive Personal Data: The rules expand
CFIUS jurisdiction to review non-controlling
On August 13, 2018, President Trump signed the
investments in U.S. businesses that collect
Foreign Investment Risk Review Modernization Act
sensitive personal data. Sensitive personal
(FIRRMA) into law. FIRRMA expands the scope of
data includes financial information, health
reviewable transactions to address a new set of
information, communications, geolocation
national security concerns and strengthens the
data, biometric or genetic data, and security
ability of CFIUS to protect national security.
clearance information.
Before FIRRMA, CFIUS jurisdiction had remained 4. Real Estate: FIRRMA allows review of
virtually unchanged in the 30 years since Congress commercial real estate transactions within
first passed the Exon-Florio Amendment (the certain proximities to named military
statutory cornerstone of CFIUS). Since that time, installations.
the nature of foreign investments in the U.S.
and the national security landscape have shifted FIRRMA does not change the longstanding open
significantly. investment policy of the U.S. The U.S. continues
to welcome foreign investment as a vital part of a
FIRRMA expanded CFIUS jurisdiction to four new
robust economy.
types of covered transactions: certain real estate
interests; non- controlling “other investments”
in certain U.S. businesses; changes in a foreign
investor’s rights; and any other transaction,
transfer, agreement, or arrangement designed or
intended to evade or circumvent the application of
previous rules governing CFIUS.
1. Critical Technology: The definitions and

standards for critical technology were not
updated with the Rules. However, subsequent
Notice of Proposed Rulemaking to update
the standards for filing critical technology-
related mandatory declarations was published
on May 21, 2020. The Department of
Commerce continues its rulemaking efforts
to characterize emerging and foundational
technologies and to align associated critical
technologies with applicable export control
laws.
2. Critical Infrastructure: FIRRMA expands

CFIUS jurisdiction to review non-controlling
investments in U.S. businesses that own,
operate, manufacture, supply, or service
certain components of the defense industrial
base, energy infrastructure, communications
networks, financial services, transportation
services, and water and wastewater systems.

Office of Small Business MPP
Programs Legislative Authority: §831 of the FY1991
NDAA
Objective
Established: 1990
The Office of Small Business Programs (OSBP)
maximizes prime and subcontracting opportunities Oversight: Industrial Policy
for small business to respond to current and IIP
future Warfighter requirements. The complexity of
Legislative Authority: 25 USC Section 1544
DoD requirements and contracting processes can
preclude new entrants to the defense market. This Established: 1997
is particularly true of small businesses that do not
Oversight: Industrial Policy
have the manpower and resources necessary to
navigate and compete for defense contracts.
develop technical capabilities. Mentors, typically
The October 2019 DoD Small Business Strategy
large defense contractors, can leverage the nimble
focuses on three objectives:
and agile nature of small businesses and their
1. Creating and implementing a unified technologies, services, and cutting-edge products
management structure across DoD’s small to improve innovation in major defense acquisition
business workforce. programs.
2. Ensuring that the Department’s small

business activities align with the 2018 Indian Incentive Program (IIP)
National Defense Strategy and other guiding While Native Americans have a long history
documents. of contributing to the U.S. military, Indian
3. Strengthening DoD’s ability to support reservations and Alaska Native Villages suffer
the warfighter through supporting small some of the worst poverty in the country. In an
businesses effort to strengthen Native American economic
development, Congress authorized Federal
The following programs help bring new business contracting agencies to encourage the use of
into the DIB by creating a pathway for non- Native American owned subcontractors. The
traditional contractors to participate and succeed. Indian Incentive Program (IIP) incentivizes
contracting with Indian Organizations, Indian-
Owned Economic Enterprises, Native Alaska and
Mentor Protégé Program Native Hawaiian Small Business Concerns by
DoD’s Mentor Protégé Program (MPP) has providing a five percent incentive to prime and
successfully helped more than 190 small sub-tier contractors who subcontract with eligible
businesses fill unique niches and become part firms. Since FY2015, the IIP has funded more
of the military’s supply chain. The MPP supports than 650 rebates totaling $100 million in incentive
eligible small businesses to expand their footprint payments, which leveraged more than $2 billion in
in the defense industrial base and become reliable subcontract performance by Native-owned firms.
government contractors. Protégés work side
by side with established defense contractors to

FY2020 Overview Small Business Training Week: In September
2020, OSBP hosted the largest-ever virtual Small
Project Spectrum: In FY2020, OSBP partnered with
Business Training Week for the acquisition
US Cyber Command to develop Project Spectrum,
community. 1,056 attendees represented Small
an initiative designed to provide training and
Business Professionals, Program Directors,
conduct risk assessments to enhance awareness of
Contracting Officers, and Program Managers. The
cybersecurity threats among small manufacturers
training week’s theme was “Refocus on Rebuilding
and universities in the DIB. Its three main
a More Resilient Small Business Community,”
elements include:
emphasizing the Department’s direction to
1. The ecosystem of government partners and better align the small business industrial base to
stakeholders pooling resources and working the DoD’s mission. Topics aligned with current
collaboratively to increase cybersecurity in innovation gaps and provided practical ways for
the DIB; small business professionals and the broader
acquisition workforce to understand their roles
2. Awareness and training of the DIB, including
and take action.
preparedness for the Department’s latest
cybersecurity requirements; and
Coronavirus Pandemic Response
3. Tools and services that lower the barrier to
small and medium-sized companies obtaining The DoD OSBP team addressed the effects of
and maintaining cybersecurity compliance. COVID-19 early on in the pandemic, retooling the
office’s functions and outreach efforts. USD(A&S)
To date, 20,000 small businesses have received Ellen Lord, referred to OSBP as the “Information
training and more than 35 cybersecurity tools were Hub,” providing up-to-date information to the
evaluated. small business industrial base. OSBP established
industry calls and webinars with industry
Cybersecurity Education Diversity Initiative (CEDI): association partners to maintain a pulse on the
The CEDI Project is a collaboration between the private sector and provide direct information
National Security Agency’s National Centers of to small businesses on a broad range of topics
Academic Excellence in Cybersecurity (NCAE-E) including: COVID-19 resources, cybersecurity,
Program Management Office and the MPP program. foreign investment, and successful teleworking
It assists Minority Serving Institutions (MI) and practices. OSBP also reinvigorated its outreach to
Historically Black College and Universities (HBCU) industry. The OSBP website, defense.business.gov,
with no existing cybersecurity programs with became the central communication portal for DoD
obtaining access to consultation and educational small business resources and updates, and social
resources from designated NCAE-E institutions, thus media channels were used to quickly disseminate
expanding access to quality cybersecurity education information to the widest possible audience.
and mentoring to students in all 50 states. This
collaboration allows the OSBP MPP to provide
participating protégés with technical assistance on
cybersecurity at HBCUs and MIs.

Industrial Base Analysis Overview
and Sustainment Legislative Authority: 10 U.S. Code § 2508.
Industrial Base Fund
Objective
The Industrial Base Analysis and Sustainment Established: FY2014
(IBAS) Program strengthens the DIB in the era
Oversight: Industrial Policy
of great power competition. It works to create
a modern Industrial Base with the capacity to
respond at will to national security requirements. Cornerstone
IBAS investments fortify and forge traditional and
The Cornerstone Other Transaction Authority
emerging sectors to improve IB readiness. These
(OTA) is a government-run, integrated contract
investments are strategically catalyzing in critical
vehicle used to create dynamic relationships
areas that lack momentum.
across the DIB using the IBAS authorities. The
Cornerstone OTA authority originates from 10
IBAS Program Priorities: U.S. Code 2371b - Authority of the DoD to carry
− Ready the Modern DIB: Advance and sustain out prototype projects. Cornerstone focuses on
traditional defense manufacturing sectors “prototype” projects, capabilities, and capacities
in support of a range of defense industrial base
− Prepare for the Future: Identify, attract, and
requirements across 19 sectors.
cultivate emerging defense sectors
− Assess and Shape the Risk: Mitigate supply
chain vulnerabilities within the Global DIB FY2020 Investments
− Build and Strengthen: Build partnerships in In FY2020, IBAS continued to address issues
the Global DIB from the E.O. 13806 report findings and priority
programs, partnering on investments and shared
interest areas.
Investment Strategy
The IBAS office directs investment by identifying IBAS FY2020 Budget
strategy/focus areas, obtaining resources, and
overseeing the execution of projects to strengthen
the defense industrial base by ameliorating
industrial base and manufacturing issues. All $10M $94M
projects are evaluated for industrial base risk using
IBAS Core Congressional
a framework of risk assessment methodologies
Budget additions for
and tools, including fragility and criticality risk
new efforts
criteria to develop feasible and effective course of
actions. Key areas of IBAS investment include:
− Advancing and sustaining traditional and

emerging defense manufacturing sectors
− Preserving critical and unique manufacturing
and design skills
− Supporting and expanding reliable sources, and
− Identifying and mitigating supply chain, cyber,
manufacturing, and trade skills vulnerabilities

