Re-industrial revolution for defense

In the last 40 years, U.S. Aerospace manufacturing employment has waned from its peak of 851K in 1989 to about half those levels today. While the workforce has declined, Aerospace manufacturing output held strong, thanks to increases in industrial automation, process improvement and a seasoned workforce. However, the COVID-19 pandemic would buck this trend. Factory lines across Aerospace & Defense companies globally went cold, and when demand roared back, cracks across the industry were exposed. The ripple effects from the pandemic are still felt today and felt in an environment where meeting this demand carries the weight of national security, global trade and America’s global influence. It’s our view that America’s Aerospace & Defense industrial base is primed for a “Re-industrial Revolution,” and this time the forges will be reignited with a digital start.

The U.S. and its allies have noted considerable challenges, including brain drain from retirements, high labor churn leading to less experienced labor, rising costs, inadequate facilities, munitions shortages and raw materials shortages. These constraints were highlighted by the GAO in their 2025 annual major weapons program assessment. The assessment painted a bleak picture, noting the acquisition processes used to deliver capabilities in the past are too slow to address emerging threats of the future, especially with China intending to have a “world class” military by the end of 2049. Meanwhile, the environment is intensifying, the U.S. is mobilizing re-shoring efforts and must ramp up production on everything from munitions to ships. With these constraints, those taking software/digital-first initiatives have proved to be more resilient. In the past year, we’ve seen notable wins from those taking this approach. Some examples include the first software company to be named the Prime on a hardware contract (TITAN program), new entrants winning a position on the CCA program, the Secretary of the Air Force flying in a fully autonomous fighter and the Department of Defense splitting hardware and software awards on singular programs. We look at these examples of those embracing the digital-first “re-industrial revolution” and do not see the trends slowing. As the GAO noted, “Weapon systems are increasingly cyber-physical — complex networks of hardware and software — with software driving programs more than ever before.”

In the world of commercial aerospace, disruptions have seemed nearly endless. While grappling with the same labor constraints as Defense, the commercial industry has also suffered from labor strikes, cyber incidents and multiple quality escapes varying in degree from minor lapses to borderline existential. While the digital-first approach is no silver bullet, we again have seen many companies benefitting from embracing this ethos. The digital-first approach has manifested in companies realizing improved quality, yields and output, which doesn’t always require major investments in new machines, factories or mass hiring. Instead, utilizing a “digital company twin” approach is aiding executives with data-enriched informed views on their supply chain, workforce and faster decision-making. In the commercial aerospace industry, we look at the success from aircraft OEM programs like “Skywise,” which enables predictive maintenance for more than 11,000 aircraft across more than 40,000 users. Other prominent examples are from aircraft engine OEMs using artificial intelligence to identify, capture and record engine inspections, as well as maintain digital records of an engine/parts history. Others have also benefited from this approach, gaining the ability to pinpoint supplier weak points, track results vs. sandbagging and even advantageously take price-leveraging dynamic pricing models to be dynamic in response to demand levels. We see these approaches as only the start of commercial aerospace better embracing technology and working through the constraints that come with a lower-volume industry. Additionally, we see those adapting their processes early as building an enduring advantage in an ever-digital world.

The rise of America’s industrial growth transformed American society and brought a prosperous middle class and influence on the world stage. Prior industrial revolutions of mechanization, mass production, automation and robotization have come with their own unique challenges — all have ushered in new waves of American entrepreneurs, inventors, engineers and prosperity. While the Aerospace & Defense industry may not be the fastest adapter, it’s our view that adaptions in this industry have the most lasting and far-reaching consequences. We anticipate the “re-industrial revolution” is an opportunity for the Aerospace & Defense industry to once again rise to the challenge and bring America back to its roots.