U.S. Faces 95% Battery Supply Chain Risk Amid Drone Revolution

The global defense landscape is undergoing a significant transformation, driven by the proliferation of autonomous, unmanned, AI- and battery-powered drone systems. This shift was underscored by President Donald Trump's executive order, "Unleashing American Drone Dominance," and subsequent efforts by Defense Secretary Pete Hegseth to enhance domestic drone technology and manufacturing. However, this revolution is threatened by a critical vulnerability: the reliance on batteries sourced from Chinese-controlled supply chains. This dependency poses a significant risk to the U.S. and Western defense superiority, as nearly every autonomous system deployed today is powered by these batteries.

The ongoing conflict in Ukraine serves as a stark reminder of this new reality in warfare. Ukrainian forces have effectively used small, inexpensive drones to target and destroy Russian strategic bombers worth tens of millions of dollars. While Ukraine has become a hub for Western drone innovation, nearly all of these drones are powered by batteries dependent on China. This highlights the urgent need for the U.S. to secure its own battery supply chain to maintain its defense capabilities.

The Pentagon has recognized this vulnerability and is taking steps to address it. The Army is undergoing its largest restructuring since the Cold War, equipping each of its active-duty divisions with thousands of drones. The Defense Department’s Replicator Initiative aims to rapidly field thousands of autonomous systems before the end of this year. Programs like the Defense Innovation Unit’s Project G.I. are fast-tracking the next generation of drone technology. This shift marks a new era in warfare, where access to batteries and AI systems, rather than oil, determines the outcome of conflicts. Unfortunately, the U.S. is currently lagging behind in battery technology.

China's dominance in the battery market is a result of decades of industrial policy and subsidies. The legacy lithium-ion battery technology, which is crucial for drones and other defense applications, relies on materials like cobalt, nickel, manganese, and graphite. China controls the supply chains for these materials, from mining to metals processing to battery manufacturing. In the case of graphite, China processes over 95% of the global battery-grade market. This monopoly is not the result of free market competition but of strategic industrial policies aimed at consolidating China's global leadership in batteries.

Despite recent investments in the U.S. and EU to build battery manufacturing, China's market consolidation continues to grow. Beijing has restricted exports of critical battery materials, flooded global markets to undercut competitors, and in some cases, stopped supplying batteries to particular U.S. drone companies. This aggressive strategy underscores China's monopoly control over the battery market. Congress acknowledged this vulnerability by passing the 2024 National Defense Authorization Act, which prohibits the Defense Department from procuring batteries containing Chinese-sourced materials beginning in October 2027. However, the current reality in 2025 is that the U.S. has not been investing fast enough or strategically enough to secure a domestic battery supply chain.

The solution lies in developing next-generation battery technologies that do not rely on Chinese-controlled supply chains. Lithium-sulfur batteries represent one of the most promising alternatives. Unlike conventional lithium-ion technology, lithium-sulfur batteries do not require Chinese-controlled minerals and processes. Instead, they are built from materials readily available in the U.S. as byproducts of the existing oil and gas industry. Additionally, lithium-sulfur batteries offer a significant leap in energy density, resulting in a 30-50% lighter weight battery. This is crucial for drone applications, where every gram matters. A U.S.-sourced, U.S.-manufactured lithium-sulfur battery that flies further and carries more payload, paired with American innovation, could lead the drone revolution.

Several U.S. companies, including Lyten, have been racing to commercialize lithium-sulfur technology. Lyten began commercial drone battery production in the second quarter, sourced and manufactured in the U.S., with energy density superior to lithium-ion batteries. The growing pipeline of interested customers across aerospace, defense, supply chain, and industrial sectors indicates a strong demand for alternatives to today’s lithium-ion technology. This presents a clear opportunity for the U.S. to lead the battery revolution.

To capitalize on this opportunity, the U.S. should invoke the Defense Production Act. This act grants the federal government authority to accelerate domestic production of critical technologies for national security purposes. President Trump previously used the DPA to boost domestic production of medical supplies during the pandemic. The current battery crisis demands similar urgency. By investing in next-generation battery technologies and leveraging the Defense Production Act, the U.S. can secure its defense capabilities and lead the global battery revolution.