COVID-19 has disrupted the global economy over the past several months in ways we never imagined, virtually freezing entire industries and regional and local economies. As a designated essential business, the defense industrial base has been fortunate to witness limited economic impact as we continue to develop mission-critical technologies essential to the United States’ national security. However, that’s not to say that our industry has been immune from the economic effects of COVID-19.
In the weeks following the passage of the CARES Act in March, the U.S. Government – specifically Undersecretary of Defense for Acquisition and Sustainment Ellen Lord – acted swiftly to mitigate disruptions in the defense supply chain to ensure the sustained success of mission-critical programs. We applaud the DoD’s continued efforts to position our industry for a healthy future – but we also recognize that COVID-19 and the ensuing economic headwinds have shed light on an area in which we must continue to work to position ourselves for long-term success.
Now more than ever, we must address the entire ecosystem of the domestic defense supply chain, making every effort to increase security and resilience as well as increasing the investment in companies providing essential defense capabilities that are part of this chain. As I covered in my recent podcast, an important first step involves the continued onshoring of critical and highly technical functions, such as advanced custom microelectronics. As the U.S. DoD increasingly leverages commercial silicon technologies to make fast, affordable, secure and trusted defense capabilities, there is also an increased need for a dedicated focus on embedded security and cyber resilience. As a result, there is also an increased awareness and appreciation that supply chain security has a direct and material impact on our own national security.
By onshoring silicon manufacturing and production for defense applications to the United States and investing in U.S.-based companies along the extent of the defense supply chain, we can not only protect mission-critical technologies from potential unintended vulnerabilities, but also form the foundation of a robust and advanced domestic industry. We witnessed a similar landscape in 2014 following Lenovo’s acquisition of IBM’s x86 server business. Since that time, companies like Mercury have greatly increased their domestic portfolio of secure processing products.
For its part, the DoD has pledged an $80M USD investment in supporting and maintaining a globally competitive microelectronics industrial base in the U.S. This investment will “protect the domestic capacity to ensure radiation-hardened microelectronics testing capability, and key subcompacts such as substrates and wafer, are available for DoD weapon systems.”
At Mercury Systems, we’re doing our part to deliver the most advanced technologies for use by the U.S. defense community by maintaining our commitment to assuring our products utilize only trusted components. We pride ourselves on being the leader in making secure mission-critical technologies profoundly more accessible to aerospace and defense. For example, in October 2019, we announced a $15M investment in secure microelectronics through the addition of a new manufacturing line at our Phoenix, AZ, facility. The first product is expected to roll off our line less than 12 months later, marking the first physical manifestation of our own efforts to ensure a robust and sustainable defense supply chain and underscoring our commitment to Innovation That Matters.
We applaud Undersecretary Lord for her – and the entire Department’s – commitment to ensuring a robust domestic industrial base. Beginning with our long-term investments in secure microelectronics and carrying well into the future, we look forward to supporting and acting on the DoD’s mandate for a secure domestic defense supply chain and industrial base.
COVID-19 has been an undeniably difficult time for industries around the world, including the U.S. defense industrial base. But these past three months have also shed light on key structural issues within our industry that require change regardless of the external environment if we wish to be successful and sustainable in the long term. I look forward to continuing to work with Undersecretary Lord and the DoD, and call upon the rest of our peers to join us in building and sustaining a robust and resilient domestic defense supply chain for decades to come.
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