Autonomous Systems and Robotics (Formerly Robotics) –
The Autonomous Systems & Robotics (AS&R) industry is increasingly consequential to national defense and economic competition. This research examines the current structure and challenges of the AS&R sector through Porter’s Five Forces, while drawing from extensive research, field studies, and comparisons with partner nations. While the U.S. continues to lead in several areas of robotics and artificial intelligence (AI) development, the U.S. Defense Industrial Base (DIB) faces numerous limitations, many of which stem from outdated policy frameworks, rigid acquisition models, and dependence on foreign suppliers. To outpace China, the DoD must secure supply chains and standardize autonomy to ensure AS&R systems are interoperable, scalable, and field-ready.
A few prime contractors dominate the AS&R market, creating a challenging environment for new and innovative companies to enter, thus enlarging the barriers to entry into the market. At the same time, many firms face long procurement timelines and concerns over intellectual property (IP) protection. The U.S. DIB’s continued reliance on Chinese-dominated supply chains for key components such as rare-earth elements and semiconductors exposes significant vulnerabilities in potential conflict scenarios. The DoD must expand domestic sourcing and production investments to mitigate this strategic risk. Insights from a site visit to a large defense contractor in California revealed acquisition barriers that directly informed the recommendations to reform facility clearance eligibility for innovative firms. Additionally, the lack of standardized technical requirements and interoperability frameworks across military services slows adoption and integration. Competitor nations like China are aggressively pushing ahead with state-driven AS&R policies with far fewer restrictions, and allies like South Korea have adopted a more coordinated industrial policy.
To respond to these challenges, the report recommends four key actions. First, the DoD should use its contracting power to seed domestic robotic suppliers, which includes long-term contracts and incentives for U.S.-based production of key robotic components. Second, the DoD should reform facility clearance (FCL) eligibility policies to enable interim sponsorships of firms with validated defense relevance before contract award, given that security parameters are met. Third, the DoD must reform and modernize existing profit policies to create an incentive-based structure to reward companies that take early risks in defense-relevant technologies. Companies will hesitate to enter the defense sector without a return on investment (ROI). Lastly, the DoD should establish service-wide standards for safety, cybersecurity, and interoperability and mandate the use of Modular Open Systems Approaches (MOSA) wherever feasible. These reforms enhance DoD and industry autonomous systems architecture, industry efficiency, and human-machine teaming. Appendix C offers additional policy recommendations to strengthen the AS&R industry and enhance collaboration between private industry and the government.
If the U.S. hopes to maintain a competitive edge in developing and executing autonomous capabilities, it must fund innovation and fix structural issues that slow the adoption. Speed, scalability, and interoperability are imperative
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