Supply clogs loom for defense industry

 

Taiwan tensions a boon for defense industry but supply clogs loom

 

At an earnings call of Lockheed Martin, the world's largest defense contractor, in mid-July, CEO James Taiclet spoke of a clear change in mentality among clients over the past three or four months.
 
At the beginning of the year, China's increased activity in the western Pacific was perceived as a "potential" concern, a watch item for the future, Taiclet said. But the Ukraine war has made the Pentagon and America's allies realize that the threat of war is real.
 
"The Pacific is on higher alert because of the statements and actions of China recently, not to mention North Korea. The value of deterrence has never been greater," he said. Events surrounding Taiwan following the visit of U.S. House Speaker Nancy Pelosi have only seemed to hammer that point home.
 
But while the prospect of selling F-35s, F-16s and the recently popular High Mobility Artillery Rocket System (HIMARS) excites Lockheed's top brass, supply chain constraints that have haunted the contractor since the start of the pandemic still linger.
 
Peers Boeing, Raytheon Technologies and Northrop Grumman have all said the same thing -- that engine parts, raw material, semiconductors and human labor are hard to secure.
 
New orders from international governments are likely to pour in in two or three years, after going through Foreign Military Sales paperwork that the U.S. requires. It looks to be a race against time to get supply chains back in shape by then.