IBAS Investments
Boron Carbide Expand DIB by establishing second U.S. source to mitigate foreign supply
chain risk
Heavy Rare Earths Elements Supply Chain Establish U.S. capacity to mitigate foreign supply chain risk. Engineering
Resiliency study to inform production scale up
Rare Earth Elements from Coal Ash Prototyping effort for rare earth elements extraction from coal ash (in
negotiations)
DE Supply Chain Analysis and Readiness Study Establish resilient DE supply chain
Radar Affordability Working Group Land & Sea Expand DIB suppliers for critical radar subcomponents to mitigate risks to
Systems cost and readiness
Silicon Interposer Establish secure domestic production capability
Lead-Free Electronics Establish public-private partnership-led electronics manufacturing
consortium. First task: establish standards to mitigate risks of using lead-free
electronics in high-performance systems (in negotiations)
Critical Energetics Working Group Support to Joint Army, Navy, NASA, Air Force (JANNAF) Executive Committee
Advanced Armor-Piercing Penetrators Improve supply chain resiliency for tungsten penetrators used in munitions
Machine and Advanced Manufacturing: America’s Joint DoD-DOE machine tool hub to improve U.S. machine tools
Cutting Edge (ACE) competitiveness: advance machine tool capabilities for DoD-specific
application; lower barriers to entry for small and medium manufacturers to
adopt new machine tools
Automated Textile Manufacturing Integrate automated manufacturing capability with advanced, high-end fibers
Supply Chain Analysis 1-3 Subscription services and tools to enable supply chain vulnerability
detection and risk management efforts (one award pending)
Hypersonics Supply Chain Analysis and Readiness Study support for Hypersonics War Room (R&E)
Study
Mobile Nuclear Reactor Supply Chain Analysis & Assessment of design elements, manufacturability, manufacturing process,
Readiness Study and supply chain for mobile power source
Submarine Workforce Development Public-private partnership with NE states to mitigate shortfalls within
submarine-building supply chain
Interdisciplinary Center for Advanced University-led consortium effort to reduce barriers preventing small and
Manufacturing medium manufacturers from adopting advanced manufacturing capabilities
and processes
Precision Optics Manufacturing Effort to advance domestic precision optics manufacturing capability and
workforce development pipeline (in negotiations)
Machine and Advanced Manufacturing: Workforce Not-for-profit institute-led effort to develop and provide advanced machine
Component tools training programs for small and mid-sized manufacturers
Manufacturing Engineering: Hypervelocity Not-for-profit led regional welding workforce accelerated pipeline
Prototype for Welding development for the ship/submarine sector
Manufacturing Engineering: Vermont University-led regional engineering and critical manufacturing technician
workforce pipeline development
Manufacturing Engineering: Texas Engineering University-led regional manufacturing workforce pipeline development for
Experiment Station Texas defense supply chain requirements
Manufacturing Engineering: System Engineering University-led regional systems-engineering manufacturing technician

Technicians workforce pipeline development
Manufacturing Engineering: Electronics Small business-led electronics technician workforce pipeline development
Manufacturing & Technical Education
*this table presents new IBAS FY2020 efforts (Note: Awards expected prior to report publication for those in negotiations or competition).

Warstopper Program Overview
Objective Legislative Authority: Responds to

requirements in E.O. 13603.
The Warstopper Program is the Department’s
primary program for consumable items in Established: FY1993 in response to
sustainment. It works to provide industry an FY1993 NDAA
incentive to support the sustainment of items that
industry would otherwise not have a business case Oversight: DLA
to support.
Warstopper Program Priorities: − and long lead time parts or provide additional
equipment)
− Sustainment readiness investments that allow
for go-to-war material to be available during a − Preserving cold production needed for go-
surge. to-war consumable items (example: fund a
company’s fixed cost to sustain a production
− Preserve industrial capability for known go-to-
line)
war requirements of sustainment items that
are in jeopardy of not being viable.
− Conduct DIB risk analysis for consumable
items in sustainment to inform investment FY2020 Investments
In FY2020, Warstopper continued to provide risk
mitigating investments for critical go-to-war items
Warstopper Program Criteria: and sectors.
− Mission Critical Materials and Supplies
− Low Peacetime Demand – High Wartime
Demand
− Limited Shelf Life – Long Production Lead Time $72.7M
FY2020 Funding
Investment Strategy
The Program provides an industrial strategy to
meet go-to-war consumable items in sustainment.
It is a deliberate strategy to off-set the buy and
hold war reserve strategy as well as securing
fragile consumable sustainment items with
go-to-war requirements. This usually involves
implementing contracting strategies for the
following:
− Secure commercially available go-to-war

material in the quantity and timeliness
(example: pay management fees to guarantee
the quantity and early delivery)
− Increase manufacturer and distributor
capability to provide go-to-war consumable
items material (example: stage raw material

Readiness Investments
Supply Chain Project Use Impacted NSNs
Land Preposition Steel Grade Aircraft Landing & Recovery 1

9260 Equipment (ALRE)
Maritime Tungsten Rhenium Ingots Electron Tube 119
Maritime Generalized Emulation of Digital Microcircuits; 5V 445
Microcircuits (GEM) Logic Family Devices
Medical Medical Corporate Exigency Pharma/Supplies/Equipment 7,223
Contracts (CEC)
Subsistence UGR GFE Maintenance Unit Group Rations 10
Subsistence VMI Submarine Forces Rations/Food Resupply of 200
Pacific Pacific Theater
Subsistence Buffer Stock Investment Flameless Ration Heaters 1
Upstream Buffer Investments
Supply Chain Material or Component Usage Impacted NSNs
Aviation Steel Grade 300M Torsion Bars and Aircraft 295

Landing Gear
Aviation Steel Grade M50; 440C & Bearings 942
52100
Aviation Titanium 6AL-4V & 5AL- Aircraft Structural Parts 8,611
2.5SN
Preservation of Capabilities/Capacities Investments
Supply Chain Initiative/Targeted Systems Impacted NSNs
Aviation Aircraft/Aerospace 2,001

Aviation Bomber/B-1, B-52 5,474
Aviation Engine/TF-33, B-52 1,500
Energy Launch/Gaseous Nitrogen 1
Energy Satellite/Hydrazine 1
Energy Satellite/Dinitrogen Textroxide (N204) 1

Small Business Innovation Overview
Research & Small Business Combined SBIR/STTR Budget: $1.8B (annually)
Technology Transfer
Oversight: Office of Small Business
Technology Partnerships (SBTP)
Program Objective
The statutory purpose of the SBIR program is to Legislative Authorities: 15 USC Section 638
strengthen the role of innovative Small Business
Concerns (SBCs) in Federally-funded research or
research and development (R/R&D) to: competitive awards-based program, SBIR enables
small businesses to explore their technological
− Stimulate technological innovation
potential, provides the incentive to profit from
− Involve small business to meet Federal R/R&D commercialization, stimulates high-tech innovation
needs from non-traditional contractors, and encourages
− Foster and encourage participation by socially entrepreneurial spirit as the Federal agencies
and economically disadvantaged SBCs, and meets its specific R&D needs. As required by
by women-owned SBCs, in technological statute, each Federal agency with an extramural
innovation; budget for R/R&D in excess of $100,000,000 must
participate in the SBIR Program and reserve a
− Increase private sector commercialization
minimum percentage of its R/R&D budgets for
of innovations derived from Federal R/R&D
small business R/R&D contracts.
to increase competition, productivity, and
economic growth.
Small Business Technology
In addition to the broad goals of the SBIR program, Transfer Program
the statutory purpose of the STTR program is to
The Small Business Technology Transfer Program
stimulate a partnership of ideas and technologies
(STTR) is intended to stimulate a partnership of
between innovative SBCs and non-profit Research
ideas and technologies between innovative SBCs
Institutions. By providing awards to SBCs
and non-profit Research Institutions. By providing
for cooperative R/R&D efforts with Research
awards to SBCs for cooperative R/R&D efforts with
Institutions, the STTR program assists the U.S. small
Research Institutions, the STTR program assists
business and research communities by supporting
U.S. small business and research communities by
the commercialization of innovative technologies.
supporting the commercialization of innovative
technologies. STTR expands funding opportunities
Small Business Innovation in the federal innovation R&D arena. Central
SBIR encourages domestic small businesses to to the program is expansion of public/private
engage in Federal R/R&D on initiatives that have sector partnerships to include joint venture
the potential for commercialization. Through a opportunities for small businesses and non-
PHASE I PHASE II PHASE III
Project Feasibility—determines the Project development to prototype Commercialization (the goal of

