Reduce the Pentagon’s Dependence on China by Recharging US Battery, Electronics Industry

It is long past time to wean American defense systems off high-tech supply chains originating in or dominated by China. Congress should act to encourage this in two product areas in particular.

First, batteries. Large and small, they form a crucial component in many critical U.S. military systems: submarines, surface warships, 5th-generation jet fighters; P-8 surveillance aircraft; intelligence, surveillance, and reconnaissance systems; satellites, and much more. It is impossible to conduct most serious military operations—whether air, sea, space, land, or cyber—without the ubiquitous presence of batteries. Yet China dominates much of the world’s lithium supply, and nearly every step in the battery supply chain, from processing of critical and rare earth minerals to production of anodes, cathodes, and lithium-ion cells.

A comparable problem exists in microelectronics, the computer chips and related components that control and guide major U.S. weapons (and virtually all modern consumer and business products, from Ford F-150 pickup trucks to sewage treatment plants). Last year, a shortage of semi-conductors forced many American auto assembly lines to shut down. While a slowdown in civilian products is tough on consumers and producers, a delay in the production of defense systems could have deadly consequences. The cause might be anything from a natural disaster (tsunami) or shipping accident near China to a deliberate and hostile act – stemming, for example, from a stand-off over Taiwan. As it stands now, there is little America can do in such an eventuality but to pray.

High-value electronics and energy products were invented in our country and used to be manufactured here en masse. It is not nostalgia or protectionism to return these supply chains to our shores or reliable friends and allies that will not be vulnerable to Beijing’s intimidation.

But it will take a sustained commitment to new priorities, policies, and incentives, based on a recognition that things are different now, and business or ideology as usual is no answer. The Congress, and perhaps only the Congress, can put the U.S. on a path towards more secure military supply chains for the most indispensable technologies. The primary tool is the National Defense Authorization Act, which provides guidance and instruction to our $700 billion-plus military enterprise, with multiple ripple effects across all sectors.

The 2022 NDAA can achieve – and signal – the needed shifts in a number of ways. It should establish the Defense Department as the lead U.S. government agency for processing and manufacturing initiatives with defense applications. For batteries, it should require all minerals, rare earth elements, and other strategic materials used in major defense programs be processed in the United States or in allied and partner nations—and not in facilities in or controlled by China. A sourcing rule can be phased in and contain waiver provisions to minimize the disruption and costs associated with this transition.

Additionally, Congress should authorize new funding – $15 billion – for loans and grants to support domestic manufacturing and sourcing of key battery components for defense programs, including cathode, anode, and battery cells and packs. Similar protections and resources (and waivers) should be applied to microelectronics used in defense programs, from semiconductors to assemblies.

Today, we don’t even have accurate, complete, publicly available information about defense sourcing. The NDAA should also mandate that the Pentagon’s acquisitions office publish an unclassified statement every year on the percentage of Chinese parts and sub-components in defense programs.

Excessive – and unnecessary – secrecy is an impediment to understanding the problem that only helps the Chinese Communist Party. No valid reason exists for these statistics to be treated as controlled or classified information. Controlling or classifying the information does not keep it from our enemies; it only it keeps the facts from the American people. The NDAA should prohibit the DoD from classifying or declaring as Controlled Unclassified Information the percentage of Chinese parts, sub-components, and components in major Pentagon programs. New defense programs should also come with a plan to track every step and source in the supply chain process, perhaps using commercially originated artificial intelligence software.

It is time to lift the fog of wishful thinking on these vulnerabilities. A growing bipartisan consensus recognizes the scale of the Chinese Communist Party challenge. This should not be a tough call – or a tough vote. Congress has the opportunity and power to make a difference – if it chooses to do so.

Jeffrey Nadaner is the executive vice president for government affairs for SAFE, director of SAFE’s Secure American Supply Chains project, and a former U.S. Deputy Assistant Secretary of Defense for Industrial Policy.