Pentagon to fill Satellites, Missiles, Combat Jets with Microchips from Middle East Company

Globalfoundries last year acquired from International Business Machines Corp. the two plants—in Burlington, Vt., and East Fishkill, N.Y.—that make the chips. IBM had been the near-monopoly supplier of the chips to the Pentagon for more than a decade and paid Globalfoundries $1.5 billion to take the unprofitable business off its hands.

Lawmakers and watchdogs such as the Government Accountability Office had expressed concern about the Pentagon’s reliance on a single source for some of its state-of-the-art chips. “Due to market trends, supply chain globalization and manufacturing costs, the [Defense Department’s] future access to U.S.-based microelectronics sources is uncertain,” the House Armed Services Committee said in a recent report.

The new Globalfoundries agreement, which was previously undisclosed, runs until 2023. Meanwhile, the Pentagon will seek to identify more suppliers and expand protections needed to prevent chips from being tampered with or falling into the wrong hands.

The Pentagon also is moving away from a reliance on purely U.S.-made chips, widening its net of vendors to keep up with changes in commercial technology that are outpacing the defense world.

The plants where chips are assembled have long been viewed by the Pentagon as a vulnerable part of the military supply chain.

The biggest concerns were over technology theft and any insertion of rogue elements that could be remotely triggered to access equipment, or so-called kill switches that render equipment useless.

With the semiconductor industry’s center of gravity shifting to facilities in Asia that churn out hundreds of millions of chips for consumer-electronics devices, the Pentagon has much less influence on an industry it helped fund and develop in the 1960s and 1970s.

The military relies on customized chips rather than the mass-produced ones used in cellphones. For instance, while the new F-35 combat jet contains several hundred advanced chips—manufacturer Lockheed Martin Corp. won’t disclose the exact number—production runs for the most sensitive military-grade processors range from a few dozen to 1,000. That compares with tens or even hundreds of millions for consumer-electronics devices.

Chip makers have shifted their focus to the larger consumer market, where competition led to technology being refreshed in months or weeks, while military chips ordered in small numbers might be upgraded once or twice a year, industry officials said.

Opening the military market to more producers of the most advanced commercial chips, would allow the Pentagon to keep pace with technology developments, officials said. But that also will require new ways to monitor chips to ensure they haven’t been tampered with, whether manufactured in the U.S. or overseas.

For example, Darpa is developing a tiny tagging device for chips that can be embedded in processors from any manufacturer and used to detect malicious content or an attempt to tamper with the technology.

Globalfoundries—which has expanded through acquisitions and has significant operations in Germany, Singapore and upstate New York—provides the Pentagon’s immediate needs. But a coalition of U.S. chip makers including Cypress Semiconductor Corp. has been pressing the Pentagon to help fund upgrades to fabrication plants owned by U.S. companies to allow them to take on the most sensitive work.

The good news is that the chip-making operation will be in the United States, but a sole-source supplier is not sufficient to ensure the chips that are needed. More worrisome is the fact that a foreign company owns the production capacity for critical military chips. That should be remedied as quickly as possible, and systems to ensure that the chips have not been tampered with must also be developed as quickly as possible.

Although it is true that the world market means that production location becomes less important, for critical items and advanced technologies, it is vital that the U.S. controls the suppliers, ideally at a U.S. location that can be effectively monitored. For example, a company that is owned by a Saudi Arabian investor provides maintenance and repairs on Air Force One and other aircraft used by U.S. cabinet secretaries. That seems particularly foolhardy, and presumably the job could be performed by countless U.S. service companies.

The world is a dangerous place, and we cannot afford to turn over our safety and security to those who may not have our best interests at heart. The Pentagon should reconsider and find ways to move the production of key military components to U.S. companies who are based in the U.S. That only seems logical and should be done at the earliest possible moment.

Source: wsj.com