Rearming Europe Demands Transparent, Resilient Defence Supply-Chains

Published on June 24, 2025

How Europe’s defence resurgence requires deeper supply-chain visibility, risk mitigation, and industrial resilience to meet accelerating procurement demands.

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Introduction: Reindustrialising for Security

European defence manufacturing stands at a critical inflection point. As outlined in Seraph’s report “European Defence Manufacturing Ramps Up: 10 Actions for Manufacturers“, Europe faces an urgent need to scale its industrial base to match geopolitical realities.

Europe is accelerating its rearmament efforts in response to a resurgent Russia, evolution in US strategy and broader geopolitical instability. Defence manufacturers are being called upon to deliver at a pace and scale not seen since the Cold War. The EU has recently announced the Security Action for Europe (SAFE) instrument, a large-scale defence investment programme worth €150 billion . SAFE is the first pillar of the European Commission’s ReArm Europe Plan/Readiness 2030 which proposes to leverage over €800 billion in defence spending.

With defence spending rising and the strategic landscape evolving, operational leaders must navigate a complex threat environment—one in which supply chains, particularly those involving China, present growing risks.

So, while the European defence industrial base ramps up production, it is doing so with a critical vulnerability: deep, and in some cases opaque, dependencies on Chinese supply chains. This article explores the specific risks these dependencies pose, the mechanisms through which they could be exploited, and what strategies operational leaders should consider to ensure resilience in the long run.

Why Defence Manufacturing Is Uniquely Vulnerable

The unique operational demands of military supply chains distinguish them from conventional commercial ones in three key respects:

Long Development Timelines: Advanced military systems often require 5–10 years from design to deployment. Dependencies embedded at the early stages become difficult to unwind later.
Limited Substitutability: Many critical raw materials (CRMs) used in defence have no near-term substitutes. Their performance characteristics in missiles, radar, and space systems are often unmatched.
Geopolitical Exposure: Adversaries can exploit these dependencies in times of conflict or coercion. As the Ukraine conflict illustrates, supply resilience is not optional—it is a prerequisite for sustained operations.

Supply Chain Dilemma: Ramping Up Under Constraint

Europe’s defence manufacturers are being asked to scale quickly. Ammunition stocks are depleted. Equipment must be replaced or modernised. Collective defence readiness across NATO and the EU has become a top political priority. Yet Europe’s industrial base is fragmented, undersized, and has limited surge capacity due to decades of underinvestment.

In this race against time, manufacturers naturally look to global supply chains to fill capacity and sourcing gaps. And that poses a risk.

Examining the Supply Chain – The China Risk

This need for expedience has led to increased entanglement with, what the EU terms a ‘systemic rival’, China. From critical raw materials (CRMs) and rare earth elements (REEs) to electronic components and software modules, many inputs essential to modern defence platforms are produced—entirely or primarily—by Chinese firms or within Chinese-controlled markets.

The European Commission currently designates 34 raw materials as “critical” due to their economic importance and supply risk. For eight of these—including bismuth, magnesium, and manganese—EU imports from China exceed 65%, a threshold indicating dangerous concentration. In some cases, the dependency is even more severe: China refines 87% of the world’s rare earths and produces 83% of the permanent magnets used in electric motors, missile guidance systems, and advanced sensors.

Recent Chinese export controls on gallium and germanium—used in advanced electronics and military applications—underscore the political leverage Beijing can exert through its dominance in strategic materials. As relations between the EU and China continue to cool, the risk of sudden supply shocks looms large.

The defence sector’s vulnerability isn’t limited to raw materials. Chinese-sourced dual-use components such as microchips, batteries, and optical elements are embedded in supply chains for everything from drones and radar to communications systems. Even tier-one or tier-two European suppliers often unknowingly rely on components with Chinese origins.

