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For decades, aerospace and defense supply chains were optimized for efficiency, cost, and predictability. That world no longer exists.
Today’s supply chain has become a strategic asset with the potential to accelerate or derail program timelines, shape competitive advantage, and directly influence national security goals.
Demand is surging. Backlogs are ballooning. And geopolitical tensions are exposing long-standing vulnerabilities faster than organizations can respond. Raw materials are harder to source, advanced manufacturing capacity is increasingly concentrated, and policy decisions are reshaping where and how critical inputs move. These pressures are not temporary.
In this environment, resilience can no longer be enough. The companies that treat their supply chains as strategic levers will likely set the pace for the next decade. Those that fail to do so often risk being constrained by forces they can no longer control.
Where leaders should act now and build for the future
As geopolitics shift quickly, supply chain transformation becomes more complex and urgent. The moment calls for structural changes that can pay off over years, paired with targeted moves that show returns quickly.
Critical minerals: Build domestic and allied strength where it matters most
Right now, the United States relies on China for 72% of its rare earth imports. Russia and China dominate titanium production. That’s not just a vulnerability—it’s a strategic constraint.
That exposure is already being tested. Since 2022, China’s exports of rare earths and related materials to the United States and other global markets have declined, reflecting tighter export controls, trade friction, and heightened scrutiny of strategic materials. While this trend suggests US reliance on Chinese imports is slowly waning, it also highlights a more immediate reality: supply chains are being reshaped under geopolitical pressure, not market forces alone. Similar dynamics are playing out across other critical inputs, including titanium and nickel, where concentrated production, sanctions, and trade friction have compelled aerospace and defense manufacturers to rethink sourcing strategies. That pressure is accelerating US investment in domestic alternatives.
Although the US and its allies have mineral resources, processing capacity is thin. China currently handles about 90% of global processing,1 giving it outsized influence over pricing, availability, and downstream production even as export volumes fall. Near term, that imbalance shows up as higher costs, longer qualification timelines, and greater volatility for aerospace and defense programs.
New processing and magnet facilities in Japan, the EU and Australia could begin to shift that balance in the next two to three years. Longer term, the US is preparing to invest billions in mine-to-magnet capability and coordination with allies. That includes rare earth mining projects such as Halleck Creek in Wyoming, one of the largest known deposits in North America, alongside growing federal and private investment aimed at rebuilding mine-to-magnet capacity.
In the near term, companies could mitigate risk by accelerating diversification and friendshoring efforts. At the same time, sustained resource constraints could be treated as a catalyst for innovation and efficiency, including redesigning products and processes to help reduce dependence on scarce inputs.
China’s rare earth exports to the US and other global markets have declined since 2022
Manufacturing capability: Confront a growing vulnerability in defense electronics
Advanced manufacturing capability has become a growing vulnerability across aerospace and defense, particularly where defense requirements depend on fast-moving, commercially driven technologies. Long acquisition cycles, specialized certification requirements, and concentrated global production can leave critical components exposed to disruption well before systems ever reach deployment.
Semiconductors are a clear example. US Army data shows that roughly 70% of defense electronics become obsolete before deployment, driven in large part by commercial chip life cycles that move faster than defense programs can adapt.
Geographic concentration compounds the risk. Taiwan dominates advanced chip production, with roughly 90% of the world’s most advanced logic chip manufacturing capacity is concentrated there, much of it with a single supplier. One disruption can cascade across multiple programs.
The CHIPS and Science Act signals US intent to rebuild domestic capacity, but the most advanced capabilities, particularly packaging and integration critical to high-performance and secure defense electronics, are likely to take years to scale. In the meantime, traditional oversight models are struggling to keep pace with a manufacturing environment optimized for speed, scale, and commercial demand.
Reducing exposure will require deep collaboration across the ecosystem. Shared engineering resources, joint capital programs, longer-horizon contracts, and supplier development initiatives can help align defense needs with manufacturing realities. The companies that invest early in manufacturing capability, not just components, will likely be better positioned to ramp reliably as demand accelerates.
Mindshift
Collaboration beats owning everything.
Joint innovation hubs. Supplier co-investment. Long-term capacity agreements. These models may scale faster and cost less than vertical integration.
Supply chain visibility: Look past tier one
Supply chain risks often live where visibility is weakest. The US Department of Defense relies on more than 200,000 suppliers supporting advanced weapons systems and noncombat items. Many of the smallest players cannot absorb economic shocks.
AI-enabled supplier intelligence can map exposure several tiers deep and spotlight vulnerabilities before they turn into outages. In one defense manufacturing environment, multitier mapping revealed hidden financial and geopolitical risks buried deep in the supplier network, enabling leaders to intervene before disruptions reached production lines. In another industrial setting, real-time alerts and supplier impact assessments helped teams reduce disruption response times and unlock meaningful cost savings within months.
Companies can fuse this data with planning and risk models to help align decisions across engineering, procurement, and program management, shifting from reactive firefighting to proactive risk management.
Mindshift
Data is only useful when it triggers action.
Dashboards are table stakes. The next step is embedding real-time intelligence that helps prompt preemptive decisions.
Workforce: Strengthen and safeguard the talent pipeline
A&D requires specialized talent, and that workforce is shrinking. AIA-PwC workforce research shows attrition reaching nearly 13% in 2023 and nearly a quarter of the A&D workforce already at or beyond eligible retirement age. That looming retirement wave is colliding with shortages of skilled machinists, engineers, and rare-earth processing specialists. Security clearances tighten the pool further, and recent labor actions add friction. This is not only a talent problem but also a supply chain risk that can slow production, raise costs, and restrict the ability to scale.
Mitigating that risk means taking a more deliberate approach to the talent pipeline. Companies can expand collaborations with universities and technical schools, grow apprenticeship programs, and work more closely with government to streamline clearance processes. Just as important, they should reinforce retention strategies that can keep scarce skills in the workforce longer.
Geopolitical uncertainty: Turn policy into a competitive tool
Defense Industrial Tier 1 Suppliers
Trade friction and geopolitical tension are increasing costs and delaying production. In 2024, Chinese firms made up 9.3% of primary contractors in major US defense programs across nine critical sectors.4 Companies are reevaluating their global footprints to help reinforce supply chain resilience.
Government incentives are reshaping the economics of production. Organizations that understand how to leverage incentives under the CHIPS and Science Act, the Defense Production Act, and allied coproduction frameworks can accelerate time to value. Policy has become a crucial strategic lever that can reduce costs, speed qualification, and create new paths to reliable supply.
Mindshift
Policy alignment is now a competitive capability.
Industrial advantage belongs to companies that use each lever available—including incentives.
1 “China starts work on easing rare earth export rules but short of Trump hopes, sources say," Reuters, 9 November 2025; accessed via Factiva. 8 December 2025.
2 United Nations Statistics Division, UN Comtrade database, accessed February 19, 2026, https://comtradeplus.un.org/TradeFlow
3 Sydney J. Freedberg Jr., “Nearly one in 10 ‘Tier 1’ subcontractors to defense primes are Chinese firms: Report,” Breaking Defense, June 27, 2025
4 IBID
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