Strategies to Enable Assured Access to Semiconductors for the Department of Defense (2024)

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Strategies to Enable Assured Access to Semiconductors for the Department of Defense Committee on Global Microelectronics: Models for the Department of Defense in Semiconductor Public Private Partnerships National Materials and Manufacturing Board Division on Engineering and Physical Sciences Board on Science, Technology, and Economic Policy Policy and Global Affairs Consensus Study Report PREPUBLICATION COPY—Subject to Further Editorial Correction 

NATIONAL ACADEMIES PRESS 500 Fifth Street, NW Washington, DC 20001 This activity was supported by Contract HQ0034-22-C-0100 with the Department of Defense. Any opinions, findings, conclusions, or recommendations expressed in this publication do not necessarily reflect the views of any organization or agency that provided support for the project. International Standard Book Number-13: 978-0-309-XXXXX-X International Standard Book Number-10: 0-309-XXXXX-X Digital Object Identifier: https://doi.org/10.17226/27624 This publication is available from the National Academies Press, 500 Fifth Street, NW, Keck 360, Washington, DC 20001; (800) 624-6242 or (202) 334-3313; http://www.nap.edu. Copyright 2024 by the National Academy of Sciences. National Academies of Sciences, Engineering, and Medicine and National Academies Press and the graphical logos for each are all trademarks of the National Academy of Sciences. All rights reserved. Printed in the United States of America. Suggested citation: National Academies of Sciences, Engineering, and Medicine. 2024. Strategies to Enable Assured Access to Semiconductors for the Department of Defense. Washington, DC: The National Academies Press. https://doi.org/10.17226/27624. PREPUBLICATION COPY – SUBJECT TO FURTHER EDITORIAL CORRECTION 

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Consensus Study Reports published by the National Academies of Sciences, Engineering, and Medicine document the evidence-based consensus on the study’s statement of task by an authoring committee of experts. Reports typically include findings, conclusions, and recommendations based on information gathered by the committee and the committee’s deliberations. Each report has been subjected to a rigorous and independent peer-review process and it represents the position of the National Academies on the statement of task. Proceedings published by the National Academies of Sciences, Engineering, and Medicine chronicle the presentations and discussions at a workshop, symposium, or other event convened by the National Academies. The statements and opinions contained in proceedings are those of the participants and are not endorsed by other participants, the planning committee, or the National Academies. Rapid Expert Consultations published by the National Academies of Sciences, Engineering, and Medicine are authored by subject-matter experts on narrowly focused topics that can be supported by a body of evidence. The discussions contained in rapid expert consultations are considered those of the authors and do not contain policy recommendations. Rapid expert consultations are reviewed by the institution before release. For information about other products and activities of the National Academies, please visit www.nationalacademies.org/about/whatwedo. PREPUBLICATION COPY – SUBJECT TO FURTHER EDITORIAL CORRECTION 

COMMITTEE ON GLOBAL MICROELECTRONICS: MODELS FOR THE DEPARTMENT OF DEFENSE IN SEMICONDUCTOR PUBLIC–PRIVATE PARTNERSHIPS LIESL FOLKS, University of Arizona, Chair MARK T. BOHR (NAE), Intel Corporation (retired) WILLIAM B. BONVILLIAN, Massachusetts Institute of Technology PATRICIA CAMPBELL, University of Maryland Carey School of Law WILLIAM CHAPPELL, Microsoft KENNETH FLAMM, The University of Texas at Austin (Emeritus) KATHLEEN KINGSCOTT, Alliance of Professionals and Consultants/IBM Research BHAVYA LAL, NASA (retired) OMKARAM NALAMASU (NAE), Applied Materials ELIAS TOWE (NAE), Carnegie Mellon University JOHN VERWEY, Pacific Northwest National Laboratory Study Staff JONLYN (BRYSTOL) B. ENGLISH, Senior Program Officer, National Materials and Manufacturing Board (NMMB), Study Director MICHELLE SCHWALBE, Director, NMMB ERIK SVEDBERG, Scholar, NMMB AMISHA JINANDRA, Senior Research Analyst, NMMB JOE PALMER, Senior Project Assistant, NMMB HEATHER LOWZOWSKI, Senior Finance Business Partner SUDHIR SHENOY, Associate Program Officer NOTE: See Appendix F, Disclosure of Unavoidable Conflicts of Interest. PREPUBLICATION COPY – SUBJECT TO FURTHER EDITORIAL CORRECTION v 

