Chinese sanctions highlight supply chain vulnerabilities in U.S. Defense Industry
Recent Chinese sanctions targeting American drone manufacturer Skydio have underscored a persistent challenge for the U.S. defense sector: the entanglement of critical supply chains with Chinese entities. The move serves as both a warning and a call to action for U.S. companies to eliminate reliance on adversarial nations for key components, according to David Michelson, director of the autonomy portfolio at the Defense Innovation Unit (DIU).
“As a former American soldier, I don’t want Chinese things in the hands of my fellow soldiers. Unacceptable,” Michelson remarked during a recent Defense One event. His comments highlight the growing urgency within the Pentagon to ensure supply chain security in an era of geopolitical tension.
The Sanctions and Their Impact
China’s sanctions against Skydio were ostensibly tied to the company’s business with Taiwan, though Skydio has clarified that its only customer in Taiwan is the National Fire Agency. The sanctions have disrupted Skydio's ability to source batteries from Chinese suppliers, forcing the company to ration existing stock and accelerate the development of alternative supply lines. Despite Skydio’s assurance that its drones are otherwise free of Chinese components, the incident reveals how even indirect dependencies can create vulnerabilities.
Skydio’s drones are widely used by the U.S. military and allies like Ukraine, which is currently relying on hundreds of these drones in its defense against Russia. This international reliance magnifies the importance of robust, secure supply chains.
A Broader Supply Chain Challenge
The reliance on Chinese components in battlefield technology has long concerned the Pentagon. In 2020, the DIU launched its Blue UAS program, which aims to vet and scale commercial drone technology for Department of Defense (DoD) use while ensuring parts are sourced from trusted suppliers. However, batteries — a critical component in drone technology — remain a weak link.
Recognizing this, the 2024 National Defense Authorization Act (NDAA) has included Section 154, which mandates that by October 1, 2027, the DoD can no longer procure batteries produced by certain Chinese companies. This move is intended to sever ties with adversarial supply chains and bolster domestic manufacturing capacity.
Industry Responses
Some companies are already adapting to this shifting landscape. For instance, Silicon Valley-based Lyten recently acquired manufacturing assets from Swedish battery maker Northvolt. This acquisition will enable Lyten to produce up to 175 megawatt-hours of Lithium-Sulfur batteries annually, helping meet growing demand from defense, drone, and energy storage markets.
Lyten’s CEO and cofounder, Dan Cook, emphasized that this expansion aligns with the NDAA’s mandate to develop domestic battery production. “The speed of Lyten’s manufacturing expansion represents a timely move to assist the U.S. Department of Defense and the military services in complying with the 2024 National Defense Authorization Act,” Cook stated.
The Growing Importance of Drones
The situation also highlights a larger strategic priority: scaling drone production. Reflecting on lessons from Ukraine, Michelson stressed the need for sheer volume. “One of the things we’ve learned from Ukraine […] is you need a lot. You just have to have a lot, and the volume that we’re seeing is just in a very difficult place right now,” he said.
Ensuring that drones are readily available and free from adversarial influence will require a concerted effort to secure supply chains and ramp up domestic production. Only then can the U.S. military ensure that its technology remains resilient, reliable, and uncompromised.
Conclusion
China’s sanctions on Skydio are a stark reminder of the vulnerabilities inherent in globalized supply chains. For the U.S. defense sector, they signal the urgent need to prioritize domestic manufacturing and diversify suppliers. As the U.S. military continues to integrate advanced technologies like drones into its operations, ensuring the security of these systems will be critical to maintaining both operational effectiveness and national security.
