Source: Master Sgt. Gustavo Castillo
America’s defense industrial base is rapidly evolving in response to rising global threats, shifting from peacetime efficiency to wartime readiness, reports Dustin Walker of War on the Rocks. New defense tech firms like Anduril are leading this transformation by leveraging private capital, innovation, and strategic acquisitions—not to consolidate power like Cold War-era giants, but to increase production scale, attract talent, and partner with small businesses. While concerns about consolidation persist, today’s mergers differ in purpose and effect, aiming to expand competition, not reduce it. A modern defense ecosystem will rely on both innovative startups and scaled firms to meet current and future national security needs. Walker writes:
America’s defense industrial base is in the throes of major change. For the first time in 40 years, major power war is a real possibility. Conflicts in Ukraine and Israel are providing a harrowing glimpse of what that war might look like. Technology is evolving at a dizzying pace. Instead of peacetime efficiency, governments are prioritizing wartime surge capacity. The “China shock” and COVID-19 have destabilized global supply chains.
Amid these daunting realities, a new generation of defense technology companies has emerged. Anduril Industries — which was founded in 2017 and which I joined in 2020 — is one of them. Of course, defense technology companies aim to make money. But these companies also aim to disrupt and transform American defense by changing culture, attracting new and better talent, harnessing commercial technologies, championing software, bolstering competition, reforming acquisition practices, and more. Only time will tell if they are successful. But perhaps not as much time as one might think. As more defense technology companies scale to compete with traditional defense primes, the contours of a new defense industrial base are emerging. […]
After decades of decline, global security risks have pushed the defense sector into a period of projected long-term growth in the United States and globally. That is driving an unprecedented infusion of private capital into defense, including more than $130 billion in venture capital investment in just the last four years. The availability of capital has helped patriotic entrepreneurs to create hundreds of new defense startups. […]
Acquisitions are also a key component of achieving economies of scale to counteract the dangerously insufficient production capacity of the defense industrial base. The Department of Defense does not just need more companies that innovate. It needs more companies that build at scale. Acquisitions that help more defense technology companies achieve that scale are evidence of the market effectively mobilizing private capital in response to government demand.
For example, when Anduril bought Blue Force Technologies, the defense industrial base did not lose an aircraft manufacturer. Rather, it gained a company with the right combination of talent, technology, and resources to give traditional industry a run for its money in autonomous aircraft. In the end, Anduril achieved a milestone victory with its downselection for the Collaborative Combat Aircraft program, beating out Lockheed Martin, Northrop Grumman, and Boeing. This win also belongs to the more than 40 small businesses that are now helping to build the YFQ-44A — the result of that program — for the U.S. Air Force. That is not industry consolidation. It is the kind of industry expansion that America’s defense industrial base needs right now. […]
It is time to turn the page on the defense industry consolidation of the last 30 years that has reduced competition and resulted in higher costs, less innovation, poorer performance, and more vulnerable supply chains. America needs a more diverse and competitive defense market that delivers improved cost, schedule, and performance. That requires the Defense Department to create new programs of adequate scale and volume — backed by sufficient, timely, and predictable funding — to provide new entrants and nonincumbents with opportunities to compete and win. And it means creating a culture of continuous competition that is embodied in acquisition policy. There should be no permanent winners or losers — only permanent competitors always looking to the next competition around the corner and constantly investing, innovating, and improving.
That is the defense industrial base in which defense technology companies and small businesses alike want to compete. That is the defense industrial base they can build together. Many, if not most, defense technology companies are small businesses. And those defense tech firms that are fortunate enough to achieve the requisite scale to compete with traditional defense primes will continue to rely on the invaluable contributions of their small business partners. Some may want to pit defense technology firms and small businesses against each other. But that is a losing game because, in the final analysis, defense technology companies and small businesses want the same thing: a chance to be ambitious, go fast, and demonstrate what they can do for America.
Read more here.
Also read REDEFINING DEFENSE STRATEGY: Anduril and the ‘Moneyball Military’, Solving America’s Missile Shortage, The AI Gap: Why Consumer Tech Outpaces U.S. Defense Systems, & Game-Changing Robot Spy Can Track Submarines Undetected for Years
