Pentagon lifts lid on latest defence industrial strategy to counter peer competitors

A central pillar of America’s long-held tactical and strategic advantage throughout the 20th century has been the raw and often unbridled capacity of its industrial and economic potential.

This came to the fore during the Second World War when American industry rapidly became the “Arsenal of Democracy”, ending the war responsible for three-quarters of global economic and industrial output, paving the way for much of the post-war economic boom, which firmly established America as the world’s economic powerhouse.

However, by the 1970s, America’s industrial power had waned somewhat, challenged by the re-emerging might of industrial powers like Japan and Germany and hobbled by the oil shocks of the late 1970s.

This would eventually give way to the liberalisation and proto-globalisation of the Reagan years, ultimately leading to the collapse of the Soviet Union and solidifying the US as the sole global superpower.

However, decades of unrestricted globalisation have effectively presided over a hollowing out of America and, indeed, more broadly, the Western world’s industrial base, now leaving the US and its partners, including Australia scrambling to revive, reinvigorate and modernise economic sectors otherwise on life support.

The defence industry is at the forefront of this reinvigorated push, particularly as the growing number of peer and near-peer competitors, with mounting great power competition once again characterising the global environment being spearheaded by the immense economic might of the People’s Republic of China.

In response to the mounting competitiveness and concerning rate of Beijing’s own militarisation over the past decade and a half, the Pentagon officially launched an updated National Defense Industrial Strategy: Implementation Plan for 2025 (NDIS), which outlines an ambitious plan to reinvigorate America’s defence industrial base and supporting workforce.

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At the core of this new implementation plan is six key initiatives, namely:

• Implementation initiative 1: Indo-Pacific deterrence.
• Implementation initiative 2: Production and supply chains.
• Implementation initiative 3: Allied and partner industrial collaboration.
• Implementation initiative 4: Capabilities and infrastructure modernisation.
• Implementation initiative 5: New capabilities using flexible pathways.
• Implementation initiative 6: Intellectual property and data analysis.

In order to deliver on these implementation initiatives, the Pentagon’s NDIS states: “In fiscal year 2024 (FY 2024), DOD injected US$74.6 billion (AU$114.06 billion) toward modernisation of the defence industrial ecosystem in critical areas. These critical investments are also evident in the President’s FY25 budget request (FY25 PBR).

“While the FY24 budget and FY25 budget request are clear signals of the department’s prioritisation of the NDIS vision, additional investment will be required in future budget cycles for the modernisation and expansion objectives detailed in the strategy.”

With this additional capital in mind and the key implementation initiatives identified, what exactly does it all mean for the US defence industrial base, and, given an increasing focus on allied partnership, how can Australia capitalise?

Enhancing Indo-Pacific deterrence and production and supply chains

The Indo-Pacific Deterrence Initiative (IPDI), or the Pacific Deterrence Initiative (PDI) as it was originally conceptualised, is at the forefront of America’s efforts to consolidate, modernise and prepare its armed forces deployed across the region.

A central focus of this IPDI/PDI is the forward deployment and prepositioning of key platforms, materiel and consumables throughout the region at key hubs in Japan, Guam, South Korea, and Australia.

At the core of this disaggregated approach is the distributing US forces across the region and away from single points of failure in an effort to offset adversarial advantages in ballistic and cruise missile numbers and a host of other capabilities; however, this strategy isn’t without its setbacks.

In this case, it is namely the logistical constraints presented by the vast size of the region and the additional complexity of the maritime lines of communication combat operations and the global economy depend upon which crisscross the Indo-Pacific.

As an element of responding to this, the Pentagon has sought to shorten the production and supply chains that underpin American military muscle, particularly in the aftermath of the COVID-19 pandemic, Russia’s invasion of Ukraine and the fall out of the ongoing conflict in the Middle East.

Underpinning both the Indo-Pacific deterrence and production and supply chains implementation initiatives is a push for what the NDIS details, as “fair and effective market mechanisms that bolster the US allied, and partner defence industries and overall economic stability are critical in supporting broader integrated deterrence within the Indo-Pacific region. Robust economic activity supports increased and growing military capabilities and capacities, meaningfully contributing to economic deterrence.”

