A new Defense Department report on securing critical defense supply chains prioritizes kinetic weapons, energy storage and batteries, metals and composites used in manufacturing tools, and microelectronics, outlining the challenges and vulnerabilities with each focus area and provides an array of recommendations to address these challenges and improve domestic and partner capabilities.

The report’s focus on kinetic capabilities, which includes hypersonic weapons, a priority for DoD, highlights the fact that while there is no commercial market for kinetic weapons, they are reliant on commercial commodities such as electrical components, chemicals and rare earth elements used in key subsystems and systems.

The primary challenges for the kinetic sector include limited visibility by DoD and prime contractors into the sub-tiers into their supply chains amid globalization, increased dependency on foreign and sole-sources, in part due to lower production costs in China, unstable DoD acquisition processes such as budget delays, and exacting demands for developing hypersonic capabilities.

In the area of hypersonics, “These issues include suboptimal manufacturing processes (e.g., highly labor-intensive processes, strict manufacturing tolerances, etc.) and higher performance requirements compared to conventional missiles due to the harsh environments in which these systems will operate,” the 78-page report says. “This means the programs are limited by existing material solutions, and new material solutions must be identified or developed to meet requirements. To drive the business case for industry to self-invest, a clear procurement forecast must be shared with industry partners.”

The report offers six recommendations for the kinetic sector supply chain, one of which calls for investing in the hypersonic industrial base. These investments will be guided by a new roadmap DoD is developing for the hypersonic industrial base, and “will address sub-tier supplier development and, where appropriate, develop and retain competition that enables affordable production.”

Other recommendations include partnering with industry on tools to better analyze supply chains and identify challenges, prioritizing chemical supply needs to inform future defense budget requests, and update old material specifications, which could lead to new sources and increase competition.

“Our recommendations focus on how we can increase domestic production capacity and renew the sources of our economic security,” Deputy Defense Secretary Kathleen Hicks says in a foreword to the report. “We will continue investing in the production and manufacturing capabilities that will enable a modern, technology-enabled defense industrial base.”

Microelectronics, which are used in a vast number of commercial products, weapon systems and satellites, are sourced globally, although about three-quarters of the design automation is done in the U.S., the report says. However, it points out, that nearly 90 percent of production and 98 percent of assembly, packaging and testing of microelectronics are done mainly in Taiwan, South Korea and China, which is pushing to boost its market share. The U.S. share of global semiconductor manufacturing has dropped from 37 percent in 1990 to 12 percent in 2020, the report says.

As with the kinetic sector, DoD still has poor visibility into the microelectronics supply chain, making it difficult to identify threats and vulnerabilities. The report warns that given China’s place in the supply chain it could potentially compromise the security of microelectronics products through tampering or the insertion of malicious code. It also warns of counterfeit microelectronics products, which have already infiltrated DoD systems.

Some of the recommendations related to microelectronics include DoD development of practices to evaluate the security of microelectronics, support congressional appropriations of $52 billion already authorized to boost domestic semiconductor fabrication, positioning the department to leverage the expansion in the U.S. of microelectronics manufacturing being done through investments by Taiwan and South Korea, and improve the business environment for electronic suppliers working with DoD.

The DoD report was one of six released by U.S. agencies on Wednesday, a year after President Biden issued an executive order to strengthen the resilience of U.S. supply chains. Another of the reports, prepared by the Departments of Commerce and Homeland Security, assesses the supply chains supporting the U.S. information and communications technology industry.