In the defence context, China’s leverage manifests in three core risk vectors:

Access Disruption: Political or military crises could result in sudden cutoffs of critical raw materials or component supplies, delaying production or maintenance of critical systems. China has a track record of using economic coercion as a geopolitical tool. The 2010 embargo on rare earth exports to Japan demonstrated how even modest supply chain leverage could be weaponized. More recently, Beijing has used informal pressure and bureaucratic hurdles to limit exports of gallium and germanium, two metals crucial to semiconductor and military-grade electronics production.
Quality and Counterfeit Risks: Investigations have previously found counterfeit or substandard electronic components originating from China embedded in Western military platforms, raising serious questions about reliability and security
Cyber and IP Threats: Chinese-made components and software have been associated with risks of hidden vulnerabilities or ‘backdoors’, potentially compromising the integrity and confidentiality of defence systems. Modern military systems increasingly integrate artificial intelligence, satellite communications, and advanced sensors. Many of these technologies are built on components from commercial sectors where China dominates production. For example, the global semiconductor industry remains critically exposed, with China playing a pivotal role in the back-end processing and assembly stages. Moreover, in a worst-case scenario, Chinese suppliers—under direction from the state—could restrict software updates, deny access to system upgrades, or introduce delays that impact system availability.

Strategic Blind Spots

The allure of low-cost components and rapid procurement timelines has historically led many European defence programs to tolerate or overlook third-country exposure in their supply chains. However, as the European Defence Industrial Strategy (EDIS) and White Paper on Defence Readiness 2030 highlight, this approach is increasingly seen as a systemic vulnerability.

One pressing issue is the lack of visibility across multi-tiered supply chains. Many prime contractors rely on mid-tier suppliers who, in turn, source globally without full transparency. This makes it difficult to assess cumulative exposure to Chinese inputs, especially for complex platforms with thousands of components.

“The mid-stream part of a defence manufacturing supply chain is a noted blind spot”.

Ambrose Conroy, Founder & CEO, Seraph.

The beginning and the end of defence supply chains are often clear. Upstream materials such as aluminium and steel for example. Downstream, the processes for assembling complex equipment such as aircraft are clearly known and managed. But the mid-stream elements often contain thousands of components from thousands of companies across various regions. Several tiers of suppliers are involved adding high levels of complexity, increasing risk of bottle-necks and points of failure.

Risk Mitigation for Operational Leaders: 6 Actions

In order for manufacturers to play an active role in anticipating, absorbing and reacting to disruptions, there is an increased need for risk mitigation actions.

European defence manufacturers must shift from reactive supply chain management to strategic resilience planning. Seraph recommends the following priorities:

Map Tier-N Dependencies Move beyond Tier-1 suppliers. Understand where CRMs, semiconductors, and specialised electronics originate.

Implementation Framework:

Conduct deep-tier supplier audits to trace components back to their ultimate source
Map critical path dependencies that could be subject to Chinese control or influence
Identify “choke points” where Chinese suppliers hold dominant market positions
Establish regular monitoring systems to track changes in supplier ownership and control structures

Dual-Source Critical Components Where China is the dominant source, identify and qualify alternative suppliers—even if they are more expensive or require co-investment. Examples include processors, capacitors, and rare earth magnets.
Invest in Domestic and Allied Processing Support EU initiatives like the Critical Raw Materials Act, which aims to process at least 40% of strategic materials domestically by 2030. Defence firms should align sourcing strategies with EU industrial policy and participate in public-private partnerships and government or European Defence Fund-backed consortia.
Build Strategic Stockpiles Like fuel or ammunition, key inputs should be stockpiled. This is especially true for components with long lead times or volatile availability.
Redesign for Resilience Where feasible, redesign components to reduce reliance on scarce inputs. Embed design-for-resilience principles in new platforms and upgrade cycles.
Embed Supply Chain Risk in Board-Level Governance Make supply chain resilience a standing agenda item. Incorporate risk metrics, scenario analyses, and progress on diversification into quarterly reviews.

Conclusion: A New Strategic Posture

Europe’s rearmament plan comes at a crucial time. European sovereignty in defence manufacturing is an essential part of the plan but cannot be achieved without decisive action on supply chain vulnerabilities.

China-related risks must be treated with the same strategic urgency as cyber threats or force readiness. The choice is not whether to decouple entirely from China—that is neither realistic nor desirable. The choice is whether to identify and mitigate risks before they materialise.

Operational leaders in Europe’s defence sector hold a pivotal role in this transformation. With the right focus, tools, and political support, Europe can reindustrialise with resilience at its core—ensuring its defence base is ready not just for today’s challenges, but for those that lie ahead.