The Race to Reindustrialize Has a Hidden Security Risk

Across the defense, AI and manufacturing industries, governments have deployed upwards of $100 billion in funding over the past few years. Rebuilding domestic production capacity in the U.S. and Europe is, however, not merely a political, financing or engineering challenge. Even the most advantageous combination of public-sector support and private-sector appetite for constructing new critical-minerals, defense and semiconductor assets cannot guarantee control over the capabilities they create.

Factories and the supply chains they belong to cannot be separated from the corporate structures governing them. Because of this, ownership disputes and certain investment relationships can create strategic leverage over firms that can pose risks even to the most generously funded and strategically important industrial development projects the government prioritizes.

The real test of supply chain independence and defense-industrial capacity—which President Trump has repeatedly emphasized—is therefore the ability to sustain production and maintain mobilization readiness during geopolitical crises. As long as countries do not fully control this lever, they remains exposed to three related risks: disruptions in strategic industrial projects, the vulnerability of sensitive technologies and the application of geopolitical pressure.

A dispute over corporate control can affect a strategic industrial project even before it becomes fully operational. Korea Zinc is a case in point as its high-profile management dispute with the Young Poong Group—its largest shareholder together with MBK Partners unfolded in parallel with the announcement and launch of its joint venture with the U.S. government for the construction of a smelter in the State of Tennessee.

Although the construction of the $7.4 billion critical mineral smelter project is progressing, uncertainties about the future of Korea Zinc’s management, whom Young Poong and MBK Partners has sought to oust, also raise questions about the strategic direction company leaders could take with regard to the joint venture.

Uncertainties and public clashes have already plagued the initial phase of the project. Young Poong and MBK Partners have attacked Korea Zinc’s current leadership and their preferred financing mechanisms to fund Project Crucible in court attempting to torpedo the project. A Korean court dismissed Young Poong and MBK’s lawsuit, but the two partners continue to challenge Korea Zinc’s management, even in unconventional ways.

At a reception in Nashville, Tennessee in July, Young Poong and MBK Partners nevertheless claimed ownership of Project Crucible and presented themselves to local stakeholders as firm supporters of the Project, using the project’s name, logo and domain address allegedly without authorization. They have claimed that their initial opposition was limited only to the financing structure of the Project and they have not opposed the Project itself. However, it was reported that they have also opposed the Project claiming that putting Korea Zinc under U.S. influence undermines Korea’s national security.

The inconsistent positions they have taken before the U.S. stakeholders are only one of the risks the U.S. must contend with as part of its smelter project. MBK Partners’ history of business ties to the People’s Republic of China and the China Investment Corporation’s (CIC) contribution to MBK’s equity fund introduce another concern: the China Investment Corporation (CIC), China’s sovereign wealth fund, is a top contributor to MBK’s buyout funds. Chinese influence could indirectly find its way into a U.S.-based industrial project aimed at creating independence from the very supply chains China already controls.

The case of Dutch semiconductor manufacturer Nexperia demonstrates how a corporate dispute can, in time, become an industrial-security problem. The firm’s Chinese parent company, Wingtech Technology, directly clashed with the Dutch government following its intervention over concerns about Nexperia’s governance and technological capabilities. China subsequently imposed export restrictions affecting Nexperia’s operations.

In response, the Dutch government intervened by invoking an emergency law to prevent Nexperia from relocating company assets deemed essential for technological capabilities in the Netherlands and Europe, more broadly. The measures were intended to prevent essential products from becoming unavailable, with an eye towards maintaining production and operational readiness.

In a separate legal process, the Amsterdam Court of Appeal’s Enterprise Chamber also expressed concern about the movement of funds and sensitive technology. The Chamber launched an investigation into the alleged diversion of funds and the restructuring of the company without proper board consultation, pointing to broader management issues.

Nexperia’s case demonstrated that industrial resilience does not only depend on where key components are manufactured but whether company leaders’ priorities are in line with those of the host government.

The significance of corporate control to sensitive technology and accumulated industrial knowledge is even better illustrated by German semiconductor manufacturer, Aixtron’s case from 2016. Near the end of his second term in office, President Barack Obama prohibited the acquisition of Aixtron’s U.S. business by German special-purpose investment vehicle, Grand Chip Investment GmbH.

The U.S. Treasury uncovered a complex ownership structure behind the company spanning multiple levels. It included an intermediate holding firm in Luxembourg and Fujian Grand Chip Investment fund LP from China as the ultimate parent entity.

Aixtron’s strategic value lay in the potential military applications of its technological knowledge. The U.S. government’s decision to intervene demonstrated that such intangible assets can prove as consequential as equipment and factories.

The lesson from these cases is that reindustrialization cannot be measured by the number of factories built or the billions of dollars invested. It must also be measured by the ability to protect the assets, knowledge and production networks those investments create.

Governments must therefore treat corporate control as an integral part of security policy, scrutinizing ownership structures of strategic companies, as well as the financial relationships, governance rights and dependencies that could expose them to external leverage. The objective is not to deter foreign investment, but to ensure that critical capabilities remain available when geopolitical pressure intensifies. A country cannot secure its industrial base if it leaves the means of influencing that base outside of its calculations.