NATIONAL MATERIALS AND MANUFACTURING BOARD THERESA KOTANCHEK (NAE), Evolved Analytics, LLC, Chair JOHN KLIER (NAE), University of Oklahoma, Vice Chair KEVIN R. ANDERSON (NAE), Brunswick Corporation CRAIG ARNOLD, Princeton University FELICIA J. BENTON-JOHNSON, Georgia Institute of Technology WILLIAM B. BONVILLIAN, Massachusetts Institute of Technology JIAN CAO (NAE), Northwestern University ELLIOT L. CHAIKOF (NAM), Harvard University JULIE A. CHRISTODOULOU, Office of Naval Research (retired) TERESA CLEMENT, Raytheon Missile Systems AMIT GOYAL (NAE), State University of New York at Buffalo JULIA R. GREER, California Institute of Technology SATYANDRA K. GUPTA, University of Southern California BRADLEY A. JAMES, Exponent, Inc. THOMAS R. KURFESS (NAE), Georgia Institute of Technology MICHAEL (MICK) MAHER, Maher & Associates, LLC RAMALU MAMIDALA, University of Washington SHIRLEY MENG, University of Chicago OMKARAM (OM) NALAMASU (NAE), Applied Materials, Inc. DENNIS SYLVESTER, University of Michigan MATTHEW J. ZALUZEC (NAE), University of Florida Staff MICHELLE SCHWALBE, Director, National Materials and Manufacturing Board and Board on Mathematical Sciences and Analytics ERIK SVEDBERG, Scholar BRYSTOL ENGLISH, Senior Program Officer AMISHA JINANDRA, Senior Research Analyst JOSEPH PALMER, Senior Project Assistant HEATHER LOZOWSKI, Financial Officer PREPUBLICATION COPY – SUBJECT TO FURTHER EDITORIAL CORRECTION 

BOARD ON SCIENCE, TECHNOLOGY, AND ECONOMIC POLICY ADAM B. JAFFE, Brandeis University, Chair NOËL BAKHTIAN, Bezos Earth Fund BRENDA DIETRICH (NAE), Cornell University BRIAN G. HUGHES, HBN Shoe LLC PAULA E. STEPHAN, Georgia State University SCOTT STERN, Massachusetts Institute of Technology Sloan School of Management JOHN C. WALL (NAE), Cummins Inc. (retired) Ex Officio Members JOHN L. ANDERSON (NAE), National Academy of Engineering VICTOR J. DZAU (NAM), National Academy of Medicine MARCIA MCNUTT (NAS/NAE), National Academy of Sciences Staff GAIL COHEN, Senior Director DAVID DIERKSHEIDE, Program Officer RENEE DALY, Senior Program Assistant CLARA SAVAGE, Financial Officer PREPUBLICATION COPY – SUBJECT TO FURTHER EDITORIAL CORRECTION vii 



Reviewers This Consensus Study Report was reviewed in draft form by individuals chosen for their diverse perspectives and technical expertise. The purpose of this independent review is to provide candid and critical comments that will assist the National Academies of Sciences, Engineering, and Medicine in making each published report as sound as possible and to ensure that it meets the institutional standards for quality, objectivity, evidence, and responsiveness to the study charge. The review comments and draft manuscript remain confidential to protect the integrity of the deliberative process. We thank the following individuals for their review of this report: LYNDEN ARCHER (NAE), Cornell University DAVID AWSCHALOM (NAS/NAE), University of Chicago MEGAN BREWSTER, Impinj STEPHANIE BUTLER, WattsButler, LLC AMIT GOYAL (NAE), State University of New York at Buffalo MELISSA GRUPEN-SHEMANSKY, SEMI SANDRA HYLAND, Northrup Grumman Corporation SAMSON JENEKHE (NAE), University of Washington JUDITH MILLER, Independent Consultant Although the reviewers listed above provided many constructive comments and suggestions, they were not asked to endorse the conclusions or recommendations of this report nor did they see the final draft before its release. The review of this report was overseen by JENS-UWE KUHN, Santa Barbara City College, and DIANE CHONG (NAE), Boeing Research and Technology (retired). They were responsible for making certain that an independent examination of this report was carried out in accordance with the standards of the National Academies and that all review comments were carefully considered. Responsibility for the final content rests entirely with the authoring committee and the National Academies. PREPUBLICATION COPY – SUBJECT TO FURTHER EDITORIAL CORRECTION ix 



