Strategic Semiconductor Sectors and National Security: How BAE Systems and Rocket Lab Are Pioneering a New Era of Reshoring

The global semiconductor industry is undergoing a seismic shift, driven by the collision of geopolitical tensions, supply chain vulnerabilities, and the urgent need for technological self-reliance. At the heart of this transformation are companies like BAE Systems and Rocket Lab, which are redefining the boundaries of dual-use semiconductor ecosystems—those serving both national security and commercial applications. For investors, these firms represent a high-conviction opportunity to align with the U.S. government's strategic priorities while capitalizing on a sector poised for decades of growth.

The Dual-Use Imperative: Bridging Defense and Commercial Innovation

Semiconductors are no longer just components; they are the lifeblood of modern infrastructure, from 5G networks to hypersonic missile defense systems. The U.S. government's $52.7 billion CHIPS and Science Act has catalyzed a shift toward reshoring production, with dual-use technologies—those serving both military and commercial needs—emerging as a linchpin of this strategy.

BAE Systems, a long-standing defense contractor, has leveraged its $35 million CHIPS Act grant to modernize its Nashua, New Hampshire microelectronics center. This facility, designated a Trusted Foundry by the Department of Defense, produces Monolithic Microwave Integrated Circuit (MMIC) chips critical for advanced aircraft like the F-35 and F-15. By quadrupling production capacity and integrating workforce training programs, BAE is not only addressing immediate defense needs but also creating a scalable platform for commercial applications such as secure communications and satellite systems.

Meanwhile, Rocket Lab is pioneering a parallel path in space-grade semiconductors. Its $23.9 million CHIPS Act funding is expanding production of radiation-hardened solar cells at its Albuquerque facility, which power satellites for NASA's Artemis program and the James Webb Space Telescope. These components are equally vital for national security, enabling missile tracking systems and hypersonic threat detection under the Department of Defense's Golden Dome initiative. Rocket Lab's recent $275 million acquisition of Geost—a leader in electro-optical sensors—further cements its role in dual-use innovation, blending optical systems with launch capabilities to create a flywheel of demand across defense and commercial markets.

Geopolitical Resilience as a Strategic Investment

The reshoring of semiconductor production is less about short-term gains and more about long-term geopolitical resilience. China's dominance in global chip manufacturing has exposed vulnerabilities, particularly in sectors where supply chain integrity is non-negotiable. By investing in domestic production, the U.S. is not only safeguarding its defense capabilities but also creating a competitive edge in emerging technologies like AI, quantum computing, and space exploration.

For investors, this translates into a compelling thesis: companies that bridge the gap between national security and commercial innovation are uniquely positioned to benefit from sustained government support and private-sector demand. BAE Systems and Rocket Lab exemplify this duality. BAE's MMIC chips, for instance, are essential for both military aircraft and commercial satellite constellations, while Rocket Lab's Neutron rocket—a medium-lift launch vehicle—serves as a dual-use asset for both defense agencies and commercial clients seeking cost-effective access to low Earth orbit.

The Flywheel of Dual-Use Innovation

What sets these companies apart is their ability to create self-reinforcing ecosystems. BAE's Nashua facility, for example, is not just a manufacturing hub but a talent incubator. By partnering with Nashua Community College to offer microelectronics bootcamps and clean room training, it is building a pipeline of skilled workers who can adapt to both defense and commercial needs. Similarly, Rocket Lab's investment in New Mexico's NewSpace Nexus initiatives—focusing on diversity and workforce development—ensures a steady supply of talent for its expanding semiconductor and launch operations.

This flywheel effect is further amplified by the Neutron rocket, which is designed to serve as a launch platform for both commercial satellite deployments and defense payloads. By reducing reliance on foreign launch providers, Rocket Lab is addressing a critical bottleneck in the U.S. space supply chain while opening new revenue streams. Analysts project that Neutron's 2025 launch could unlock $1.2 billion in annual revenue potential, driven by its dual-use capabilities.

Risks and Rewards: A Calculated Long-Term Bet

While the strategic case for these companies is strong, investors must weigh risks. The semiconductor industry is capital-intensive, and scaling production requires sustained investment. For BAE, the challenge lies in maintaining profitability as it transitions from a pure defense contractor to a hybrid player in commercial markets. Rocket Lab, meanwhile, faces competition from established aerospace firms and the inherent risks of developing next-generation launch vehicles.

However, the rewards outweigh these risks. The U.S. government's commitment to the CHIPS Act—coupled with its $630 billion Advanced Manufacturing Investment Credit—creates a tailwind for companies that align with national priorities. Rocket Lab's $564 million cash reserves and BAE's $35 million grant provide financial flexibility to navigate these challenges. Moreover, the growing emphasis on venture-backed defense startups (as highlighted in the NatSec100 rankings) signals a broader ecosystem shift, where innovation is increasingly driven by agile, dual-use players.

Conclusion: A High-Conviction Play for the Future

The reshoring of semiconductor production is not a fleeting trend but a structural shift with profound implications for global power dynamics. BAE Systems and Rocket Lab are at the vanguard of this movement, leveraging dual-use technologies to address both immediate defense needs and long-term commercial opportunities. For investors, the key insight is clear: those who invest in the infrastructure of resilience—companies that bridge the gap between national security and technological innovation—will reap outsized rewards in an era defined by geopolitical uncertainty and technological competition.

As the U.S. continues to prioritize self-reliance in critical sectors, the semiconductor ecosystem will remain a cornerstone of its strategy. BAE and Rocket Lab are not just beneficiaries of this shift—they are architects of a new industrial paradigm. For those with a long-term horizon, the time to act is now.