Giants and the Myth of America’s New Defense Consolidation – War on the Rocks– warontherocks.com

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Excerpt:

America’s defense industrial base is in the throes of major change. For the first time in 40 years, major power war is a real possibility. Conflicts in Ukraine and Israel are providing a harrowing glimpse of what that war might look like. Technology is evolving at a dizzying pace. Instead of peacetime efficiency, governments are prioritizing wartime surge capacity. The “China shock” and COVID-19 have destabilized global supply chains.

Amid these daunting realities, a new generation of defense technology companies has emerged. Anduril Industries — which was founded in 2017 and which I joined in 2020 — is one of them. Of course, defense technology companies aim to make money. But these companies also aim to disrupt and transform American defense by changing culture, attracting new and better talent, harnessing commercial technologies, championing software, bolstering competition, reforming acquisition practices, and more. Only time will tell if they are successful. But perhaps not as much time as one might think. As more defense technology companies scale to compete with traditional defense primes, the contours of a new defense industrial base are emerging.

Changes to this scope, speed, and scale naturally lead to questions, anxieties, and fears. To wit, these pages recently carried a warning about an impending “new era of defense giants.” According to this view, defense technology companies are engaging in corporate acquisitions that mirror the defense industry consolidation carried out by the traditional defense primes after the end of the Cold War. This new consolidation is hurting small businesses and making America’s defense industrial base less diverse, resilient, and innovative.