Acknowledgements The committee would like to thank the following individuals who added to the members’ understanding of the fields of semiconductors and public–private partnerships: Dan Armbrust, Silicon Catalyst; Rob Atkinson, Information Technology and Innovation Foundation; Mike Burkland, Raytheon Missile Systems; Patty Chang-Chien, Boeing Research and Technology; Victoria Coleman, U.S. Air Force; Antonio de la Serna, Siemens Government Technologies; Doug Fuller, Copenhagen Business School; Erik Hadland, Semiconductor Industry Association; Ezra Hall, Global Foundries; Dan Hutchison, TechInsights; Mukesh Khare, IBM; Lode Lauwers, IMEC; Mark LaViolette, Deloitte; James Li, BAE Systems; Eric Lin, CHIPS Research and Development Office; Christina Lomasney, Pacific Northwest National Laboratory; Thomas Lopez, Boston Consulting Group; Robert McFarland, Contractor Support for the Department of Defense; Vivek Menon, National Reconnaissance Office; Chris Miller, The Fletcher School at Tufts University; Bora Nikolic, University of California, Berkeley; Ramiro Palma, Boston Consulting Group; Leah Palmer, Mesa Community College, Maricopa Community Colleges; Vanessa Pena, Department of Energy; Jason Rathje, Department of Defense; Melinda Reed, Department of Defense; Jon Rolf, National Security Agency National Information Assurance Partnership; Mark Rosker, Department of Defense; Paul Schaum, National Reconnaissance Office; Tyler Schmidt, Intel Corporation; Brent Segal, Lockheed Martin; Arun Seraphin, National Defense Industry Association’s Emerging Technologies Institute; Sujay Shivakumar, Center for Strategic and International Studies; Christie Simons, Deloitte; Alison Smith, Naval Surface Warfare Center-Crane Division; Bryan Smith, Naval Surface Warfare Center-Crane Division; Duncan Stewart, Deloitte; Neil Thompson, Massachusetts Institute of Technology; Sowmya Venkataramani, Intel Corporation; and Terri Wetteland, Intel Corporation. The committee also reached out to several other semiconductor-related entities who declined the invitation to meet with the committee. The committee would specifically like to thank those who helped support this study on behalf of the Office of the Undersecretary of Defense of Research and Engineering, including Dev Shenoy, Jayson McDonald, Syd Pope, Daniel Radack, and Estelle McKnight. PREPUBLICATION COPY – SUBJECT TO FURTHER EDITORIAL CORRECTION xi 



Contents PREFACE xvii SUMMARY 1 1 INTRODUCTION 9 Study Background and Statement of Task, 9 The Study Process and Data Gathering, 11 The Structure of the Report, 11 2 THE COMPETITIVE POSITION OF THE UNITED STATES IN THE SEMICONDUCTOR SECTOR 12 The Position of the U.S. Semiconductor Sector, 12 Prior Periods of Government Supported Semiconductor Public–Private Partnerships, 14 Current State of the U.S. Semiconductor Sector Compared with Other Nations, 21 International Competition: The Role of National Subsidies in Semiconductor Fabrication, 28 A Third Governmental Public–Private Partnership in Semiconductors: The CHIPS Act, 32 Accompanying Export Controls, 34 National Security and Economic Security Issues, 35 Lessons for DoD from Semiconductor History, 37 3 REDUCING BARRIERS TO SUSTAINABLE AND RESILIENT SEMICONDUCTOR PRODUCTION 42 Overcoming Barriers to Manufacturing, 43 Overcoming Barriers to Lower-Cost Design, 50 Overcoming Research and Development Barriers to Next-Generation Semiconductors, 51 Packaging, Integration, and Other Near-Term Technologies, 53 Post-Complimentary Metal-Oxide-Semiconductor Advances, 54 Overcoming Regulatory Barriers, 55 Immigration, 58 Overcoming Barriers to Modernization, 59 Overcoming Workforce Education Barriers, 59 4 THE ROLE OF PUBLIC–PRIVATE PARTNERSHIPS IN SUPPORTING SEMICONDUCTOR MANUFACTURING 60 Potomac Institute: Consortia Analysis and Recommendations Trade Study, 61 Institute for Defense Analyses: Lessons Learned from Public–Private Partnerships and Options to Establish a New Microelectronics Public–Private Partnership, 62 Public–Private Partnerships and Direct Support to Semiconductor Manufacturing, 63 Public–Private Partnerships and Indirect Support to Semiconductor Manufacturing, 66 Key Features of Successful Public–Private Partnerships, 66 Targeting Public–Private Partnerships to Address Specific DoD Equities in the Semiconductor Supply Chain, 73 PREPUBLICATION COPY – SUBJECT TO FURTHER EDITORIAL CORRECTION xiii 