scientific, technical, and commercial (the major R&D effort)—funding the each SBIR/STTR effort)—Phase III
merit and feasibility of proposals. prototyping and demonstration of work must be funded by sources
the most promising Phase I projects. outside the SBIR/STTR Program.
~1,300 awards/year
~950 awards/year Funding exceeded $15B
between 1995–2018

profit research institutions. Unique to the STTR
4,367 $2.06B
program is the requirement for the small business
to formally collaborate with a research institution
in Phase I and Phase II. STTR’s most important Total Contracts Total Amount
role is to bridge the gap between basic R&D and Awarded in Awarded in
commercialization of resulting innovations. STTR FY2020 FY2020
is regulated by the same statue as SBIR, requiring
participation based extramural budget for R/R&D.
*These figures are accurate based on
FY20 contract actions as of the date of
FY2020 Overview preparation of this document and do not
− In June 2020, the Office of Small Business reflect final numbers for the 2020 Fiscal Year
Technology Partnerships (SBTP) office
launched the OSD Transitions SBIR/STTR FY2021 Goals
Technologies Pilot Program, which will help
The Small Business and Technology Partnerships
enable and accelerate the incorporation and
(SBTP) office’s primary goal is to increase
transition of SBIR/STTR Phase II technologies
awareness of the SBIR and STTR Programs within
to the Warfighter. Since June, the program has
the Department and encourage small innovative
funded $39.4M on 24 projects
businesses to work with DoD to solve National
− In August 2020, the DoD SBIR/STTR Innovation Security challenges. The following objectives will help
Portal integrated with Login.gov to increase achieve this goal:
security, efficiency, and user experience for
Small Business Concerns. − Implement legislative changes to the SBIR/STTR
programs in accordance with the FY2020 NDAA;
− In October 2020, the SBTP Office hosted its
inaugural DoD SBIR/STTR Virtual Symposium. − Engage with other DoD and Federal
The Symposium appealed to a broad audience stakeholders on SBIR/STTR best practices;
aiming to do business with the Department. − Participate in outreach events across the
Registrants and participants represented country to educate the small business
all 50 states and the territories of Puerto community on the SBIR/STTR programs;
Rico and the U.S. Virgin Islands. Participants
− Enhance the Defense SBIR/STTR Innovation
included: government personnel, large
Portal (DSIP) based on feedback from users and
business, prime contractors, small business,
stakeholders;
support contractors, and university/academia.
Approximately 1,110 unique visitors logged in − Identify and establish relationships with new
to view and participate in the symposium. partners.
COVID-19 Response
March 2020, SBTP formed a COVID-19 Response working group. The group’s purpose was to
strategize on how the SBIR/STTR programs could utilize funding to quickly respond to the coronavirus
pandemic and determine if funding through as the CARES Act could be utilized to fund COVID-19
related research and development. The Missile Defense Agency and Defense Logistics Agency,
respectively, provided additional funding to companies e-Spin Technologies and AAPlasma, who
converted their current SBIR technologies for use in PPE gear. The SBTP office provided $7.38 million
to DARPA to further develop COVID-19 technologies in partnership with the Texas Air National Guard.
Additionally, the office is reviewing $13.5 million in potential funding for COVID-related projects from
the Defense Health Agency.

Rapid Innovation Fund Overview
Objective Authority: National Defense Authorization

Act, Public Law 116-92, Section 878
The Rapid Innovation Fund (RIF) operated via
Congressional Add until funding ceased in FY2020. Established: 2011
There is no expectation the RIF will receive future
funds or be reinstated. The RIF continues to Permanently Authorized: 2017
be managed by OUSD(R&E) Small Business and
Technology Partnerships (SBTP) through closeout.
The RIF was established as a competitive, merit-

FY2011-FY2019 RIF Highlights
based program designed to rapidly transition
innovative technologies into defense acquisition
and use. Projects are drawn from Small Business >$2.2B 85%
Innovation Research/Technology Transfer (SBIR/
Invested in Small Business
STTR) initiatives, defense laboratory and academia
Department Awards
efforts, and other non-conventional sources. The
of Defense
RIF is a major benefactor to small businesses and
requirements
SBIR/STTR follow-on efforts, acting as a direct-to-
from Air Force,
Phase III conduit. Program objectives include:
Army, Navy & 57%
− Accelerating or enhancing a military capability, over 30 OSD
SBIR/STTR Phase III
organizations
− Reducing development, acquisition, Awards
sustainment, or lifecycle costs of defense
acquisition programs or fielded systems,
− Reducing program technical risk, and
20,600 ~1,500
− Improving timeliness and thoroughness of test
and evaluation. Whitepapers Proposals
In FY2018, the RIF re-aligned objectives to

address critical security needs based on the 2018
National Defense Strategy (NDS). In FY2019,
the RIF adapted requirements to cover the NDS
~1,000 $2.1M
modernization priority areas supported by Contract Awards Average Value
OUSD(R&E). Prior efforts focused on general
warfighting needs and Reliance 21.
++ Financial statistics from TechLink “Defense
Rapid Innovation Fund: An Assessment of RIF
Effectiveness FY 2011-16”
RIF Source Selection Process
Individual projects limited to $3-6M* each and 24-month performance period
STEP I STEP II STEP III
Issue annual broad agency Invite highest-rated WPs for full Award highest-rated full
announcement for whitepaper (WP) proposals proposals
solicitation
* Higher cost projects cannot exceed 25 percent of the total budget

Recent Accomplishments Modernization Principle Director Projects
SBTP delivered milestone RIF FY2020 National AI/ML 6 awards $15.8 M

Defense Authorization Act Congressional report
on FY2017 through FY2019 RIF efforts and Autonomy 6 $13.8 M
overall program effectiveness in June 2020
Cybersecurity 7 $13.1 M
− Data from a TechLink study determined
Directed Energy 4 $11.2 M
RIF is highly successful at meeting program
objectives, transitioning approximately 60 Hypersonics 4 $8.9 M
percent of projects to-date with more than
Microelectronics 3 $8.9 M
three times return on investment
Networked C3 8 $20.3 M
Streamlined financial process to shorten
Space 2 $6 M
timelines
− Simplified funds request paperwork and process Total 40 $98 M**
− Implemented financial deadlines: Check-ins at

30, 60, 90 day marks; award within 90 days Services and OSD Projects
− Awarded contracts on average within 74 days
AI/ML 6 awards $11.9 M
Increased RIF Office oversight from proposal Autonomy 4 $10.7 M
through contract award phases
Biomedical & 4 $9.3 M
− Cradle-to-grave project tracking to link Human Systems
program and financial team efforts
Cybersecurity 2 $3.8 M
− Monthly financial updates to decrease risk
from contract issues Energy & Power 4 $9.7 M
− Quarterly updates from RIF Office to program Materials & 7 $18.8 M

managers Manufacturing
− Quarterly performance project performance Microelectronics 3 $8.9 M
reviews with all RIF program managers
Networked C3 6 $16.6 M
Awarded FY2019 selections from Army, Air Platforms: Air, 4 $8.3 M
Force, Navy, and OSD-affiliated Organizations, Ground & Sea
including selections by OUSD(R&E)
Modernization Principal Directors Sensors 9 $22.9 M
− Awarded over 60 percent of FY2019 funding Weapons Tech 2 $3.1 M
to projects within OUSDR&E modernization
Other 3 $6.8 M
priority areas
Total 54 $131 M
** Funding does not include project administration

FY2019 Investments
costs
$250M 2,212 153 94 ~$2.4M

Total FY 2019 Whitepapers Proposals Awards Average award
appropriations value

Manufacturing Technology Overview
Program Legislative Authority: Title 10, U.S. Code §2521
Objective Established: 1956

The DoD ManTech Program was created to
Oversight: OUSD(R&E), Office of Strategic
further national security objectives through
Technology Protection and Exploitation
the development and application of advanced
manufacturing technologies and processes. The
program strives to reduce the acquisition and
The various ManTech programs collaborate to
supportability costs of defense weapon systems
identify and integrate joint requirements, conduct
and reduce manufacturing and repair cycle times
and develop joint program planning and strategies,
across the life cycles of such systems.
and avoid duplication. While the Military Services
DoD ManTech comprises component ManTech invest in more targeted projects, OSD ManTech
investment programs operated out of OSD, Army, focuses on cross-cutting defense manufacturing
Navy, Air Force, Defense Logistics Agency, and needs – those that are beyond the ability of a
Missile Defense Agency. The OSD ManTech Office single service to address – and stimulates the
is responsible for administering the DoD ManTech early development of manufacturing processes
Program by providing central guidance and and enterprise business practices concurrent with
direction to the component ManTech programs. science and technology development.
Investment Priority Areas

Long Range Precision Fires; Next Generation Combat Vehicle; Future Vertical Lift;
Network; Assured Positioning, Navigation, and Timing; Air and Missile Defense; Soldier
Lethality; Synthetic Training Environment
Metals Processing and Fabrication; Electronics Processing and Fabrication; Composites

