China Has Scale. Can America Catch Up?
Timestamps are as accurate as they can be but may be slightly off. We encourage you to listen to the full context.
Podcast Summary
This episode of the Ben and Mark Show features a deep dive into America's manufacturing crisis and defense readiness with Brian Schimpf, co-founder and CEO of Anduril, and Chris Power, founder and CEO of Hadrian. The conversation reveals a sobering reality: (00:03) Russia is currently outproducing NATO on artillery munitions, and the US runs out of munitions and missiles in just 6-7 days during war games, taking 2-3 years to replenish supplies. The guests break down how decades of outsourcing manufacturing has left America vulnerable, while China has built massive production capacity and anti-access systems that challenge traditional US military strategy. They discuss solutions including automation, strategic industrial policy, regulatory reform, and the critical need for large-scale government offtake agreements to rebuild America's industrial base.
- Core theme: The urgent need to rebuild US manufacturing capacity for national security, combining technological innovation with industrial scale production to compete with China's massive manufacturing advantage.
Speakers
Brian Schimpf
Co-founder and CEO of Anduril, a defense technology company focused on autonomous systems and next-generation defense platforms. Schimpf has extensive experience in defense technology and has been at the forefront of discussions about America's defense industrial base modernization and the need for mass production capabilities in modern warfare.
Chris Power
Founder and CEO of Hadrian, a company building advanced manufacturing capabilities with high levels of automation. Power specializes in precision manufacturing and has deep expertise in factory automation, supply chain optimization, and the challenges of rebuilding American manufacturing competitiveness against global competition, particularly from China.
Key Takeaways
Technical Superiority Alone Is Insufficient for Modern Warfare
The US defense strategy has relied heavily on having technologically superior but low-quantity weapons, based on Gulf War experiences. (01:37) However, Ukraine proved that mass production matters and that advanced weapons without industrial capacity don't provide effective deterrence. Modern conflicts are protracted and industrial in scale, where the amount of materiel you can produce becomes the decisive factor. (02:39) As Schimpf notes, "mass really does matter" - you need both technical superiority and the ability to produce at scale. A small number of exquisite weapons won't win a conflict, as Ukraine definitively showed the world.
America Faces a Critical Skilled Manufacturing Labor Crisis
(09:24) The manufacturing expertise crisis runs deeper than just moving jobs overseas - it's fundamentally about skilled labor replacement. Most highly skilled workers in manufacturing domains are around 62 years old, creating an urgent succession problem. When companies like Anduril search for manufacturing executives, they find virtually no tier-one American-born candidates available. The solution requires high levels of automation to make jobs simpler so new workforces can ramp up quickly, combined with strategic talent development initiatives.
Supply Chain Vulnerabilities Create Strategic Dependencies
China has strategically controlled critical supply chain components, particularly rare earth elements and processing capabilities. (13:30) They've now banned the export of magnet-making technology, treating it as restricted national technology. During conflicts, it's often not the obvious high-tech components that become bottlenecks - COVID showed that power regulators and analog components can constrain entire industries. (18:34) The US has very little industrial independence compared to China, which has minimal choke points and greater ability to continue production during conflicts.
Government Offtake Agreements Are Essential for Manufacturing Scale
The fundamental difference between successful data center construction and struggling factory development comes down to financing structures. (36:22) Data centers benefit from long-term offtake agreements that enable massive CapEx investments, while defense manufacturing suffers from one-year contract cycles that make long-term capital investment impossible. (38:01) The government needs to create large offtake agreements for manufacturing capability and capacity, similar to how power plants and data centers operate with 30-year agreements, to unlock private capital for industrial expansion.
Strategic Industrial Policy Must Leverage America's Capital Market Advantages
Rather than direct government grants, America should utilize its superior capital markets through government-backed loans with shared risk. (42:52) Banks would underwrite loans with government backstopping to lower interest rates and absorb default risk, keeping all parties accountable while leveraging what the US does best. (45:12) The US capital market system is not just 10% better than competitors - it's several thousand times better, enabling unprecedented capital-intensive projects that even governments can't match.
Statistics & Facts
- (00:03) Every war game the US runs shows America running out of munitions and missiles in 6-7 days, with a 2-3 year timeline to replenish supplies. This was mentioned by both speakers as a critical vulnerability in US defense readiness.
- (07:54) Apple trained approximately 28 million Chinese people in advanced manufacturing skills and invested $50-60 billion in CapEx - more than the Marshall Plan - to build China's manufacturing capabilities, according to Patrick McGee's research.
- (48:46) China has approximately 250 times the shipbuilding capacity of the United States, and thousands of times greater production capacity for weapons and drones, creating a massive industrial advantage in any potential conflict scenario.
