Consolidation vs. Reinvention: Modernizing America's Precision Manufacturing Base

For decades, the U.S. built the world’s most advanced defense systems with the world’s most sophisticated manufacturing base. Today, that industrial foundation is eroding and the tools and processes used to build missiles, jets, drones, and space vehicles have stagnated, even as our geopolitical rivals modernize and scale at breakneck speed.

The Aging Core of U.S. Manufacturing

The U.S. precision manufacturing sector is one of the most critical, and fragmented, parts of the national industrial base. Most of the precision parts that make up our defense systems are built via a network of nearly 25,000 machining shops, composite fabricators, and forging houses across the country, the vast majority of which are small, family-owned businesses. These shops form the hidden backbone of countless industries, from aerospace and defense to automotive, medical devices, and energy. And yet, most of these businesses are operating with minimal digital infrastructure, decades-old equipment and paper-based quality tracking systems.

The vast majority of America’s precision manufacturing shops are under 50 employees. They are experts in what they do, but they were never built to operate in today’s environment: high-mix, low-volume production, exotic materials, zero-margin-for-error tolerances, and global supply chain shocks. Most lack the digital infrastructure to track quality, prove compliance (AS9100, ITAR, NADCAP), or deliver at the speed modern aerospace programs require.

The challenges are compounded by a severe skilled labor shortage. The average age of a U.S. worker in a precision manufacturing shop is now in the mid-50. As they retire, their institutional knowledge disappears. New workers aren’t entering the field fast enough, and the few who do face outdated tools, analog processes, and limited training.

Why Reindustrialization Can’t Wait

The future of the U.S. Aerospace and Defense sector depends on our ability to build, inspect, and certify highly complex parts. Hypersonic systems, tactical drone swarms, space vehicles, missile defense systems are all crucial modern defense systems, many of which depend on a long tail of machine shops that can no longer keep up.

China is already ahead in many of these domains. Its industrial strategy pairs automation investment with vertically integrated factories capable of compressing production cycles to weeks, not months. By contrast, a single U.S. defense system might rely on ten different shops, to produce ten different parts on ten different timelines.

The Strategy: Consolidation and Reinvention

Over the next decade, the US manufacturing base needs to go through a massive structural overhaul.   There are two paths forward and we need both.

Consolidation of Legacy Infrastructure

One promising approach is the acquisition and modernization of existing precision manufacturing shops. Companies like Amca and Re:Build Manufacturing are spearheading this strategy by rolling up fragmented, underutilized shops into integrated, digitally-enhanced platforms.

This is a unique spin on a traditional private equity strategy.  Rather than simply extracting cost and realizing economies of scale, these companies are infusing automation and AI technologies  into legacy operations: adding real-time scheduling software, implementing standardized digital quality assurance tools, onboarding compliance automation platforms, and upgrading CNC and systems across the network. The result is a network of small shops that can act like a large, agile, compliant supplier, one with more consistent lead times, and higher throughput.

Building brand new, AI native advanced manufacturing facilities is strategically important, but it would be an oversight to simply ignore the 25,000 precision manufacturing shops that already exist. By acquiring and upgrading them, you can unlock latent capacity already distributed across the country, especially in key defense manufacturing regions. This approach also has a cultural and political advantage: it allows for soft transitions. Owners nearing retirement have a path to exit and employees don’t have to be replaced. Instead, they’re supported with better tooling, training, and systems that augment their capabilities and reduce the need for tribal knowledge passed down. 

Many small precision manufacturing shops are technically capable of fulfilling aerospace and defense orders, but often lack the required certifications, digital infrastructure, and compliance systems to actually win and execute those deals. There is also an interesting opportunity to provide independently operated shops a turnkey compliance and traceability platform that integrates seamlessly with existing shop-floor tools—offering AS9100-ready quality management, ITAR documentation workflows, and real-time digital part traceability out of the box. By automating inspection records, material cert logging, and audit prep, the platform would reduce the certification burden and accelerate onboarding for defense and aerospace contracts. 

 Frontier Factories Built from the Ground Up 

In parallel, a new generation of startups is reimagining the factory itself, building vertically integrated, automation-native manufacturing platforms from the ground up. Hadrian stands out as a leading example, developing a network of highly automated, software-defined precision machining facilities built to produce flight-critical components for the space, defense, and aerospace sectors. Unlike traditional machine shops where quoting, programming, machining, inspection, and documentation are siloed across fragmented workflows, this approach integrates each function into a unified, software-orchestrated system designed for speed, compliance, and scalability - all with reduced human intervention.  Machina Labs follows a similar philosophy, leveraging AI-driven robotics to enable flexible metal forming, operating at the convergence of composite manufacturing and forging technologies.

In contrast to the traditional model where a single defense system build might be distributed across ten or more specialized shops, these startups aim to consolidate the role of multiple shops under one roof. The first step is creating advanced manufacturing facilities that integrate core processes, such as composites, forming or machining, with inspection and certification. From there, the model can evolve into a fully verticalized production stack, for example a new-age machining shop could extend upstream into forging or downstream into complex sub-assembly.

This tech-first approach aligns particularly well with urgent, high-volume production needs such as missile systems and tactical or swarm drones, where accelerating throughput is critical to replenishing and stockpiling defense assets. At the same time, there is surging demand for rapid prototyping and small-batch runs of high-complexity components supporting hypersonics, space systems, and next-generation UAV platforms. While production volumes in these emerging categories are only beginning to scale, they represent some of the most strategically critical segments of the defense industrial base.

The Path Forward

The legacy consolidation approach benefits from speed and scale as it leverages existing facilities and its skilled labor workforce. By layering in standardized digital tooling, compliance automation, and quality assurance platforms, these companies reduce the typical friction of certifying and modernizing fragmented shops. Still, the challenges remain: legacy equipment, inconsistent processes, and cultural inertia can make full integration complex and resource-intensive. 

In contrast, ground-up frontier manufacturing platforms are built for efficiency, automation, and compliance, enabling unmatched speed, traceability, and integration once operational. The tradeoff is cost and time: these factories are extremely capital-intensive and slower to stand up, making them a scalable, but a longer-term solution.