Processing and Fabrication; Manufacturing Enterprise; Energetics Manufacturing
Advanced Concepts; Future Factory; Digital Enterprise; Additive Manufacturing; Low-Cost

Attritable Systems; Networked Command, Control, & Communications (C3) Systems;
Hypersonic Strike
Advanced Microcircuit Emulation; Battery Network; Castings/Forgings; Military Unique

Sustainment Technology; Subsistence Network; Defense Logistics Information Research;
Additive Manufacturing
High Temperature; Refractory Alloys; Thermal Protection Systems; Advanced Ceramic

Composites; Printed Sensor Microsystems; Next Generation Electronics; Flexible Hybrid;
Electronics; Biocarbon-based Supercapacitors; Additive Manufacturing
Metals; Electronics; Composites; Advanced Manufacturing Enterprise; Energetic Materials;

USD(R&E) Modernization Priorities: 5G, Artificial Intelligence and Machine Learning,
Autonomy, Biotechnology, Cyber, Directed Energy, FNC3, Hypersonics, Microelectronics,
Quantum Science, Space

DoD Manufacturing Innovation
Institutes
The OSD ManTech Office also sponsors nine
manufacturing innovation institutes (MII) with
headquarters and hubs across the country. Each
institute is a public-private partnership designed to
overcome the challenges faced by manufacturing
innovators in a variety of technology areas. The
DoD MIIs connect organizations and activities
to enable the affordable and rapid transition
and delivery of defense-essential technologies.
While each institute operates in its own unique
ecosystem, the institutes offer common
capabilities that:
− Provide access to state-of-the-art tools and

equipment that are otherwise beyond the
reach of most businesses,
− Implement targeted education and workforce
development training programs, and
− Encourage project investments in applied
research & industrially-relevant manufacturing
technologies.
Industry partners, commercial manufacturers,

start-up businesses, higher education institutions,
and state and local economic developers join as
members of the institutes for the opportunity to
collaborate with each other and DoD in a pre-
competitive environment.
The DoD Manufacturing Innovation Institutes bring new technologies

to U.S. warfighters through:
$1.12B $1.93B 865 1,270

Initial and follow-on Matching funds DoD-Sponsored Institute members
Federal investment from industry, education and R&D from industry,
academia, and state projects academia, and state
governments governments

Hart-Scott-Rodino Overview
Objective Authority: Hart-Scott-Rodino Antitrust

Improvements Act of 1976, 15 U.S.C. 18a. 7a
The Hart-Scott-Rodino (HSR) Act was established
of the Clayton Act
to avoid some of the difficulties and expenses
encountered when challenging anticompetitive Effective: September 5, 2978
mergers and acquisitions after the fact. It is often
impossible to restore competition fully once a
merger takes place, and any attempt to reestablish
competition is usually very costly for the parties 3. One party has sales or assets of at least $100
and the public. million (as adjusted); and
The HSR Act requires parties to certain mergers or 4. The other party has sales or assets of at least
acquisitions notify the Federal Trade Commission $10 million (as adjusted).
(FTC) and the Department of Justice (DoJ) before
consummating a proposed acquisition. Once
Case Study
FTC and DoJ are notified, the parties must wait a
specific period of time (generally 30 days) while In June 2019, Raytheon and United Technologies
these enforcement agencies review the proposed Corporation (UTC) two major defense suppliers
transaction. The review period enables the FTC announced their pending merger of equals with
and DOJ to determine which acquisitions are likely the transaction valued at $121 billion, resulting
to be anti-competitive and to challenge them at a in the creation of one of the largest defense
time when remedial action is most effective. contractors by revenue. Both companies served as
prime contractors and subcontractors to multiple
customers within the DoD, notably the Army,
Determining Reportability Navy, Air Force, and the U.S. Special Operations
The HSR requires both acquiring and acquired Command. Shortly after announcing their intent
persons to file notifications under the Program if to merge, the companies filed the HSR premerger
all of the following conditions are met: review documents. The DoD worked closely with
the DoJ, the lead antitrust agency for the case,
1. As a result of the transaction, the acquiring
during the entirety of the review to meet with the
person will hold an aggregate amount of
companies and other industry members to gauge
voting securities, non-corporate interests
the impact on competition, as well as facilitate
(NCI) and/or assets of the acquired person
discussions with DoD stakeholders to examine all
valued in excess of $200 million (as adjusted),
identified overlapping capabilities. The review,
regardless of the sales or assets of the
including review of divestitures, carried into
acquiring and two acquired persons;
FY2020.
2. As a result of the transaction, the acquiring
person will hold an aggregate amount of
voting securities, NCI and/or assets of the
acquired person valued in excess of $50
million (as adjusted) but at $200 million (as
adjusted) or less;

The review revealed that the overlap in three FY2020 HSR Actions
of the companies’ businesses would present
− In FY2020, the DoD assessed 23 transactions
a potential threat to competition within the
as part of the HSR premerger review
defense industrial base, specifically for airborne
process. Of those 22 transactions, 20 were
radios, military GPS, and Electro-Optical/Infra-Red
investigations initiated in FY2020 and two
sensors. As a result, one companyRaytheon was
were continuing investigations or mitigation
required to divest its airborne radios business,
efforts from previous fiscal years. There
and another companyUTC was required to divest
was a slight decrease in overall transactions
its GPS business and its optics business. The
between FY2019 and FY2020, possibly due to
investigation was carried out by both the DoD and
the impact of the coronavirus pandemic.
DoJ to approve potential buyers for the divested
businesses. In January 2020, it was announced − Two transactions assessed in FY2020 were
that a major global defense firm BAE Systems abandoned: Hexcel/Woodward and Carlisle
would purchase the airborne radio and military Companies/Draka Fileca.
GPS businesses. In April 2020, it was announced − The average value of the transactions
that a technologyAmergint company would (disclosed financial terms included) was
purchase the optics business. Following the $622 million, excluding United Technologies’
second request in March 2020, DoJ filed a consent $120 billion merger with Raytheon, which
decree, approving the merger on the condition was announced in FY2019 and completed in
that the pending divestitures be completed. FY2020.
The merger officially closed in April 2020 with
− The large majority of the transactions
the airborne radio, military GPS, and Optics
involved companies in the Aerospace and
divestitures closing in May 2020, July 2020, and
Defense sector. Three transactions involved
September 2020.
companies in the Industrials sector and
two transactions involved companies in the
Services sector.
− Major HSR actions from FY2020 include:
United Technologies/Raytheon (announced
in FY2019), CPI/GD SATCOM (announced in
FY2019), Huntington Ingalls/Hydroid, and
Leidos/Dynetics.

Trusted Capital Overview
Program Objective Oversight: OUSD(A&S)/Chief Information

Security Officer
The Trusted Capital program connects companies
critical to the defense industrial base with vetted Website: https://www.acq.osd.mil/tc
trusted capital and capability providers.
Established: 2020
Companies critical to the DoD require access
to rapid funding from capital providers at key
development stages. Without this funding,
capability providers in the DoD supply chain
Sectors Of Focus
become susceptible to strategic funding from
adversaries that leverage capital to exploit − Advanced Computing
technology transfer. − Advanced Conventional Weapons
The Trusted Capital Marketplace is a forum to Technologies
convene trusted sources of private capital with − Advanced Engineering Materials
innovative domestic companies. The companies − Advanced Manufacturing
have been down-selected by the military services
− Advanced Sensing
and operate in emerging technology sectors critical
to the U.S. defense industrial base – strengthening − Aero-Engine Technologies
domestic manufacturing through, and limiting − Agricultural Technologies
foreign access to, critical technology. Trusted
− Artificial Intelligence
Capital Marketplace participants include:
− Autonomous Systems
− AFWERX − Biotechnologies
− Army Futures Command − CBRN Mitigation Technologies
− Defense Innovation Unit − Communication and Networking
− NavalX Technologies
− U.S. Special Operations Command − Data Science and Storage
− Distributed Ledger Technologies
Capability Providers: Capability Providers are
companies that specialize in developing and − Energy Technologies
providing products and services in key technology − Human-Machine Interfaces
sectors and subsectors. These companies offer − Medical and Public Health Technologies
key capabilities and have been down selected
− Quantum Information Science
by the military services or the DoD innovation
programs for inclusion in the Trusted Capital − Semiconductors and Microelectronics
program so they can raise additional investment − Space Technologies
funding for growth.
Capital Providers: Capital Providers are vetted

sources of strategic capital. Capital providers
invest in companies to increase the capability of
the defense industrial base to support the DoD
production needs and the availability of emerging
technologies.

