As the U.S. races to unearth domestic supplies of minerals critical for its defense systems, it’s equally urgent to transform those minerals into capability through the development of a comprehensive national strategy to boost domestic electronics manufacturing.
Electronics are the endgame, and scaling up mineral capacity without doing the same for electronics will lead to failure.
Critical minerals, which include rare earth minerals, are vital to electronics production because of their unique magnetic, electrical and luminescent properties. While the U.S. developed much of the modern science to extract and purify these minerals, refining and processing capacity has migrated overseas.
China now dominates nearly all stages of critical mineral production, giving the country unchecked control on supply and pricing. Even if the U.S. is successful with its current efforts to secure non-Chinese mineral supply chains, the materials still need to be sent to China for processing.
China also dominates the electronics ecosystem, leading a handful of Asian countries that collectively are responsible for approximately 75% of worldwide production. More than 40% of the semiconductor components that sustain U.S. weapons systems and associated infrastructure are now sourced from China alone. For some electronics, it’s nearly domination. China is the predominant supplier of liquid crystal displays (LCDs), upon which more than 90% of U.S. military systems rely.
U.S. capability is eroding
While China presses forward with its national strategy to dominate critical minerals and the electronics that underpin defense and commercial systems, the U.S. continues to see its electronics manufacturing capability and capacity erode to critical levels.
There is no large-scale domestic production of ultra-high-density interconnect (UHDI) printed circuit boards (PCBs), which are used in defense applications to meet the critical need for smaller, lighter and more powerful electronic systems. Advanced packaging capacity is limited, and U.S. chip manufacturing accounts for only 12% of global output.
This domestic deficit, combined with Asian-centric production of critical minerals and electronics, puts the U.S. at significant risk militarily and economically. With U.S. officials warning that China aims to be ready to take Taiwan by 2027, an Indo-Pacific conflict would jam supply lines and contested logistics could make resupply from Asia difficult, if not impossible.
Electronics power every weapon system, aircraft, ship and communications platform, and they enable the tools used to manufacture these critical defense systems. The war in Ukraine is a canary in the coal mine, showing the massive electronics requirements needed to maintain battle readiness.
Should the U.S. be drawn into a conflict, there is no flipping a switch to ignite a surge in critical electronics production. Domestic manufacturers have no slack in capacity, supply chains are globalized and fragmented, and the current backlog for major defense contractors exceeds $1.3 trillion, according to earnings reports.
This is the opposite of what occurred during World War II, when the country rapidly mobilized manufacturing because of its vast onshore industrial base. Surge capacity today requires deliberate investment, allied partnerships and sustained demands.
Urgent need for electronics strategy
Building a strong domestic electronics industry that is reliable, resilient and surge-ready requires a comprehensive national electronics strategy that positions electronics as the goal and critical minerals as a key enabler. Success hinges on scaling electronics while securing an assured supply of critical minerals from domestic and allied sources.
Key components of a national electronics strategy include:
- Providing government funding and other support, such as tax credits, for production facilities and the acquisition of technical knowledge to help derisk and spur investment by U.S. manufacturers and private equity firms.
- Generating a sustainable demand signal for domestic electronics by aggregating government purchases, requiring suppliers critical to our national infrastructure to use trusted sources, and encouraging the manufacture of dual-use products that are valuable to both defense and commercial customers.
- Adopting an ecosystem approach that integrates upstream inputs with mid and downstream manufacturing and that considers critical minerals through semiconductor fabrication, PCBs, packaging, assembly, testing and system integration under one coordinated strategy.
- Ensuring a strong pipeline of engineering and manufacturing talent.
It will take an estimated 18 to 24 months to bring limited domestic and allied production of critical electronics online. This requires government and industry to align on the mission and take decisive action.
The U.S. currently cannot surge or scale the electronics needed for sustained conflict unless it relies on adversarial sources. Without electronics, our arsenal cannot function. Our country’s security, therefore, rests on a national electronics strategy that mitigates dependence on Asia by securing trusted domestic and allied capacity.
