America's Defense Supply Chains Are in Danger

From 2000 to 2015, there was an 80% contraction in the US printed circuit board (PCB) sector. The number of manufacturers dwindled from 2,500 to just 145. The value of the PCB industry shrank from $10 billion to $2 billion. Capacity was lost.

According to Calumet Electronics' COO Todd Brassard, "there was a "failure to maintain state-of-the-art."

Calumet is a survivor in the US's PCB industry. They manufacture the critical PCBs and IC substrates used in American defense and weapons systems. And this survivor is issuing a plea for America's defense supply chain to receive some attention.

The Same Shortages, but Different

The US defense supply chain is facing the same shortages that currently confront the consumer and automotive electronics industries. And while US officials are hard at work to fix supply issues for consumer and automotive electronics, cries for help issued by the defense industry are, according to Brassard, "falling on deaf ears."

The issue lies in a sense of stubbornness. While the US enjoys having advanced and unrivaled defense and weapons systems, they are unwilling to design them. Hence the great reduction in PCB and IC manufacturers from 2000 to 2015. During that time, the US allowed commercial forces to direct manufacturing to offshore locations. Add two decades of "post-industrial" US government policy into the mix, and you can start to see why Taiwan and China are the hotbeds of component manufacturing.

Many of the PCBs critical to the US defense industry can no longer be bought from American companies. Because of this, the US Department of Defense must rely on foreign suppliers (like China and Taiwan) for critical components. Capacitors are also difficult to source from within the US, which potentially correlates with it being the second-most counterfeited component in electronics.

And while conversation among US officials has taken place, no concrete plans have been made to improve US manufacturing of critical defense electronics.

For now, DoD engineers and acquisition professionals are being guided in how to better source PCBs and other critical parts from trusted supply chains. Yet this band-aid solution is hardly any help when supply is so limited.

It's Not an Issue of Demand

‍Demand for aerospace and defense electronic components pales in comparison to other electronics industries. Currently, the demand is up 6 percent from 2020.

Automotive demand, on the other hand, is up 60 percent—while industrial demand is up 30 percent, communications are up 80 percent, and computing is up 30 percent.

If demand is so much lower for aerospace and defense, why is the industry in danger? The simple answer is this: the skyrocketing demand in other sectors is directly inhibiting aerospace and defense's ability to access critical components.

Additionally, factories are loading up on capacity for components that are not uniquely specific to aerospace and defense. This means that everyone is competing for the same chips, and consumer electronics, communications, and automotive industries are typically the highest bidders.

If a silver lining is to be had, it's that at least the pandemic has slowed commercial aviation. Due to this, some capacity has been freed up within factories. Yet most lead times continue to elongate. For example, electronic connector lead times have doubled from 8 to 10 weeks in 1Q20 to 16 to 18 weeks in 2021. Meanwhile, more complex connectors have lead times as long as 36 weeks, while some semiconductor lead times have increased to as long as 33 to 44 weeks.

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Don Akery, president of TTI Americas, says that lead times are not likely to improve until the end of this year, "By the end of this year we will see lead times come down, and it will be next year before they come down to pre-pandemic levels."

For now, defense supply chains will have to rough it out.