Why Trusted Capital?
The 2018 National Defense Strategy called for the
DoD to strengthen its military advantage through
three lines of effort: Lethality, Partnerships, and
Reform.
The Trusted Capital program is aligned with the

NDS:
− Trusted Capital Marketplace increases

Lethality
− Innovation Tours with Industry build
Partnerships
− Incentives for Capital Providers supports
Reform
The Trusted Capital program’s lines of effort will

cultivate new partnerships with the private sector
to provide opportunities for innovation, ensuring
a more efficient, lethal force and enduring
competitive edge.
How do I participate in the DoD

Trusted Capital program?
Capital Providers will be able to apply via the
Trusted Capital Marketplace website. Capability
Providers will have the ability to submit white
papers through the Trusted Capital Website and
then must be down selected by a DoD Military
Service through their acquisitions processes. Once
a company has been down selected, the Military
Service may offer the company the opportunity
to apply to the Trusted Capital program and will
provide companies with a link to access the online
Trusted Capital application portal.

SECTION 10
APPENDIX
Appendix A: Industrial Base Map
This appendix contains controlled unclassified information, and business confidential and proprietary
content, and will be provided to Congress as an annex to this report.

Appendix B: Industrial Base Studies and Assessments
This appendix contains controlled unclassified information, and business confidential and proprietary
content, and will be provided to Congress as an annex to this report.
SECTION 11
ACRONYMS

11. ACRONYMS
5G Fifth generation
A&D U.S Aerospace and Defense Industry
ACE America’s Cutting Edge
AESA Actively Electronically Scanned Array
AFRL Air Force Research Laboratory
AI Artificial intelligence
AMT Association for Manufacturing Technology
ARM Advanced Robotics for Manufacturing Institute
ASIC Application-specific integrated circuits
C2 Command and Control
C3 Command, Control, and Communications
CAGR Combined Annual Growth Rate
CARES Act Coronavirus Aid, Relief, and Economic Security Act
CBC Chemical Biological Center
CBDP Department of Defense Chemical and Biological Defense Program
CBRN Chemical, Biological, Radiological, and Nuclear
CBRND Chemical, Biological, Radiological, and Nuclear Defense
CDI Covered defense information
CEMWG Critical Energetic Materials Working Group
CFIUS Committee on Foreign Investment in the United States
CHIPS Creating Helpful Incentives to Produce Semiconductors
CIO DoD’s Chief Information Officer
CITE Center of Industrial and Technical Excellence
CMMC Cybersecurity Maturity Model Certification
CO Cyberspace Operations
CUI Controlled Unclassified Information
CV Combat Vehicles
DARPA Defense Advanced Research Projects Agency
DCMA Defense Contract Management Agency
DE Directed Energy
DevSecOps Development, security and operations
DEW Directed Energy Weapon
DFARS Defense Federal Acquisition Regulations Supplement

DFC U.S. International Development Finance Corporation
DIB Defense industrial base
DISA Defense Information Systems Agency
DIU Defense Innovation Unit
DLA Defense Logistics Agency
DMS&T Defense-Wide Manufacturing Science & Technology
DMSMS Diminishing manufacturing sources and material suppliers
DoC Department of Commerce
DoD Department of Defense
DOE Department of Energy
DoJ Department of Justice
DPA Defense Production Act
DTTI Defense Technology and Trade Initiative
EB DPAS Enterprise Board
EBITDA Earnings before Interest, Tax, Depreciation, and Amortization
EM Electromagnetic
EMS Electronic manufacturing service
EO Executive Order
EW Electronic Warfare
FAANG Facebook, Amazon, Apple, Netflix, and Google
FEMA Federal Emergency Management Agency
FGPA Field-programmable gate arrays
FIR Foreign Investment Review
FIRRMA Foreign Investment Risk Review Modernization Act
FNC3 Fully Networked Command, Control, and Communications
FTC Federal Trade Commission
FY Fiscal Year
FYDP Future year defense program
GaN Gallium Nitride
GOCO Government-owned, contractor-operated
GOGO Government-owned, government-operated
GPU Graphics processing units
HBCU Historically Black College and Universities
HEL High energy lasers
HHS Department of Health & Human Services

HPM High power microwaves
HSR Hart-Scott-Rodino Act
HSWR Hypersonics War Room
IAG Defense Contract Management Agency’s Industrial Analysis Group
IB Industrial Base
IBAS Industrial Base Analysis & Sustainment Program
IBC Industrial Base Council
IC Integrated circuit
IC Intelligence Community
IoT Internet of things
IP Intellectual Property
IPT integrated product team
ISR intelligence, surveillance, and reconnaissance
IT Information technology
JADC2 Joint All-Domain Command and Control
JATF Joint Acquisition Task Force
JGPD-HME Joint General Purpose Decontaminant for Hardened Military Equipment
JIBWG Joint Industrial Base Working Group
JRIBWG Joint Radar Industrial Base Working Group
LEP Life Extension Program
LOE Line of effort
LSRM Large solid-rocket motor
M&A Mergers & Acquisitions
M2M Machine, machine teaming
ManTech Manufacturing Technology Program
ME Microelectronics
MI Minority Serving Institution
MII Manufacturing Innovation Institutes
MILDEPS Military Departments
MINSEC Microelectronics Innovation for National Security and Economic Competitiveness
ML Machine Learning
MMIC Monolithic Microwave Integrated Circuits
MOA Memorandum of Agreement
MUM-T Manned-Unmanned Teaming
NACE-E National Centers of Academic Excellence in Cybersecurity

NASA National Aeronautics and Space Administration
NAVSEA Naval Sea Systems Command
NCI Non-corporate interests
NDAA National Defense Authorization Act
NdFeB Neodymium Iron Boron
NDS National Defense Stockpile
NDS National Defense Strategy
NIST National Institute of Standards and Technology
NSS National Space Strategy
NTIB National Technology and Industrial Base
ODASD(MR) Office of the Deputy Assistant Secretary of Defense for Materiel Readiness
ODIN Optical Dazzler Interdictor
OEA USD(A&S) Office of Economic Adjustment
OECD Organization for Economic Co-operation and Development
OIB Organic Industrial Base
OLED Organic light emitting diode
OSAT Outsourced semiconductor assembly and test
OSBP Office of Small Business Programs
OSD Office of the Secretary of Defense
OTA Other Transaction Authority
OUSD(A&S) Office of the Undersecretary of Defense for Acquisition and Sustainment
OUSD(R&E) Office of the Under Secretary of Defense for Research and Engineering
PBA Pine Bluff Arsenal
PLAA People’s Liberation Army
PLAN People’s Liberation Army Navy
PPBE Planning, programming, budgeting and execution
PPE Personal protective equipment
PPP Public Private Partnership
PrCB EA DoD Executive Agent for Printed Circuit Board and Interconnect Technology
PrCB Printed circuit board
PrCBA Printed circuit board assembly
QA Quality Assurance
R&D Research & Development
R/R&D Federal Research/Research and Development
RAMP Rapid Assured Microelectronics Prototypes

RDT&E Research, Development, Testing, and Engineering
RF/OE Radio frequency and optoelectronic
RIF Rapid Innovation Fund
RSRP Radar Supplier Resiliency Plan
S&T Science and technology
SBC Small Business Concern
SBIR Small Business Innovation Research Program
SBTP Office of Small Business Technology Partnerships
SHIP State-of-the-Art Heterogeneous Integration Prototype
SIBWG Space Industrial Base Working Group
SLP Substrate-like printed circuit board
SMM Small and medium-sized manufacturers
SOTA State-of-the-art
STEM Science, technology, engineering, and mathematics
STTR Small Business Technology Transfer Program
sUAS Small Unmanned Aircraft Systems
SWAP Software Acquisition and Practices
TEA Technical execution area
TKA Tail Kit Assembly
TMIB Technology, Manufacturing, and Industrial Base
TWTA Traveling Wave Tube Amplifiers
TWV Tactical Wheeled Vehicles
U.S. United States
UAE United Arab Emirates
UAS Unmanned Aircraft Systems
UAV Unmanned Aerial Vehicle
USD(A&S) The Undersecretary of Defense for Acquisition and Sustainment
WG Working group
YTD Year-to-date

