The Defense Department is concerned about the dwindling number of domestic microelectronic manufactures after being forced to rely on a single, foreign-owned provider for its needs.

Spurred by a lack of domestic manufacturers and the uncertainty of a single-source provider, DOD is now conducting an industrial base study on the microchips and circuits used in hardware to lay a foundation with key industry players, Acting Deputy Assistant Secretary of Defense for Manufacturing and Industrial Base Policy Andre Gudger told lawmakers Oct. 28.

“At the study’s conclusion, the team will recommend strategies to the department’s requirements while addressing a sustainable commercial strategy for the future. Additionally, the department is taking steps to proactively identify our current and future critical suppliers and fragile sectors like that of the microelectronics industry,” Gudger said before the House Armed Services subcommittee on oversight and investigations.

Sustaining technological superiority

DoD uses microelectronics in the hardware for its defense systems in weapons and non-lethal programs and are essential for the department’s increasing reliance on technology and cyber. Microelectronics are especially important now that the department has doubled down on its technological investments through the Defense Innovation Initiative. The program is aimed at sustaining the country’s technological superiority to its adversaries.

While DoD is now taking action, a Defense Science Board report from a decade ago stated that the department had no overall vision of its future microelectronics components needs or how to deal with them. The report found that DoD addressed supply problems as they came up.

DoD created a trusted suppliers program to accredit manufacturers. The list totaled 64 as of 2014. But, only IBM could meet DoD’s needs.

In July, IBM transferred its microelectronics business to GlobalFoundries. The company is based in the U.S., but foreign-owned. It now serves as DoD’s sole provider.

Gudger said U.S. adversaries are gaining traction with the microelectronics industry.

DoD’s fear is that microelectronics made in foreign countries or by untrusted companies may have built-in bugs that can ruin or stop a system.

“With one transistor [a basic part of a microelectronic], you can make something fail possibly, the denial of service, that’s the simplest kind of tact. So the hidden kill switch gets a lot of attention,” said Brett Hamilton, division chief engineer for trusted microelectronics, Naval Surface Warfare Center – Crane, during the hearing.

Lack of access to microelectronics could also cause schedule impacts to programs that rely on the technologies and may have national security implications, according to GAO.

Incalculable consequences

The costs associated with producing microelectronics have grown with each generation of technology, stated testimony from the Government Accountability Office to the subcommittee.

Accordingly, microelectronics companies have consolidated and specialized, and the supply chain for manufacturing has mostly gravitated toward Asia.

Companies that produce high volume consumer electronics can turn a profit, however, DoD needs microelectronics in low volume, that are specialized and sometimes have no commercial demand.

Companies spend about $1 billion on microelectronics foundries.

Gudger said it would be even more if DoD tried to manufacture microelectronics itself.

“For the DOD, the total cost of loss assessed would be greater than $1 billion, and given the research redesign prototyping requalification test, reproduction cost required to replace the required trusted foundry components, it’s unknown. Operationally the consequences of interrupting the national security programs that use these components are incalculable,” he said.

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