Beyond Reshoring

Introduction

Over the past several years, Congress and the Trump and Biden administrations have made significant efforts to reverse America’s atrophying manufacturing capability broadly and the defense sector specifically. The Department of Defense (DoD) has emphasized production and manufacturing with programs like the Office of Strategic Capital (OSC) and Accelerate the Procurement and Fielding of Innovative Technologies (APFIT) while funding new modernization programs that prioritize faster and more aggressive ramps to the full rate of production. In turn, defense companies, both traditional and nontraditional, have invested billions of dollars toward the creation of manufacturing facilities and the research and development (R&D) of new manufacturing technologies, like additive manufacturing. These efforts are largely focused on one issue—capacity limitation—and on one sector of the defense supply chain—original equipment manufacturers (OEMs) delivering fully integrated weapon systems, such as missiles.

However, the DoD has paid less attention and made less progress addressing supply chain risks threatening subtier suppliers. Subtier suppliers are no less critical to defense systems than OEMs, but they are a much harder segment of the industrial base to bolster. For these subtier providers, surviving in the commercial market is key, and additional DoD or U.S. government support is rarely sufficient. Instead, the United States must focus on transformational manufacturing approaches that provide companies with an appreciably higher value proposition, such as better quality products or lower costs. One solution is in-space manufacturing, which decades of research has shown to have significant benefits to production for a wide range of critical materials used by the DoD. As the chief revenue officer for a space manufacturing start-up, I have a commercial stake in this industry and my position gives me a view into how space industrialization is one of the United States’ best strategic and economic advantages.

Key Takeaways

• Subtier defense suppliers depend on commercial markets, not DoD budgets, to survive—making them vulnerable to foreign competition in ways that defense spending for traditional manufacturing alone cannot fix.
• U.S.-based companies need transformational manufacturing approaches to compete and win in the global market. In-space manufacturing is the next frontier of American manufacturing innovation—leveraging unmatched U.S. launch capabilities to onshore production of critical materials that cannot be secured through conventional means.
• Congress and the DoD should continue to support the development of super heavy-lift launch capabilities and their defense applications, as well as fund technical innovation to expand U.S.-based manufacturing of defense critical minerals into space.

Structural Risks to Subtier Supply Chains

The 2018 DoD report, Assessing and Strengthening the Manufacturing and Defense Industrial Base and Supply Chain Resiliency of the United States, lays out 10 risk archetypes threatening the U.S. defense supply chain, ranging from sole source (there is only one provider) to foreign dependency (the U.S. industry does not produce the items) to fragile market (the U.S. market has a bad business case). The report assesses that these risks are caused by five “macro forces,” some of which are within the control of the U.S. government—such as government funding and acquisition practices—while others are global economic forces—such as the decline in the broader U.S. industrial base capability and competitive practices by foreign countries. The DoD report finds that these risks “primarily [impact] the sub-tiers of the defense supply chain.”

Securing the subtier supply chain is more difficult because these companies and their products are often dual-use products, and thus the success of these companies requires that they compete and win in the global market. In these situations, U.S. government objectives and requirements can be orthogonal to what the market wants and will reward. Further, the size of some commercial markets, such as microelectronics, dwarfs the DoD budget, limiting the influence of the “defense business” in a company’s decision-making. In short, the DoD can’t simply buy more from these U.S.-based companies and assume they will survive.

There is no industry where this is more widely felt than in microelectronics. The United States ceded chip manufacturing to foreign nations decades ago. While the United States still leads innovation in chip design, Taiwan, Japan, and South Korea dominate the actual fabrication of chips and their upstream materials. This globalized market arrangement was by choice and has benefited the U.S. economy for a long time; the United States retained technically innovative high-margin work, while offshoring lower-margin rote production.

As a result of this strategy, the U.S. labor pool with technical skill sets and experience disappeared and the United States spent less R&D on manufacturing technology and process development. The CHIPS and Science Act has tried to right the ship by investing billions to incentivize companies to build fabrication facilities in the United States. However, it remains to be seen how the United States will compete with well-established foundries.

The other headwind is that China dominates the supply chains for critical materials and technologies. China’s Made in China 2025 plan articulated the need to reduce foreign dependency on key technologies, to include microelectronics. The Chinese government employs several tools to support Chinese companies, from billions in investments and subsidies to low-interest loans to lax environmental regulations to even more aggressive tactics such as forced technology transfers, intellectual property theft, and dumping. These policies all aim to increase Chinese companies’ market share, to the purposeful detriment of the United States and its like-minded allies and partners. A prime example of this behavior and its impact is the solar power market, in which China used these tactics to gain significant market share and decimated the U.S. market.

