Military pressing for edge on tech

Chip execs urged to open U.S. lines

SAN FRANCISCO — Pentagon officials have been holding private discussions with technology industry executives to wrestle with a key question: how to ensure future supplies of the advanced computer chips needed to retain America’s military edge.

The talks, some of which predate President Donald Trump’s administration, recently took on an increased urgency, according to people who were involved or briefed on the discussions. Pentagon officials encouraged chip executives to consider new production lines for semiconductors in the United States, said the people, who declined to be identified because the talks were confidential.

The discussions are being driven by the Pentagon’s increased dependence on chips made abroad, especially in Taiwan, as well as recent tensions with China, these people said.

One chipmaker, Taiwan Semiconductor Manufacturing Co., plays a particularly crucial role producing commercial chips that also have applications for aircraft, satellites, drones and wireless communications. And because of unrest over the past few months

in the semiautonomous Chinese territory of Hong Kong, some Pentagon officials and chip executives have wondered about situations that could force suppliers in Taiwan to limit or cut off silicon shipments, the sources said.

Mark Liu, the chairman of Taiwan Semiconductor, said he had recently discussed options for a new factory in the United States with the Commerce Department. The stumbling block was money; major subsidies would be required, he said, as it is more expensive to operate in America than Taiwan.

“It is all up to when we can close the cost gap,” he said in an interview.

The conversations are a sign of how federal agencies are grappling with a deep-rooted technology conundrum. The United States has long fielded the most advanced weaponry by exploiting electronic components once exclusively produced in the country.

But domestic production lines of many chips have long since moved overseas, raising questions about supply interruptions in the event of political or military crises abroad.

Some chips, such as the wireless base-band processors

needed for new 5G communications abilities that Pentagon officials covet, require advanced manufacturing technology that has become a key selling point of Taiwan Semiconductor.

“We in the Defense Department cannot afford to be shut out of all of those capabilities,” said Lisa Porter, deputy undersecretary for research and engineering, in remarks at an event in July that were later widely circulated among chipmakers.

Porter, at a technology event Wednesday in Los Angeles, said secure supply chains for both essential components and software were a “macro” issue that the Pentagon and the tech industry had to collaborate on. She declined to discuss specific efforts to bolster American chip production.

In another sign of action, Skywater Technology, a Minnesota chip manufacturing service, said this week that the Defense Department would invest up to $170 million to increase its production and enhance technologies, such as the ability to produce chips that can withstand radiation in space.

The Skywater investment illustrates how the Pentagon also is wrestling with how to upgrade aging technology at domestic companies that make small volumes of classified chips tailored for the military. Such “trusted” factories, as they

are called, operate under Pentagon rules aimed at preventing sabotage or data theft.

Porter and other Pentagon officials have pushed for new technical safeguards besides guards and employee background checks to keep sensitive chip designs secure, a strategy that would help the Defense Department use more advanced commercial factories. She called the idea a “zerotrust” philosophy.

Taiwan Semiconductor, which dominates the build-toorder services called foundries, recently took the lead from Intel in shrinking chip circuitry to give chips greater capability. Its production edge is one reason the company has continued to win business from big American chip designers such as Apple, Qualcomm and Nvidia, whose chips have become increasingly important for defense as well as civilian applications.

The United States remains the leading supplier and innovator in most chip technologies, including the processors that Intel sells for nearly all personal computers and server systems. But the Pentagon’s research arm, the Defense Advanced Research Projects Agency, has been trying since 2017 to spur chip innovations under a $1.5 billion Electronics Resurgence Initiative.

Its goals include finding alternatives to silicon for manufacturing and packaging small “chiplets” together instead of making big monolithic chips.

“We have vulnerabilities we really need to address, but we are still the dominant producer of electronics in the world,” said Mark Rosker, the director of the defense research agency’s microsystems technology office. He said questions about the American semiconductor industry called for “a graceful and considered kind of panic.”

Much of the recent urgency stems from China’s growing stature as a chip innovator. Designers there have developed chips for sensitive applications such as supercomputers. Many of the designers — including Huawei, a key target of the Trump administration in the trade war — also rely on Taiwan Semiconductor for manufacturing.

At a recent panel of semiconductor industry veterans in Silicon Valley, the concern about an overreliance on Taiwan Semiconductor was evident.

The panelists suggested that the federal government should subsidize more domestic chip production. But advanced commercial factories can cost as much as $15 billion, plus the additional recurring costs to run, staff and supply such facilities.