What is vertical integration and why does it matter for aerospace stocks?

Vertical integration is when a company acquires parts of its supply chain to bring production in-house instead of relying on outside suppliers. For aerospace companies like Boeing, this means owning the facilities that make critical aircraft components rather than purchasing them from suppliers. This matters for investors because it can lead to better cost control, improved quality management, and fewer production delays. Companies that successfully integrate their supply chains often see improved margins, while the remaining specialized suppliers become more valuable due to their scarcity and expertise.

What is the significance of Boeing acquiring Spirit AeroSystems' Belfast plant?

Boeing's acquisition of Spirit AeroSystems' Belfast plant is significant because it shows a strategic shift in how major aerospace manufacturers are approaching their supply chains. The Belfast plant produces critical aircraft structures, and by bringing this capability in-house, Boeing gains more direct control over a vital part of its production process. This move helps Boeing reduce dependency on external suppliers, potentially minimize production delays, and better manage quality control. For investors, this signals a broader industry trend that could create opportunities in both large aerospace manufacturers and specialized suppliers.

What are aerostructures and why are they important?

Aerostructures are the physical components that make up an aircraft's frame and body, including the fuselage, wings, and tail sections. They're critical because they determine an aircraft's structural integrity, aerodynamics, and overall performance. Manufacturing aerostructures requires specialized knowledge, advanced materials (like carbon fiber composites), and precision engineering. As aircraft designs become more sophisticated to improve fuel efficiency and performance, the companies that can produce these complex components gain strategic importance. That's why Boeing's move to acquire aerostructure manufacturing capabilities represents a significant strategic investment.

What does "OEM" mean in the aerospace industry?

OEM stands for "Original Equipment Manufacturer." In the aerospace industry, OEMs are the major companies that design and assemble aircraft, like Boeing, Airbus, or Lockheed Martin. These companies typically don't manufacture every component themselves—they rely on a network of suppliers who provide specialized parts. When we talk about "OEMs securing their supply chains" (as mentioned in this theme), it means these large aircraft manufacturers are taking steps to ensure reliable access to critical components, either by bringing production in-house through acquisitions or forming stronger relationships with key suppliers.

What is an ETF and why is ITA included in this collection?

An ETF (Exchange-Traded Fund) is an investment fund traded on stock exchanges that holds assets like stocks, bonds, or commodities. ITA, specifically, is the iShares U.S. Aerospace & Defense ETF that invests in companies from the U.S. aerospace and defense sector. It's included in this collection because it offers broad exposure to the entire industry affected by Boeing's supply chain integration strategy. For investors who want to capitalize on the overall trend of aerospace supply chain consolidation but prefer not to pick individual stocks, ITA provides a diversified option that includes many of the companies that could benefit from this industry shift.

15 handpicked stocks

Boeing's Supply Chain Takeover

Boeing's acquisition of Spirit AeroSystems' Belfast plant signals a major shift toward vertical integration in aerospace manufacturing. This collection features carefully selected companies positioned to benefit from this industry consolidation, including key suppliers, component makers, and defense contractors.

Han Tan | Market Analyst

Updated 2 days ago | Published at juillet 2