The U.S. military's supply chain risk called 'frightening'

New report from the Alliance for American Manufacturing questions the military's use of foreign semiconductor and telecom equipment

The U.S. military's reliance on foreign-made products, including telecommunications equipment and semiconductors, is putting the nation's security at risk by exposing agencies to faulty parts and to the possibility that producing nations will stop selling vital items, according to a new report from the Alliance for American Manufacturing.

The current level of risk to the U.S. military's supply chain is "frightening," said John Adams, a retired U.S. Army general and president of Guardian Six Consulting, the company that wrote the report. "We incur unacceptable national security risks as we outsource key sectors of the defense industrial base."

The U.S. government should instead encourage local manufacturing of military equipment and investment in U.S. high-tech industries that are vital to military agencies, the report said.

"The United States' national security is threatened by our military's growing and dangerous reliance on foreign nations for the raw materials, parts, and finished products needed to defend the American people," said the report, released Wednesday. "The health of our manufacturing sector is inextricably intertwined with our national security, and it is vital that we strengthen the sector."

As the U.S. sees growing cyberthreats from Asia, allowing critical defense products to come from "China and other potentially unreliable suppliers just doesn't make sense," said Scott Paul, president of the alliance, a coalition of U.S. manufacturing groups.

The report covers a wide range of military products and raw materials, including steel armor plates, lithium-ion batteries and night-vision goggles. But counterfeit and faulty commercial, off-the-shelf (COTS) semiconductors and telecom equipment made outside the U.S. are also hurting the U.S. military's ability to do its job, Adams said.

"These COTS parts often lack the quality control necessary to meet the rigorous standards we expect of our military equipment," he said.

Three U.S. lawmakers attended an alliance press conference and called for the U.S. government to encourage more domestic military manufacturing. Buying from overseas manufacturers may save some money in the short term but costs U.S. jobs in the long term, said Senator Chris Murphy, a Connecticut Democrat.

"Our administration should have a holistic view of cost," he said.

Semiconductors are used in several military systems, including missiles and rockets, helicopters and fighter jets, radar systems, and computers, the report said. The U.S. share of semiconductor fabrication has decreased from nearly 50 percent in 1980 to 15 percent in 2012, according to the report.

The U.S. is in danger of losing a technological edge as more semiconductor fabrication moves overseas, the report said.

In addition, foreign manufacturing raises quality concerns, the report said. "The presence of foreign-supplied counterfeit and defective microchips in both commercial and military products is also a widely acknowledged challenge," the report added. "Quality control becomes harder as the United States depends on more and more overseas facilities, defense contractors, and subcontractors for vital inputs."

The military uses telecom equipment in field radios, missile defense systems and unmanned vehicles, the report said. Production of mobile handsets is concentrated in a handful of countries, including China and South Korea, and networking equipment is "increasingly dominated" by Chinese companies, it said.

A rise of overseas manufacturing raises concerns about quality of the equipment, the report said. "Telecommunications supply chains are lengthy, extremely diffuse, complex, and dispersed, making it difficult to verify the authenticity of the purchased electronic equipment," it said.

The report suggested foreign telecom vendors could insert spy capabilities into their equipment. "Malicious hardware or software may be embedded in a product and used to intercept or interrupt the transmission of sensitive information," the report said. "Perhaps most alarming, is that malicious activities could potentially disrupt or disable the entire Internet by manipulating routers and switches."

The report recommended that military agencies apply existing regulations that give some domestic industries procurement preferences. The U.S. government should also develop domestic sources of key natural resources, and Congress should develop a strategy to strengthen the domestic defense industrial base, the report said.

A representative of TechAmerica, an IT trade group, questioned some of the conclusions in the report. TechAmerica has raised concerns about government procurement, but the trade group sees bigger problems with federal agencies too often buying the cheapest product instead of the better product, said Trey Hodgkins, TechAmerica's senior vice president for the global public sector.

Government agencies should focus more on quality issues and risks in their supply chains than on the origin country of the parts, Hodgkins said. "It's not where it's built, it's how it's built," he said.

Instead of focusing on country of origin, agencies should look at whether equipment is coming from a trusted vendor, he said.

Efforts to limit procurement to U.S. products don't "reflect the realities of the global economy we live in," Hodgkins said. "There are simply products that we use in the United States on a daily basis that you can't get in the United States."

In addition, efforts to significantly cut foreign procurements could lead to a trade war that hurts U.S. companies, he said.

Grant Gross covers technology and telecom policy in the U.S. government for The IDG News Service. Follow Grant on Twitter at GrantGross. Grant's e-mail address is

Copyright © 2013 IDG Communications, Inc.

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