SECTION 12
SOURCES

Inc, Leidos Holdings Inc, Airbus SE, Thales SA,
12. SOURCES Huntington Ingalls Industries Inc, Leonardo
1. National Security Strategy of the United States SpA, Rolls-Royce Holdings PLC, Qinetiq Group
of America, December 2017, https://www. PLC, General Electric Co, Elbit Systems Ltd,
whitehouse.gov/wp-content/uploads/2017/12/ Ball Corp, Science Applications International
NSS-Final-12-18-2017-0905.pdf Corp, ViaSat Inc, Textron Inc, Moog Inc,
Curtiss-Wright Corp, Oshkosh Corp, Aerojet
2. Stephen J. Rose, Manufacturing Employment:
Rocketdyne Holdings Inc, TransDigm Group
Fact and Fiction, April 2018, URBAN INSTITUTE
Inc, Singapore Technologies Engineering Ltd,
(citing its author’s calculations from 1960,
Serco Group PLC, Rheinmetall AG, Melrose
1980, and 2000 censuses, the Conference
Industries PLC, Saab AB, Safran SA)
Board Total Economy Database Data, and 2015
American Community Survey) 9. “How Important Is The U.S. Government To
Boeing’s Revenue?,” https://dashboards.
3. An evolution often described as the “Last
trefis.com/no-login-required/pFxcKTVr/How-
Supper,” after the Pentagon dinner where
Important-is-the-US-government-to-Boeing-s-
Secretary Les Aspin and his deputy (and
Revenue ?fromforbesandarticle=ba200102
eventual successor) William Perry urged
greater consolidation of the already-shrinking 10. “Drone Manufacturer Market Shares: DJI Leads
post-Cold War defense industry. the Way in the U.S.,” https://www.droneii.com/
dronemanufacturer-market-shares-dji-leads-
4. Public Remarks, Deputy Secretary of Defense
the-way-in-the-us
Robert Work at the Royal United Services
Institute, Whitehall, London, September 11. “May Passenger Demand Shows Slight
2015, https://www.defense.gov/Newsroom/ Improvement,” https://www.iata.org/en/
Speeches/Speech/Article/617128/royal-united- pressroom/pr/2020-07-01-02/
services-institute-rusi/ 12. Ibid.
5. National Security Strategy, December 2017. 13. “U.S-China Economic and Security Review
6. Antonio Varas, Raj Varadarajan, Jimmy Commission The 13th Five-Year Plan,”
Goodrich, & Falan Yinug, “Government https://www.uscc.gov/ sites/default/files/
Incentives and U.S. Competitiveness in Research/The%2013th%20Five-Year%20Plan_
Semiconductor Manufacturing,” Boston Final_2.14.17_Updated%20(002).pdf
Consulting Group & Semiconductor 14. 2017 County Business Patterns, United States
Industry Association, (September 2020), Census Bureau
Caution-https://web-assets.bcg.com/27/ 15. Ibid.
cf/9fa28eeb43649ef8674fe764726d/
bcg-government-incentives-and-us- 16. NSWC Crane, Counterfeit Electronic Part
competitiveness-in-semiconductor- Trends, Created using ERAI-provided data
manufacturing-sep-2020.pdf 17. “New Rule Expands Counterfeit Reporting”,
7. Defense Production Act Title III, https://www. https://www.nationaldefensemagazine.
businessdefense.gov/Programs/DPA-Title- org/articles/2020/1/13/new-rule-expands-
III/ counterfeit-reporting
8. 25 Mid-Tier includes: a combination of 25 U.S. 18. U.S. Department of Commerce, U.S. Bare
and Foreign based U.S. DoD Suppliers that are Printed Circuit Board Industry Assessment
publicly traded. Compiled using FPDS data 2017, Data updated in 2020 by DoD
on prime obligations and Defense News Top Executive Agent for Printed Circuit Board and
100 list of defense suppliers based on revenue Interconnect Technology.
for 2020 (Companies: L3Harris Technologies

19. “EMS 2019 in Review: Trade Wars Batter Supply Article/Article/2320194/dod-can-lead-
Chains, Profits,” microelectronics-manufacturing-back-to-us/.
20. Benchmark, Space Systems, https://www. 30. World Electronic Circuits Council (WECC), WECC
bench.com/space Global PCB Production Report for 2015.
21. “TTM Tecnologies, Inc. Announces Opening 31. World Electronic Circuits Council (WECC), WECC
of Advanced Technology Center in Chippewa Global PCB Production Report for 2018.
Falls, Wisconsin,” https://www.globenewswire. 32. GP Ventures, “199”, http://gp-ventures.
com/news-release/2020/02/25/1990456/0/en/ com/199-2/
TTM-Technologies-Inc-Announces-Opening-
33. “Do Trade Wars and Mergers Portend a
of-Advanced-Technology-Center-in-Chippewa-
Coming Changing of the Guard?”, https://
Falls-Wisconsin.html
www.circuitsassembly.com/ca/editorial/menu-
22. “Aerospace and Defense Deals Insights: features/31430-ems-top-50-1906.html
Midyear 2020,” https://www.pwc.com/us/
34. Ibid.
en/industries/industrial-products/library/
aerospace-defense-quarterly-deals-insights. 35. “EMS 2019 in Review: Trade Wars Batter Supply
html Chains, Profits”, https://www.circuitsassembly.
23. “Summit Interconnect, INC. Acquires Integrated com/ca/editorial/menu-features/33470-ems-
Technology LTD. (ITL Circuits)”, https:// 2019-in-review-trade-wars-batter-supply-
www.summit-pcb.com/press-releases/ chains-profits.html
summit-interconnect-inc-acquires-integrated- 36. “Mid-2019 PCB and EMS M&A Round-up”,
technology-ltd-itl-circuits/ http://gp-ventures.com/mid-2019-pcb-and-
ems-ma-round/, 08/22/2019
24. “NTI-100 2019: A Not-So-fabulous Year
for Fabricators”, https://www.pcdandf. 37. Semiconductor Industry Association Brief to
com/pcdesign/index.php/editorial/menu- OSD Industrial Policy, June 2020.
features/14933-a-not-so-fabulous-year-for- 38. “Global Semiconductor Sales Increase 5.8
fabricators Percent Year-to-Year in May; Annual Sales
25. “2020 Trends in Electronics Sourcing,” Projected to Increase 3.3 Percent in 2020, 6.2
https://www.businesswire.com/news/ Percent in 2021”, https://www.semiconductors.
home/20200519005327/en/Supplyframe- org/global-semiconductor-sales-increase-5-
Electronics-Sourcing-Report-Highlights- 8-percent-year-to-year-in-may-annual-sales-
Innovation-Imperative-Amid-COVID-19. projected-to-increase-3-3-percent-in-2020-6-2-
percent-in-2021/
26. Ibid.
39. “Worried About Chinese Backdoors, Lord
27. “The Impact of the Coronavirus (COVID-19)
Pushes for New Tech Strategy”, https://
Epidemic on Electronics Manufacturers: March
breakingdefense.com/2020/09/worried-about-
Update,” https://www.ipc.org/emails/gr/
chinese-backdoors-lord-pushes-for-new-tech-
corona-virus-report2.pdf.
strategy/
28. “Department of Defense Announces $197.2
40. Comparison of Global Machine Tool Producing
Million for Microelectronics,” https://www.
and Consuming Nations by Value, https://
defense.gov/Newsroom/Releases/Release/
www.gardnerintelligence.com/report/world-
Article/2384039/department-of-defense-
machine-tool
announces-1972-million-for-microelectronics/
41. Ibid.
29. “DOD Can Lead Microelectronics
Manufacturing Back to U.S.”, https://
www.defense.gov/Explore/News/

42. “When the machine stopped: A cautionary tale 51. Assessing and Strengthening the
from industrial America,” ISBN-10: 0875842089 Manufacturing and Defense Industrial base
43. “Trade Balances for Machine Tool Sector and Supply Chain Resiliency of the United
Nations,” https://www.gardnerintelligence. States, https://media.defense.gov/2018/
com/report/world-machine-tool oct/05/2002048904/-1/-1/1/assessing-
andstrengthening-the-manufacturing-and%20
44. “The Hazards of Global Supply Chains,” https:// defense-industrial-base-and-supply-chain-
www.asme.org/getmedia/82c9f3bd-9622-4677- resiliency.pdf
97a8-0cff5a4c3a8d/ps20-13-asme_hazards_of_
global_supply_chains.pdf 52. Executive Order on Assessing and
Strengthening the Manufacturing and Defense
45. “Net Orders for U.S. Consumption of Industrial Base and Supply Chain Resiliency of
Manufacturing Technology,” https://www. the United States, https://www.whitehouse.
amtonline.org/article_display.cfm?article_ gov/presidential-actions/ presidential-
id=205180 executive-order-assessing-strengthening-
46. Language contained in the NDAA for FY2019 manufacturing-defense-industrial-base-supply-
directs the Secretary of Defense to deliver a chainresiliency-united-states/
comprehensive strategy to the congressional 53. “STEM crisis or STEM surplus? Yes and yes”,
defense committees for improving the depot https://doi.org/10.21916/mlr.2015.14
infrastructure of the military departments
with the objective of ensuring that the depots 54. Report was provided in response to Senate
have the capacity and capability to support Report 115-290, Pages 199-200, Accompanying
the readiness and material availability goals S.3159, the Department of Defense
of current and future DoD weapon systems. Appropriations Bill for Fiscal Year 2019
The language requires that the strategy 55. 2018 “Deloitte and The Manufacturing Institute
include a review of the current conditions and skills gap and future of work study,” http://
performance of each depot, a business-case www. themanufacturinginstitute.org/~/media/
analysis comparing the minimum investment E323C4D8F75A470E8C96D7A07F0A14FB/
necessary required under Section 2476e of DI_2018_Deloitte_MFI_ skills_gap_FoW_study.
title 10, United States Code, with the actual pdf
investment needed to execute the planned 56. “STEM Occupations: Past, Present, and Future”,
mission and a plan to improve the conditions https://www.bls.gov/spotlight/2017/science-
and performance utilizing this data. technologyengineering-and-mathematics-
47. See https://media.defense.gov/2018/ stem-occupations-past-present-and-future/
oct/05/2002048904/-1/-1/1/assessing-and- pdf/science-technologyengineering-and-
strengthening-the-manufacturing-and%20 mathematics-stem-occupations-past-present-
defense-industrial-base-and-supply-chain- and-future.pdf
resiliency.pdf. 57. Under Secretary of Defense for Acquisition and
48. 2020 Department of Defense China Military Sustainment, Software Acquisition Pathway
Power Report Interim Policy Review, https://www.acq.osd.mil/
49. World Steel Association, https://www. ae/assets/docs/USA002825-19%20Signed%20
worldsteel.org/ Memo%20(Software).pdf
50. Ibid. 58. DoD Enterprise DevSecOps Initiative, https://

