Europe’s DefenceTech bottleneck

Europe's weapons factories are expanding rapidly, covering 7 million square meters of new industrial development, according to reports. This represents "rearmament on a historic scale" as governments worldwide invest heavily in building manufacturing capacity for advanced technologies like semiconductors and quantum systems. However, policymakers often assume that supply chains will scale along with increased factory production, which may not always be the case.

Advanced industries can reach a point where demand for critical parts, materials, or skills outstrips supply, causing delays in production despite factories being ready to ramp up. To address this issue, governments must consider three categories of markets: mature industries with established supply chains, developing markets where coordination and certainty can foster growth, and emerging strategic technology markets where companies are scaling the market rather than within it.

In the latter case, suppliers may lack the capital, equipment, or confidence to expand before demand is secured. Policymakers must tailor support for suppliers, shared facilities, and long-term orders to help young companies develop their supply base. Each advanced system consists of components at different stages of industrial maturity, requiring tailored sourcing approaches.

Governments should identify components that can be easily sourced, those needing long-term coordination, and those requiring the creation of an entirely new industrial base. Rather than measuring industrial success by the number of factories built, governments should focus on whether the supply base behind the factories can sustain production, even during crises.