Reliable, sustainable and sizeable stores of key munitions and missiles are at the forefront of this push and will require greater integration and participation by the US and its key regional allies, Australia in particular, given the nation’s growing investment in the Guided Weapons and Explosive Ordnance Enterprise (GWEO) that will position the nation as a central pillar of aggregated regional deterrence capabilities.

This is reinforced by growing efforts to expand the submarine industrial base (SIB) among the AUKUS partners, again with a specific focus on Australia’s own latent submarine industrial base to enhance the capacity and capability of America’s own SIB in order to meet the growing demands of Australia’s nuclear-powered submarine fleet and the US Navy’s own requirements.

In order to deliver these priorities, the NDIS states: “This partnership involves collaboration among the US and its allies to address common acquisition and sustainment challenges, such as co-development, co-production, and co-sustainment of defence technologies.”

Building on this, the NDIS adds: “For supply chain visibility to work, there must be trust and collaboration between the company and its customer, as the solution hinges on the ability to partner with vendors to track supply movement. An end-to-end supply chain visibility solution aims to reduce supply chain risks, improve lead times, and identify problems in product security, quality, and shortage along the chain.”

This brings us to the growing importance of allied and partner industrial collaboration and capabilities and infrastructure modernisation that will provide the depth of platforms, consumables, and also the maintenance and sustainment capabilities that build resilience into the forces available in the Indo-Pacific.

Allied, partner industrial collaboration and critical capability and infrastructure modernisation

While much of the industrial collaboration focus has been dominated by the big-ticket items under AUKUS Pillars I and II, particularly between the US, Australia and the United Kingdom, the US has sought to enhance the collaboration and integration of allies and their respective industrial bases.

As a powerful example, US Navy Secretary Carlos Del Toro has actively engaged with Japanese and South Korean shipbuilders to provide expanded maintenance and sustainment capabilities to US Navy ships in the Indo-Pacific and actively courted their investment in the once mighty US shipbuilding industry domestically.

To a lesser extent, Australia has also sought to capitalise on these relationships, leveraging relationships with South Korea in particular, through the multibillion-dollar LAND 400 Phase 3 and LAND 8116 programs won by Hanwha, establishing the company’s secondary supply point outside of the range of North Korea’s tactical and strategic arsenals.

Australia’s recently expanded Guided Weapons and Explosive Ordnance Enterprise (GWEO) also seeks to increase Australian and allied supplies of key war stocks and related consumables, provides another example of the individual parts already beginning to coagulate and recognises the shifting trends towards aggregated industrial capabilities.

So the framework is already existing between the partners, how the US NDIS aims to expand on deliver this capability provides further incentive to get the ball rolling within a relatively short timeline will be the most critical.

In order to deliver this, the NDIS highlights: “The NDIS underscores production diplomacy as a key aspect of bolstering the defence ecosystem. Co-development and co-production of major defence platforms and critical weapons systems with partners and allies is key to that effort.

“Utilising global production capabilities to manufacture US and foreign products domestically and in allied and partner nations is integral to building a modernised, resilient defence industrial ecosystem and to enabling interoperability and interchangeability.”

To deliver this, the NDIS and Pentagon have highlighted a number of priorities, including the seamless transfer of patents and intellectual property through royalty-free licensing agreements between partners, removing or alleviating foreign military sale (FMS) bottlenecks and increasing the collaboration with like-minded partners to expand the global production of key munitions and missiles.

The NDIS states: “Defense industrial mobilisation will increasingly become a key priority for allied and partner industrial collaboration due to evolving geopolitical threats, technological advancements, and the changing nature of warfare.”

Rising geopolitical tensions, particularly in regions like eastern Europe and the Indo-Pacific, have prompted nations to focus on strengthening defense capabilities. Industrial collaboration will be essential in ensuring that allies can rapidly mobilise to deter or respond to threats.”

