Reps. Mike Gallagher (R-Wis.), the chairman of the House Armed Services Committee’s (HASC) cyber, information technologies and innovation (CITI) panel, and Rep. Ro Khanna (D-Calif.), the HASC CITI panel’s ranking member, called out corporate refusal to testify at a Sept. 20 hearing focused on what DoD needs to do “to turbocharge our innovation enterprise” and “defibrillate a sclerotic defense industrial base,” in Gallagher’s words.
Gallagher said that he is inviting Deputy Defense Secretary Kathleen Hicks to testify at the next CITI hearing on DoD’s Replicator initiative.
The CEO of defense prime contractor Lockheed Martin [LMT], James Taiclet, and the CEOs of two non-primes, Brian Schimpf of Anduril Industries, and Richard Jenkins of Saildrone, were witnesses at the Sept. 20 hearing, but Gallagher said that CITI had envisioned testimony from another defense prime contractor.
“It’s shocking to learn this, Mr. Taiclet, that not all of your peers were eager to testify before Congress,” Gallagher said at the start of the hearing. “Some, in fact, told us that some of the dates we offered didn’t work. We then asked them to name whatever date worked for them, and they said, ‘Just kidding. We’ll only testify before the full committee.’ But they have refused previously to do just that. I’m not going to name names, but you know who you are, and others are just nervous about having a discussion with Congress.”
Moving away from Chinese supply–“figuring out how to decouple in a smart and selective way” on items such as rare earth elements, “life saving drugs,” and batteries–is essential for U.S. national security, Gallagher said.
Khanna revealed that it was RTX that was to be the second defense prime at the hearing. “I have questions about Raytheon’s involvement in China that I want to get answered, what they’re manufacturing there, if anything, and I also have concerns about any of our reliance on China or overseas defense production,” Khanna said.
Defense Daily will add any response from RTX on the Sept. 20 CITI hearing and why the company declined to participate.
RTX CEO Gregory Hayes told the Financial Times (FT) in June that RTX has “several thousand suppliers in China and decoupling . . . is impossible.”
“We can de-risk but not decouple,” Hayes said at the time. “Think about the $500 billion of trade that goes from China to the U.S. every year. More than 95 per cent of rare earth materials or metals come from, or are processed in, China. There is no alternative.”
Taiclet told the CITI hearing on Sept. 20 that Lockheed Martin tries to eliminate all parts and materials from China but receives waivers from Federal Acquisition Regulations to source some Chinese small components and materials, such as “rare earth elements in the materials stage, generally, [that] cannot be spoofed, hacked, used for cyber.”
“The challenge with the U.S. supply base is that it’s often very fractured,” Schimpf testified on Sept. 20. “When you look at where a lot of the components and pieces come from, they’re frequently made by small companies, many of whose owners are entering the age of retirement. The U.S. industrial base needs active development, active investment, and there are significant capabilities that do exist, frequently in more of the commercial manufacturing world. Those have often not been what’s supplying technology to the defense base.”
“Our view has been to go above and beyond removing China from the supply chain,” he said. “We have basically eliminated nearly every part possible that we can get away from, gone above and beyond to source everything we can from U.S. and allied manufacturing sources, but it’s a significant challenge, and often the capacity within the U.S. does not exist. This has taken significant investment on our part, either to bring things in house or find and invest in those partners that can scale what is needed.”
Schimpf suggested that DoD and Congress use the Defense Production Act to help restore needed defense industrial capacity in the U.S.
The Biden administration’s enactment of the CHIPS Act is to re-shore the semiconductor manufacturing base, and domestic “companies are making massive investments in battery technology” because of new U.S. subsidies, Schimpf said.
On Sept. 19, DoD said that the Manufacturing Capability Expansion and Investment Prioritization office under Assistant Secretary of Defense for Industrial Base Policy Laura Taylor-Kale has awarded Kentucky’s E-VAC Magnetics, LLC (E-VAC), part of German company Vacuumschmelze (VAC), $94 million to start high-volume domestic production by 2025 of rare earth permanent magnets, used in the Lockheed Martin F-35 fighter, drones and other defense systems.