As a Deputy Assistant Secretary of Defense for Industrial Base Policy, I saw firsthand the vulnerabilities of U.S. industrial sectors crucial to America’s military readiness and broader economic and national security.
Among the most concerning sectors was advanced batteries, indispensable to operating everything from automobiles to weapons systems (platforms and munitions), and vital national infrastructure.
The United States was perilously overdependent—and continues to be dependent directly or, in most cases, indirectly—on the People’s Republic of China for essential phases of battery supply chains: starting with mineral extraction, moving to processing, then making components, and concluding with battery assembly.
Data generated by Ark, the leading acquisition software platform, illustrates the depth of the challenge. Between 2020 and 2023, China’s exports to the United States of battery types and components—lithium, nickel cadmium, parts, and primary cells—swelled sevenfold, from roughly $2 billion to $14 billion.
At the same time, imports of lithium-ion batteries—those in highest demand for EVs and military systems—surged from $2 billion to $12 billion.
The U.S. Department of Defense faces the same battery supply chain challenges and vulnerabilities as the private sector, but with added complications and concerns. The U.S. military’s shift toward distributed operations, stealthier vehicles, survivable long-duration uncrewed systems, electronic warfare, and large constellations of small satellites have sharply increased the demand for advanced batteries. Yet, the unique requirements of many defense systems translate into low-volume sales and, thus, high per-unit production costs. This financial reality disincentivizes commercial entrants from investing in more secure battery supply chains to meet the needs of military customers.
The risks are clear and widespread. And we can’t fix everything all at once. So, setting priorities is paramount.
The place to start is the point of maximum Chinese control and, thus, maximum U.S. vulnerability. This is the critical but often neglected “upstream”—mineral extraction and initial processing—and early “midstream” phases, which fabricate the refined minerals into components like electrodes (anodes and cathodes), electrolytes, and separators.
China has relatively modest accessible mining deposits within its borders, but its state-subsidized companies control much of the extraction in central Africa and other mineral-rich regions. More significantly, China dominates the processing phase, which turns mined raw copper, nickel, manganese, cobalt, and lithium into commercially usable materials.
A handful of mostly Chinese companies master and control this complex phase. They form an intricate, capital-intensive chokepoint in the battery supply chain. Lithium batteries simply cannot come into existence without them.
Yet despite the seminal importance—and bottleneck vulnerabilities of these early phases of the battery supply chains–most U.S. policy action so far has focused further downstream, when cells and modules are fabricated into packs and then integrated into finished batteries.
Several new cell fabrication and battery assembly plants have opened within the United States in recent years, aided in part by federal subsidies and incentives. However, Ark’s data shows that fundamental battery materials and subcomponents needed to advance to the fabrication and assembly stage originate somewhere else, usually China.
Addressing the national battery problem, commercial and defense, requires speed and, above all, scale. Our situation calls for a wartime sense of urgency to fuel a do-what-it-takes approach seen in the Apollo space program and Operation Warp Speed for the COVID-19 vaccine.
The Administration has imposed stricter export controls on battery technologies and products that China could exploit. Congressional action has forced the executive branch to approach Chinese-linked investments and mergers in battery sectors with much greater skepticism than in the past.
The problem is that China has always found a way to co-opt, copy, buy, or steal the latest technology from the West, despite sanctions and restrictions. A better defense alone, trying to block and protect, will not suffice. The key is shifting production for the most important energy, transportation, and computing products steadily towards the United States, our allies, or some other assured sources.
Today, it is astoundingly difficult for the United States and similar countries to break into the mineral processing sector—and near impossible to compete solely on cost. Building a new environmentally clean processing facility from scratch costs several hundred million dollars and, in some cases, more than a billion dollars.
And that is if the construction is allowed to proceed at all. The permitting regulations associated with the National Environmental Policy Act (NEPA), which govern the building of anything of consequence in this country, effectively serve as an automatic brake to building a complete domestic supply chain for advanced batteries. However, the fears of pollution resulting from mineral processing—and resulting litigation—are mainly based on dated assumptions. Technology gains over the last four decades make it possible to minimize risk to nearby ecosystems, wildlife, or people.
Can America get out of this fix? Indeed, with sensible policies that are within our reach:
It is unsustainable for America to continue relying on our principal global competitor and military pacing threat for materials and products essential to national security. It will take years to unwind these vulnerabilities in our battery supply chains. But that challenge provides no excuse for failing to fast-track changes in tax incentives, tariffs, and laws. It only increases our obligation to act—and soon.