software.af.mil/dsop
59. U.S. and Global STEM Education, https://
www.nsf.gov/statistics/2018/nsb20181/digest/
sections/u-s-andglobal-stem-education

60. Report was provided in response to Senate 71. “The Contest for Innovation: Strengthening
Report 115-290, Pages 199-200, Accompanying America’s National Security Innovation Base
S.3159, the Department of Defense in an Era of Strategic Competition,” https://
Appropriations Bill for Fiscal Year 2019 www.reaganfoundation.org/media/355297/
61. “The Importance of International Students to the_contest_for_innovation_report.pdf
American Science and Engineering,” http:// 72. Award summaries available at https://www.
nfap.com/wp-content/uploads/2017/10/The- oea.gov/Defense-Manufacturing-Community-
Importance-of-International-Students.NFAP- Support-Program
Policy-Brief.October-20171.pdf 73. Office of the Undersecretary for Defense
62. “In the wake of Northrop-Orbital merger, Aerojet’s for Research & Engineering, Modernization
solid rocket engine business teetering on the Priorities, https://www.cto.mil/modernization-
brink”, https://spacenews.com/in-the-wake-of- priorities/
northrop-orbital-merger-aerojets-solid-rocket- 74. M. Zatman, Fully Networked Command,
engine-businessteetering-on-the-brink/ Control, and Communication: Infrastructure
63. Avon Rubber Completes Acquisition Supporting the National Defense Strategy
Of 3m’s Ballistic Protection Business,” (NDS), 2020
https://www.avon-rubber. com/ 75. Ibid.
media-centre/press-releases/press-
76. Ibid.
releases1/avon-rubber-completes-
acquisition-of-3m-s-ballisticprotection- 77. M. Zatman, “FNC3 Road to Dominance
business/#currentPage=1 Overview (Workshop Opening Remarks),” 2020
64. Russian Ministry of Defense, http://eng. 78. M. Zatman, Fully Networked Command,
mil.ru/en/news_page/country/more. Control, and Communication: Infrastructure
htm?id=12071791@egNews Supporting the National Defense Strategy
65. Ibid. (NDS), 2020
66. “‘Iron Man’ Suit To Fall Short Of Its 79. Office of the Undersecretary for Defense
Goals (Updated),” https://www. for Research & Engineering, Modernization
nationaldefensemagazine.org/articles/2019/2/6/ Priorities, https://www.cto.mil/modernization-
special-ops-iron-man-suit priorities/
67. World Bank, https://data.worldbank.org/, 80. Ibid.

Central Intelligence Agency, https://www.cia. 81. “ 2020 State of the U.S. Semiconductor
gov/library/publications/the-world-factbook/ Industry,” https://www.semiconductors.org/
rankorder/rankorderguide.html wp-content/uploads/2020/06/2020-SIA-State-
68. Defense Space Strategy Summary, https:// of-the-Industry-Report.pdf
media.defense.gov/2020/Jun/17/2002317391/- 82. “CHIPS for America Act Would Strengthen U.S.
1/-1/1/2020_DEFENSE_SPACE_STRATEGY_ Semiconductor Manufacturing, Innovation,”
SUMMARY.PDF?source=email https://www.semiconductors.org/chips-
69. “Evaluation of China’s Commercial Space for-america-act-would-strengthen-u-s-
Sector,” https://www.ida.org/research-and- semiconductor-manufacturing-innovation/
publications/publications/all/e/ev/evaluation- 83. “DOD Adopts ‘Zero Trust’ Approach to Buying
of-chinas-commercial-space-sector Microelectronics,” https://www.defense.
70. “The Global Commercial Market for Orbital gov/Explore/News/Article/Article/2192120/
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2020. microelectronics/.

84. “Emerging Military Technologies: Background 97. “USD(R&E) Technology Roadmap Quantum
and Issues for Congress,” https://crsreports. Science” Briefing, May 2020
congress.gov/product/pdf/R/R46458 98. “Fiscal Year 2019 Industrial Base Capabilities
85. Maintaining Technology Advantage, “Artificial Report to Congress.”
Intelligence TAPP Appendix A-1,” 2020. 99. OUSD(R&E)/ST&E/S&T, Quantum Technology
86. “ Maintaining the Competitive Edge in Artificial Area Protection Plan, September 2020
Intelligence and Machine Learning.” https:// 100. “USD(R&E) Technology Roadmap Quantum
www.rand.org/pubs/research_reports/RRA200- Science” Briefing, May 2020
1.html
101. “Understanding Gartner’s Hype Cycles,” https://
87. “ Artificial Intelligence and National Security,” www.gartner.com/en/documents/3887767/
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R45178/9
102. Assessing and Comparing the Robustness
88. “Big Data at War: Special Operations Forces, of the U.S. Industrial Base in Quantum
Project Maven, and Twenty-First-Century Technology: Kickoff Briefing Addendum.”
Warfare,” https://mwi.usma.edu/big-data-at-
103. “MITRE Statement of Work: DIB Workforce
war-special-operations-forces-project-maven-
Assessment,” October 2020
and-twenty-first-century-warfare/
104. “Emerging Military Technologies: Background
89. “AI To Fly In Dogfight Tests By 2024: SecDef,”
and Issues for Congress,” https://crsreports.
https://breakingdefense.com/2020/09/ai-will-
congress.gov/product/pdf/R/R46458
dogfight-human-pilots-in-tests-by-2024-secdef/
105. “Maintaining Technology Advantage, 2020
90. “Army advances learning capabilities of drone
Directed Energy TAPP Appendix A-1.”
swarms,” https://www.army.mil/article/237978/
army_advances_learning_capabilities_of_ 106. “Advancing High Energy Laser Weapon
drone_swarms Capabilities.”
91. “ Keeping Top AI Talent in the United States,” 107. “The ODIN Shipboard Laser: Science Fiction
https://cset.georgetown.edu/wp-content/ No More.” https://jnlwp.defense.gov/Press-
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States.pdf shipboard-laser-science-fiction-no-more/
92. “ Artificial Intelligence and National Security,” 108. AFRL gives warfighters new weapons
https://crsreports.congress.gov/product/pdf/R/ system.”https://www.whs.mil/News/News-
R45178/9 Display/Article/2138161/afrl-gives-warfighters-
new-weapons-system/
93. “Recommendations on Export Controls for
Artificial Intelligence,” https://cset.georgetown. 109. Ibid.
edu/wp-content/uploads/Recommendations- 110. “Emerging Military Technologies: Background
on-Export-Controls-for-Artificial-Intelligence. and Issues for Congress,” https://crsreports.
pdf congress.gov/product/pdf/R/R46458
94. “Executive Summary of the Defense Science 111. “Advancing High Energy Laser Weapon
Board Report on Applications of Quantum Capabilities.”
Technologies.”
112. Ibid.
95. “USD(R&E) Technology Roadmap Quantum
113. Ibid.
Science” Briefing, May 20200
114. “DoD Drafts Guidelines for Laser Design,”
96. OUSD(R&E)/ST&E/S&T, Quantum Technology
https://breakingdefense.com/2020/08/dod-
Area Protection Plan, September 2020
drafts-guidelines-for-laser-design/