Going further, the NDIS states: “The ability to respond quickly and scale production will be increasingly important in future conflicts. Industrial collaboration will ensure that nations can rapidly ramp up production of critical assets like munitions and drones for deployment. Strengthened industrial collaboration also serves as a deterrent, signalling to adversaries that allies can quickly mobilise their collective defence capabilities when needed.”

All of this feeds into the growing importance of critical infrastructure as an enabling capability and the modernisation of infrastructure and the more traditional capabilities to respond to peer and near-peer challengers.

A major challenge not just for the US military but also for many US allies both in the Indo-Pacific and indeed across the globe is the proliferation of Cold War-era platforms that needed replacement or significant modernisation to remain effective in the modern environment.

This challenge is also faced by infrastructure, particularly in the Indo-Pacific, where significant infrastructure hubs have not been modernised given the global responsibilities and European and Middle East focus of the US, resulting in major vulnerabilities across critical military and industrial infrastructure.

The NDIS articulates this, stating: “To achieve resilient supply chains and dynamic production, there needs to be adaptability, responsiveness, and scalability in the DIB. This will ensure that the DIB can securely produce the products, services, and technologies needed now and in the future at speed, scale, and cost. In addition to this, we also need acquisition strategies that strive for dynamic capabilities while balancing efficiency, maintainability, customisation, and standardisation in defence platforms and support systems.”

Going further, the NDIS adds: “Modernising public and private critical capabilities and infrastructure bolsters US, ally, and partner defence industries, their underlying commercial industries, overall economic deterrence, and military capabilities and capacities ... The Defense Production Act plays a crucial role in shaping national defence preparedness programs and enhancing the domestic industrial base. As we look to the future, reauthorising and reinventing DPA will be essential. DPA, which is up for reauthorisation in 2025, needs procedural and policy changes to better fulfil its existing mission.”

Final thoughts

Without sounding like a broken record, it is important to both understand and accept that Australians are going to be asked to confront and accept a number of uncomfortable realities in the coming years.

First and foremost, Australians will have to accept that while the world is increasingly becoming “multipolar”, the Indo-Pacific, in particular, is rapidly becoming the most hotly contested region in the world, and this will fundamentally reshape the position, role and security of the nation.

This period of multipolarity competition has been underpinned by the emerging economic, political, and strategic might of powers like China, India, Pakistan, Thailand, and Vietnam, and the established and re-emerging capability of both South Korea and Japan, in particular, are serving to create a hotbed of competition on our doorstep.

Second, both the Australian public and our policymakers will have to accept that without a period of considered effort, investment and reform, or as I like to colloquially refer to it, our “Rocky montage” moment, current and future generations of Australians will be increasingly impoverished, living in a nation pushed around by the region’s now rising powers.

Recognising this array of challenges and opportunities, both the Australian public and its policymakers need to look beyond the myopic lens of short-termism that has traditionally dominated our diplomatic, strategic, and economic policy making since Federation.

Again, as I have said multiple times before, we need to see Australia begin to play the long game to fully capitalise on the opportunities that are transforming the Indo-Pacific.

The most important question now becomes, when will we see a more detailed analysis and response to the challenges and opportunities facing Australia, and when will we see both a narrative and strategy that better helps industry and the Australian public understand the challenges faced and opportunities we have presented before us?

As events continue to unfold throughout the region and China continues to throw its economic, political, and strategic weight around, can Australia afford to remain a secondary power, or does it need to embrace a larger, more independent role in an era of increasing great power competition?

In the second part of this short series, we will take a look at the remaining implementation initiatives that underpin the success of the 2025 implementation plan for the Pentagon’s National Defense Industrial Strategy.

Get involved with the discussion and let us know your thoughts on Australia’s future role and position in the Indo-Pacific region and what you would like to see from Australia’s political leaders in terms of partisan and bipartisan agenda setting in the comments section below, or get in touch at This email address is being protected from spambots. You need JavaScript enabled to view it. or at This email address is being protected from spambots. You need JavaScript enabled to view it..