Governments on both sides of the Atlantic are leaning hard on defence manufacturers to expand assembly lines, reopen dormant plants, and hire new workers as stockpiles of missiles and shells are drawn down by active conflicts. The push is reshaping the economics of the arms industry, with long-term contracts and public subsidies used to convince firms that the current surge in demand will not vanish as soon as the headlines move on. At stake is whether the industrial base can sustain high-intensity warfare while still deterring future crises.
The new pressure is most visible in munitions, from artillery rounds to advanced interceptors, where years of just-in-time procurement left little slack. Defence ministries now talk less about boutique technology and more about volume, redundancy, and surge capacity. That shift is forcing executives and policymakers to rethink how much risk taxpayers, shareholders, and local communities should carry in order to keep production lines warm in peacetime.
From stockpile shock to structural expansion
The immediate catalyst for the current buildup has been the rapid depletion of Western arsenals as missiles and shells flowed to Ukraine and Israel. Citing low munitions stockpiles, the Pentagon has warned that under current conditions, it may be impossible to replenish inventories fast enough without a much larger and more predictable financial commitment from the Department of Defence. That warning has been echoed in internal planning documents, where Pentagon officials, including LaPlante himself, have pushed Congress for more authority to sign multi-year munitions deals, arguing that only such guarantees will justify the capital spending needed to expand factories.
Those concerns are not abstract. The U.S. Department of Defence has reported detailed increases in the production of various munitions, including artillery shells and rockets for HIMARS rocket systems, per month, yet officials concede that even these higher outputs are racing to catch up with consumption. In parallel, Russia’s full-scale invasion has forced Western governments to revisit systems that had slipped out of regular production, with demand for the surface-to-air missile system, first used in the 1990s but upgraded since, surging again as Ukraine and other states seek protection from missile and drone salvos.
How governments are persuading industry to bet big
To move from emergency surges to lasting capacity, officials are trying to de-risk investment for private manufacturers. In the United States, President (Donald J.) Trump’s administration has backed a wave of contracts that signal long-term intent, with Defense companies expanding production and hiring workers after the Army awarded $10 billion in missile orders in September. The Pentagon is also using its leverage as a monopsony buyer, pressing missile makers to accelerate output for a potential conflict and identifying which Missile systems are priorities in any future contingency.
European policymakers are taking a similar approach, but with a heavier dose of direct subsidy. The European Commission has said that “Now €2 billion is invested in defence-related research and development, ammunition production, and common procurement,” presenting this as a way to strengthen the defence technological and. A separate initiative has sprinkled $560 m across selected manufacturers, with officials describing how $560 million is being channelled to grow ammunition output and support allied stockpiles.
Inside the factory floor: from PAC-3 to THAAD
The most visible proof of this policy shift is on the production lines of major contractors. Lockheed Martin has highlighted how it is steadily increasing production of advanced interceptors, describing investments in facilities, workforce, and supply chains to ramp up output while still ensuring quality control. Within that portfolio, the company has singled out the PAC-3 Missile Segment Enhancement, known as PAC-3 MSE, as a key focus, with capacity for PAC-3 MSEs being expanded to meet the needs of partners who rely on the system for air and missile defence.
Other programmes are scaling even faster. The United States is aiming to quadruple the output of Terminal High Altitude Area Defence interceptors, with plans for 4x more production of THAAD interceptors and a target to make 400 k key missiles per year in cooperation with Lockheed Martin and the Department of the Army. At the more traditional end of the spectrum, the head of the US Army’s armaments and ammunition programs has described how nine new facilities are coming online to raise shell production, while cautioning that even with these plants, it will be hard to hit the planned 100,000 monthly target 100,000 monthly target on a sustained basis.
Global partners, local doubts
The industrial buildup is not confined to the United States and the European Union. As US capacity grows, South Korea wants in, with Lockheed Martin Australia working on guided projectiles whose base is adjusted during flight to improve accuracy. These partnerships are designed to spread production risk, deepen supply chains, and give allies a direct stake in the munitions that underpin collective defence. They also reflect a recognition that Asia Pacific security dynamics are now tightly bound to European and transatlantic stockpile decisions.
Yet even as governments urge companies to expand, executives remain wary. Analysts have noted that the challenge for defence firms is not really solely how long the war in Ukraine is going to last, but whether it is worthwhile investing in new capacity that could sit idle if orders fall by half over the past year. On the smaller end of the market, John Coffman, who owns a small munitions company called Armada Ammunition based in Greensboro, Florida, is eyeing opportunities created by the shortfall, but he also warns that without predictable demand, the United States will struggle to sustain any war on any scale. That tension between urgent geopolitical need and long-term commercial risk sits at the heart of the current effort to persuade defence firms to keep ramping up munitions production.