115. “Army Rapid Capabilities and Critical 129. “AI Chips: What They Are and Why They
Technologies Office Manufacturing Technology Matter,” https://cset.georgetown.edu/research/
Overview.” ai-chips-what-they-are-and-why-they-matter/
116. Office of the Undersecretary for Defense 130. “New Challenges Facing Semiconductors,”
for Research & Engineering, Modernization https://irds.ieee.org/topics/new-challenges-
Priorities, https://www.cto.mil/modernization- facing-semiconductors
priorities/ 131. “Artificial Intelligence and National Security,”
117. IEEE 5g and Beyond Technology Roadmap https://crsreports.congress.gov/product/pdf/R/
White Paper,” https://futurenetworks.ieee. R45178/9
org/images/files/pdf/ieee-5g-roadmap-white- 132. “Joint Chiefs of Staff Publication 3-12, Cyber
paper.pdf . Operations,” https://www.jcs.mil/Portals/36/
118. Ibid. Documents/Doctrine/pubs/jp3_12.pdf
119. Ibid. 133. Office of the Undersecretary for Defense
120. Ibid. for Research & Engineering, Modernization
Priorities, https://www.cto.mil/modernization-
121. “FCC 5G,” https://www.fcc.gov/5G
priorities/
122. “DOD Kicks Off World’s Largest Dual-Use 5G 134. “2018 National Cyber Strategy,” https://www.
Testing Effort,” https://www.defense.gov/ whitehouse.gov/wp-content/uploads/2018/09/
Explore/News/Article/Article/2378047/dod- National-Cyber-Strategy.pdf
kicks-off-worlds-largest-dual-use-5g-testing-
effort/ 135. “Defense Primer: Cyberspace Operations,”
https://fas.org/sgp/crs/natsec/IF10537.pdf
123. Ibid.
136. “2017 National Security Strategy of the United
124. “Defense Department Press Briefing on 5G States of America,”https://www.whitehouse.
Communications Technology Testing and gov/wp-content/uploads/2017/12/NSS-
Experimentation,” https://www.defense. Final-12-18-2017-0905.pdf
gov/Newsroom/Transcripts/Transcript/
Article/2208939/defense-department-press- 137. “Cyberspace Solarium Commission Report,”
briefing-on-5g-communications-technology- https://www.solarium.gov/report
testing-and-e/ (accessed 16 Oct 2020) 138. Ibid.
125. “Report of the Defense Science Board Summer 139. “The Defense Production Act of 1950: History,
Study on Autonomy.” Undersecretary of Authorities, and Considerations for Congress,”
Defense (USD), Acquisition, Technology, and https://crsreports.congress.gov/product/pdf/R/
Logistics (AT&L). R43767
126. “Manned-Unmanned Teaming: A Great
Opportunity or Mission Overload?” https://
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127. “Army robots get driver education for difficult
tasks,” https://www.army.mil/article/237248/
army_robots_get_driver_education_for_
difficult_tasks (accessed October 8, 2020)
128. “The Army’s got a Universal Robot Driver,”
https://breakingdefense.com/2019/11/the-
armys-universal-robot-driver/

IMAGE SOURCES
Page
Cover Photo By: Joshua Armstrong, Air Force

https://www.defense.gov/observe/photo-gallery/igphoto/2002085551/
7 Photo By: Air Force Senior Airman Keith Holcomb

8 Photo By: Navy Petty Officer 2nd Class Taylor DiMartino

http://www.defense.gov/observe/photo-gallery/igphoto/2002460143/
21 Photo: by Senior Airman Franklin R. Ramos, U.S. Air Force/Released

https://www.flickr.com/photos/39955793@N07/12234809043/in/photolist-29QD6SM-2gfJxj7-
2gfK3JR-SV81N5-p6VUva-nknxXp-oYAEyU-KoTXjk-ps1jtf-VynNBa-p68mPW-p4jVME-p67tke-TCrQfB-
dtmgHo-LYDrrQ-L4TkLU-Uh2fmS-p68oV9-JGXTLk-popuxw-ps2Zni-VHE4eb-MQ9Qxy-ojhQLN-2guVzva-
daEqmD-ddHWY5-e4U6b4-pMDyJv-LeGao3-jD9Atv-VVZvtA-e5ZAgk-Lt3vp7-p7Jmn9-bGVyun-p7JUo1-
oR2K59-e5a8Gk-e13pAK-bEwYun-daEoLx-bNQuAH-bDd6va-bDhAtr-9dycGi-85sNFD-84GAhq-7gPNde
22 Photo By: Air Force Staff Sgt. Trevor McBride

25 Photo By: Air Force Airman 1st Class Jacob B. Wrightsman

26 Photo By: Army Sgt. Sarah Sangster

31 Photo By: Joshua Armstrong, Air Force

32 Photo By: Marine Corps Lance Cpl. Mackenzie Binion

35 Photo By: Army Sgt. John Schoebel

36 Photo By: Navy Petty Officer 3rd Class MacAdam Weissman

39 Photo by: Ens. Jalen Robinson

https://www.flickr.com/photos/39955793@N07/32853273557/in/photostream/
40 Photo By: Marine Corps Cpl. Brennan Beauton

49 Photo By: Air Force Senior Airman Bryan Guthrie


50 Photo By: Navy Petty Officer 3rd Class Nicholas Huynh
115 Photo By: Navy Petty Officer 1st Class Devin Langer
116 Photo By: Todd Maki, Air Force

163 Photo by Sgt. Jesse Pilgrim

https://www.flickr.com/photos/39955793@N07/48631270737/
167 Photo By: Jeff Spotts

173 Photo: by Sgt. Dustin D. Biven

https://www.flickr.com/photos/39955793@N07/48631279807/
139 Photo By: Army Master Sgt. Becky Vanshur


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What is the purpose of this report?

What is the purpose of this report?

What sectors are assessed in this report?

What sectors are assessed in this report?

FISCAL YEAR 2020

The estimated cost of this report or study for the Department of

4. Industrial Base Council.....................................................................................................................................31

5. COVID-19 Response Highlight..........................................................................................................................35

6. Defense Industry Outlook...............................................................................................................................39

Characteristics of the Market/Overview.....................................................................................................40

The Big Six Defense Suppliers......................................................................................................................40

Research & Development Spending............................................................................................................44

Global Military Spending...............................................................................................................................46

Chemical, Biological, Radiological, and Nuclear.........................................................................................59

Cybersecurity for Manufacturing.................................................................................................................62

INDUSTRIAL CAPABILITIES REPORT TO CONGRESS | 2020 ANNUAL REPORT 3

Nucler Matter Warheads...............................................................................................................................88

Organic Defense Industrial Base..................................................................................................................90

Radar and Electronic Warfare.......................................................................................................................94

8. Critical and Emerging Technologies............................................................................................................ 115

Fully Networked Command, Control, and Communications................................................................. 119

Machine Learning/Artificial Intelligence....................................................................................................125

4 INDUSTRIAL CAPABILITIES REPORT TO CONGRESS | 2020 ANNUAL REPORT

Defense Priorities and Allocations System...............................................................................................140

Defense Production Act Title III..................................................................................................................142

Committee on Foreign Investment in the United States........................................................................144

Office of Small Business Programs............................................................................................................146

Industrial Base Analysis and Sustainment...............................................................................................148

Small Business Innovation Research & Small Business Technology Transfer.....................................152

Rapid Innovation Fund................................................................................................................................154

Manufacturing Technology Program.........................................................................................................156

Appendix A: Industrial Base Map...............................................................................................................164

Appendix B: Industrial Base Studies and Assessments..........................................................................165

12. Sources .............................................................................................................................................................173

INDUSTRIAL CAPABILITIES REPORT TO CONGRESS | 2020 ANNUAL REPORT 5

INDUSTRIAL CAPABILITIES REPORT TO CONGRESS | 2020 ANNUAL REPORT 7

America’s defense industrial base was once the

8 INDUSTRIAL CAPABILITIES REPORT TO CONGRESS | 2020 ANNUAL REPORT

dominance in the coming century and, with it, 25

deterrence that will keep Americans safe and keep

investment and resources, as well as continuing 10

base can be viewed in the context of four major

change and reform. 10

manufacturing innovation. From 40 percent of

manufacturing has shrunk to less than 12 percent 35.00%

today, while shedding more than five million 30.00%

manufacturing jobs from 2000 to 2015 alone. Just 25.00%

fifty years ago, manufacturing industries employed 20.00%

36 percent of male workers. Today, manufacturing 15.00%

employs fewer than 11 percent of all workers.2 10.00%

While total manufacturing output has grown 0.00%

INDUSTRIAL CAPABILITIES REPORT TO CONGRESS | 2020 ANNUAL REPORT 9

10 INDUSTRIAL CAPABILITIES REPORT TO CONGRESS | 2020 ANNUAL REPORT

China's Defense Spending 1999-2018

Data Source: World Bank

INDUSTRIAL CAPABILITIES REPORT TO CONGRESS | 2020 ANNUAL REPORT 11

How will the Department accomplish this? By

12 INDUSTRIAL CAPABILITIES REPORT TO CONGRESS | 2020 ANNUAL REPORT

INDUSTRIAL CAPABILITIES REPORT TO CONGRESS | 2020 ANNUAL REPORT 13