Will Chip Giant Recover US Defense Industry?

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The global shortage of semiconductors sees a large number of industries, ranging from consumer electronics to automotive and defense, struggling to secure key components needed to build their products. 

About 75% of the world’s total semiconductor manufacturing capacity comes from China, Japan, South Korea and Taiwan, according to semiconductors.org. 

At the same time, manufacturing capacity in the US has significantly declined. According to a recent report carried out by the Semiconductor Industry Association (SIA), the US held 37% of the global chip manufacturing capacity in 1990 – a number that has gone down to 12% today, mostly due to the stagnation of government subsidies to help the industry prosper. 

This means that key organizations like the DoD in the US have limited access to domestic supplies of semiconductors, even for critical security systems – and there remains a question mark over the country’s capacity to meet its own needs for computer chips in the long term. 

Moreover, as Afghanistan is home to a crucial, untapped treasure-trove of minerals and metals, including lithium, which is in high demand as it is used to make semiconductor chips, the US withdrawal from the country raises concerns regarding the future of these resources.

It can be seen over this background that US semiconductor giant Intel won a major contract to domestically design and build electrical chips for the US Department of Defense. The computer chips are required by critical Department of Defense (DoD) systems, as part of growing efforts to boost the US’s capabilities when it comes to producing semiconductors. 

According to zdnet.com, the agreement is part of the first phase of a program launched by the National Security Technology Accelerator (NSTXL), called RAMP-C (Rapid Assured Microelectronics Prototypes – Commercial), with the objective of creating a US-based ecosystem of commercial fabrication plants for semiconductors, also called foundries. 

RAMP-C will ensure that the Pentagon has access to critical semiconductor technology and is also designed to strengthen overall supply chain security, keeping the US on top of the latest advances in chip design, manufacturing and packaging. 

As the only US company that both designs and produces semiconductors, Intel seems a logical choice to work on RAMP-C. Earlier this year, the company launched a dedicated foundry business called Intel Foundry Services, which will lead the work carried out together with the DoD.