Issue link: https://iconnect007.uberflip.com/i/1415897
22 SMT007 MAGAZINE I OCTOBER 2021 Vaughan: And I would add that one of the pri- mary rationalizations for the acquisition of ITL in Toronto is that they did have the Cana- dian Goods Program status, and they are 126.5 ITAR excepted, so we can build U.S. DoD product in Toronto. We believe that the de- fense sector will continue to grow, so there's only two ways to approach that, and one's to greenfield an operation and stand it up to bring on additional capacity. e route Greg and the rest of the senior team chose was to add that additional capacity through the Toronto oper- ation to help support our DoD growth. Kind of a different mindset from the typical fabricator that's clinging to the hopes of the reshoring ac- tually materializing, right? Matties: Right. Now you guys have mentioned capacity as a CapEx driver, but what about technology? What challenges or technology changes are driving CapEx expenditures? McCoy: Generally speaking, miniaturization is continuing, plus a march toward higher-speed material platforms. It changes a little bit of the dynamic as far as what we're looking at from a CapEx perspective as we continue to support these trends. Vaughan: I have to say one of the secrets to CapE x i s, of cour s e, having access to funds to execute on whatever your CapEx strategy is. at's an important dynamic. Look at the land- scape. We did an informal head count on our side over the past, say, six months, and we be- lieve we are down to around 185 U.S. fabrica- tors. If you look at defense, the spend is about $1.3 billion for defense in North America. And if you take the top five fabricators, of which we are one, and you aggregate that up, you get to about a billion dollars. Your top five guys are supporting 90% of the business and that tells you something. And then, of those 185 fabricators, you have 135 of them that are sub $25 million that haven't had the access to the capital to reinvest the business. We see it as a very fragmented market, and that's kind of how we approach it and how we differentiate. Our customers keep demanding more support for emerging tech- nologies to support their emerging program objectives. As long as we keep our CapEx aligned with their roadmaps and where their programs are going, we feel we'll be extreme- ly successful. Matties: It's nice to have a wish list, but if you can't act on it, you're le behind in these markets. Halvorson: Yes. e additional challenge is just what's happening in the world today through transportation and ability to obtain the equip- ment once it's been manufactured; to trans- port it to the facilities and being able to have the equipment installed by quality techni- cians from the factories is a challenge point today. ere is equipment within our facto- ries and within our competitors' factories that that is ready to be installed, needing to be in- Brett McCoy, VP/GM Chicago.