In-Space Manufacturing as a Defense Industrial Solution

If the DoD is to have assured access to a secure supply chain for critical materials and technology, then U.S. companies must fundamentally change how they think about manufacturing and building competitive products. In-space manufacturing provides an innovative opportunity. The U.S. government has been studying the benefits of in-space manufacturing for the past 25 years, maturing the technology over hundreds of experiments.

The benefits boil down to:

• Vacuums in space are higher quality than man-made vacuums on Earth, as well as more abundant and free.
• Microgravity environments have many benefits, such as the lack of friction and the reduction of conductive currents, which leads to faster, larger, and more uniform crystal growths.
• The expanse of space means there is more real estate in space and less regulation (e.g., environmental)—two of the major time and cost drivers of manufacturing in the United States.

No other country, including China, has the launch capabilities of the United States. This is a strategic advantage that the United States needs to leverage, and in-space manufacturing is that opportunity.

• Constant and frequent launches. In 2025, there were 329 attempted orbital launches worldwide. The United States accounted for 181 of those or 55 percent of all global launch attempts. SpaceX alone conducted 170 launches, more than the rest of the world combined. China was second with 92 orbital launch attempts.
• Decreasing launch costs. The NASA shuttle program averaged launch costs of about $54,500 kg. Today, commercial launch costs are closer to $2,700/kg because of the invention of reusable rockets. SpaceX projects costs could be as low as $100/kg once the SpaceX Starship is operational.
• Super heavy-lift class rockets. The development of super heavy-lift rockets will unlock orders of magnitude more payload capacity and is what enables in-space manufacturing. U.S. space companies are leading the charge with SpaceX Starship and Blue Origin New Glenn.

The use cases for in-space manufacturing are varied, ranging from compound semiconductors to crystals and fiber optics to pharmaceuticals, many of which have direct defense system applications. A near-term benefit to the DoD are compound semiconductors, such as silicon carbide (SiC) and gallium nitride (GaN), which are critical components for defense systems including radars, communications, and satellites. While demand grows, supply is heavily concentrated abroad, and China’s market share continues to expand through its control of raw materials and heavily subsidized domestic production. In-space manufacturing would allow the United States to produce higher quality compound semiconductors at lower costs, giving U.S. companies a real market advantage and the defense industrial base a sustainable path toward assured supply. Beyond securing the supply chain today, in-space manufacturing would unlock future capabilities. One such example is ZBLAN (zirconium, barium, lanthanum, aluminum, and sodium) fiber, a heavy fluoride glass that outperforms current silicon-based fibers on power and signal loss. ZBLAN fiber is easier to grow in microgravity and could enable higher-power directed energy systems.

Recommendations

In-space manufacturing is one of many novel solutions that can help secure critical parts of the defense supply chain. The strategic benefits to defense and national security are real.

• The DoD and space companies should continue investment in super heavy-lift rockets. The space industrialization economy is gated by this technology reaching an operational level of maturity. The DoD should continue programs like its “Point-to-Point Delivery (P2PD)” program to develop military-specific applications of commercially developed super heavy-lift rocket capabilities.
• Fund efforts for in-space manufacturing. The DoD should fund efforts to develop products from in-space manufacturing that meet unique defense requirements, such as radiation-hardened compound semiconductors or ZBLAN fiber. The DoD should also use new tools such as loans or investments to support dual-use companies that have direct benefits to defense but would be considered higher risk in the broader market.
• Extend incentives provided to manufacturing to in-space manufacturing. The government has provided many incentives to reshore manufacturing. These benefits, such as tax credits, should also be included for U.S. companies exploring in-space manufacturing.

The United States has had the luxury of leading many technical innovations that have changed the world: computers, the internet, and artificial intelligence. The country once again has the opportunity to lead and define the future of American manufacturing by capitalizing on one of our best strategic advantages—assured and cheap access to space.

About the Author

Diem Salmon is the chief revenue officer at Besxar and formerly worked at Anduril Industries and the Senate Armed Services Committee. She is an adjunct senior fellow at the Center for a New American Security and was a commissioner for Planning, Programming, Budgeting and Execution (PPBE) Reform.

About the New American Industrial Base Series

This essay series, The New American Defense Industrial Base, features expert practitioners with experience in government, industry, and finance writing on the most pressing challenges in defense acquisition today. For more in this series, click here. The DIB series is made possible by general support to the CNAS Defense Program and corporate support for the series.

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