It raises the question of how the renewal will play out in terms of economic development at the state and local level. The initial results of the chip onshoring movement suggest that not all communities will benefit equally. Most of the new chip plants announced in the U.S. are going to Arizona and Texas, for example, although Columbus, Ohio, had a major win with its Intel factory.
This suggests that states and cities will need to work hard to position themselves to be part of this movement. As a Midwesterner, I’m particularly interested in how our region can participate in this. Detroit was the “arsenal of democracy” in World War II, but can it and the rest of the Midwest be relevant in today’s defense environment?
U.S. Rep. Jim Banks of northeast Indiana has been trying to focus on this question in his district. For the last three years he’s hosted an annual defense summit in Fort Wayne that has attracted key players from the emerging defense complex.
Indiana may not be the first place that comes to mind on the subject of defense, but there are already notable defense production centers in the state. One of the most important is the Navy’s NSA Crane facility in southwest Indiana, which employs 3,800 people at a center specializing in high-tech electronic warfare. Humvees are manufactured in Mishawaka. Fort Wayne in Banks’ district has facilities owned by Raytheon, BAE Systems, and L3Harris. “In Fort Wayne,” he says, “we have a defense manufacturing base that we’re really proud of, but that we hope to build upon.” So while people may first think of automotive manufacturing in the Midwest, there actually is a defense industrial presence as well.
With high-tech companies like SpaceX, Palantir, and Anduril Industries becoming players in the national security space, there’s been a shift in mindset in Silicon Valley towards investing in the defense industry. This is great news for America when it comes to competition with countries like China and Russia, but not necessarily for the Midwest, which hasn’t traditionally been on Silicon Valley’s radar. Indeed, a lot of the defense startup world is concentrated in El Segundo in the traditional military production hub of Los Angeles.
Bridging the gap between the Midwest and Silicon Valley is part of what Banks hoped to accomplish with his defense summits. After becoming exposed to these new defense innovators while co-chairing a Future of Defense Task Force, he says, “It occurred to me that in Fort Wayne and Indiana we make things. Innovation certainly occurs here, but we’re not Silicon Valley. If I could bring venture capital fund investors and defense innovators like Palmer Luckey to Fort Wayne, they’re going to love it.”
After coming to the defense summit, Luckey’s Anduril purchased Adranos, a rocket engine startup with a fuel manufacturing facility near Purdue University in West Lafayette. Luckey also met the new leadership of AM General, which makes Humvees, and they began a conversation at that first defense summit about how to propose autonomous Humvees to the Pentagon. “That’s the kind of synergies and connection we’re trying to foster,” Banks says.
The role of Purdue, a highly rated Indiana engineering school, and similar universities elsewhere in the Midwest is critical to realizing defense ambitions. These schools produce the kind of labor force, research and facilities needed for high-tech defense work. Venture capitalist Joe Lonsdale, who previously co-founded Palantir, was a speaker at the conference and noted, “Purdue’s doing all the right things.”
Lonsdale also suggests that traditional business-friendly policies could play a role in attracting new defense manufacturing. He says states should “make it easier through regulation to do advanced manufacturing here. One of the reasons a lot of businesses have outsourced a lot of things to China and around the world is that we made everything in America a lot more expensive with red tape.”
How things play out with the renewal of our defense industrial base is uncertain. But there’s widespread agreement action needs to be taken. If the CHIPS Act is any guide, other such actions could result in major economic investment in diverse parts of this country. States that want to end up as destinations for new investment need to be working now to position themselves correctly. How exactly to do that isn’t certain. But raising the profile of defense and building connections to the defense world, as Banks’ defense summit has been doing, is a good start.
Governing’s opinion columns reflect the views of their authors and not necessarily those of Governing’s editors or management.
