Where America's fragile defense production and futuristic megafactories meet

Driving the news: The Ronald Reagan Institute's third annual National Security Innovation Base report card, published Tuesday, paints an uncomfortable picture.

• "While China, America's pacing challenger, continues to outproduce the United States, Washington remains stuck in a self-perpetuating cycle of budgetary and appropriations dysfunction that is threatening its advantage."
• But, it offers, "This trend is not immutable."

Here are some of the study's findings:

1. The U.S. blazes the innovation trail, earning an A- for leadership, a B+ for available cash and another B+ for the growing sense of competition. There were four consecutive quarters of defense-tech venture capital growth last year, from $4.4 billion to $14.7 billion.
2. But the country struggles with modernization and capacity, with caches of "critical weapons" remaining "dangerously low." Both scored a D. Customer clarity — the coherence of conversation between buyer and seller — was slightly better at D+.
3. International cooperation is middling at a C. The labyrinthine foreign military sales process is "interfering with core national security and foreign policy objectives."

What they're saying: "I feel like there's this bias or mindset that hardware is not valuable, hardware is not sexy. 'Why can't we just outsource this stuff?' And that's kind of the problem we've been in," Paul Kwan, who leads General Catalyst's global resilience team, told Axios.

• "This reindustrialization of America is not just critical, but necessary."

State of play: Defense contractors are erecting factories and expanding footprints. Others are inking their blueprints.

• The first products from Anduril Industries' Arsenal-1 are expected to roll off the lines next year. When the company picked Columbus, Ohio, as the location, there were still permitting, renovation and hiring hurdles to clear.
• Drone-boat maker Saronic wants to open the doors to its futuristic shipyard, Port Alpha, within five years. It still needs to find a location, secure incentives, put a shovel in the ground and attract a workforce.
• Helsing completed construction of its Resilience Factory, or RF-1, in southern Germany. It's expected to pump out more than 1,000 HX-2 attack drones per month.

• Saab plans to break ground for its Michigan munitions facility in April. It's expected to come online in 2026. The company also launched its Skapa initiative in San Diego.
• Bell Textron will support Future Long Range Assault Aircraft work with a recently selected 447,000-square-foot facility in Texas. The company won the FLRAA competition in late 2022.
• Kongsberg in September said it would build a state-of-the-art factory in Virginia, boosting capacity for Naval Strike and Joint Strike missiles.

Our thought bubble: You can't build the future with tools of the past.

• Automation, robotics, and 3D printing are table stakes.
• And if you want a great example of spinning up quickly, look no further than Ukraine. Pressure breeds innovation. (The country is on track to build some 3 million military drones this year, according to the Kyiv Post.)

The bottom line: "We cannot fight wars unless our troops have the ammunition they need," Vice President JD Vance said Tuesday as he backed a Defense Department nominee on the Hill.

• "We cannot defend our own national security unless we have the tank shells, the artillery shells, and, increasingly, the drones and other advanced weapon systems that are necessary to actually fight battles when — God forbid — those battles are necessary to fight."