5 CHALLENGES FOR THE DEPARTMENT OF DEFENSE IN SUPPORTING SUSTAINABILITY IN THE SEMICONDUCTOR ECOSYSTEM 82 Background and Context, 82 Addressing Research and Development Barriers, 84 Artificial Intelligence Advances, 87 Addressing Design Barriers, 87 Addressing Bureaucratic and Regulatory Barriers, 89 Addressing Barriers to Managing Intellectual Property Rights, 91 Addressing Manufacturing Barriers, 96 Addressing the Breadth of DoD’s Semiconductor Challenges, 98 6 GENERAL PRINCIPLES FOR THE DEPARTMENT OF DEFENSE (DOD) TO ADOPT IN ACCELERATING THE ADOPTION OF DISRUPTIVE TECHNOLOGIES TO BENEFIT DOD AND COMMERCIAL NEEDS 100 Principle 1: Be a Fast Follower, 100 Principle 2: Simplify Procurement, 100 Principle 3: Establish Upgrade Schedules for Microelectronics Systems, 100 Principle 4: Coordinate Closely with the Department of Commerce and Other Agencies, 101 Principle 5: Collaborate with Leading Companies for Custom Needs, 102 Principle 6: Ensure University Researchers and Startups Have Access to Advanced Equipment, 102 Principle 7: Support Access to Scale-Up Capital, 102 Principle 8: Support the Transition from Prototyping to Manufacturing, 102 Principle 9: Build International Collaborations for Access to the Full Semiconductor Ecosystem, 104 Principle 10: Streamline Environmental Reviews, 104 Principle 11: Foster Information Exchange, 104 7 WORKFORCE DEVELOPMENT IN THE SEMICONDUCTOR INDUSTRY 106 Workforce Development Gaps in the Semiconductor Sector, 106 Workforce Development Challenges in Higher Education, 108 Best Practice Examples for Professional Workforce Education, 108 Workforce Development Challenges for the Technical Workforce, 109 Best Overall Practices for Technical Workforce Education, 110 Examples of Best Practices in Semiconductor Technical Workforce Education, 111 Mechanisms for Support of Workforce Education for the Department of Defense to Consider, 113 Access to Foreign-Born Scientists and Engineers, 114 8 RECOMMENDATIONS 116 Modernization, 116 Research, 116 Design, 117 Manufacturing, 117 Regulatory Concerns, 118 Intellectual Property, 118 Workforce Development, 119 Agency Coordination, 119 APPENDIXES A Statement of Task 123 B Public Meeting Presentations 124 C A Semiconductor Public–Private Partnership Playbook 128 PREPUBLICATION COPY – SUBJECT TO FURTHER EDITORIAL CORRECTION xiv 

D Summary Description of the CHIPS and Science Act of 2022 130 E Committee Member Biographical Information 132 F Disclosure of Unavoidable Conflicts of Interest 136 G Acronyms and Abbreviations 138 PREPUBLICATION COPY – SUBJECT TO FURTHER EDITORIAL CORRECTION xv 



Preface Pursuant a congressionally mandated request, the Department of Defense (DoD) asked the National Academies of Sciences, Engineering, and Medicine to form an ad hoc review committee to assess public–private partnership (PPP) models that have the potential to enable sustainable and resilient production of semiconductor chips in the United States. DoD requires access to both commercial-off-the-shelf (COTS) semiconductor chips (e.g., those routinely used in computers and electronics) and highly specialized, custom-built chips (e.g., for application in radar systems, high-power density electronics, extreme environments, high-sensitivity sensor systems, and in systems requiring higher voltage and frequency ranges than commercial applications). While DoD’s chip needs have grown over time as defense technologies have advanced, this growth has been dwarfed by the rapid expansion of commercial semiconductor applications, such that today DoD represents less than 2 percent of the total U.S. market. At the same time, the increased complexity of semiconductor chip architectures has driven up the price for designing and fabricating leading-edge, application-specific integrated circuits, creating price constraints for DoD-specific systems. Finally, the entire semiconductor supply chain has become increasingly globalized over the past three decades, such that the U.S. semiconductor sector today is strongly dependent on other nations, including for defense needs. These intersecting factors have created a challenging environment for DoD, sometimes frustrating its efforts to be nimble and innovative with technologies incorporating semiconductor chips. This report of the Committee on Global Microelectronics: Models for the Department of Defense in Semiconductor Public–Private Partnerships recommends that the relationship between the commercial and defense semiconductor chip sectors should be strengthened, and that the nation’s defense needs can be most efficiently and effectively met by DoD leveraging relationships with commercial manufacturers for both COTS parts and for many, although certainly not all, custom parts. In some sense, the committee advocates for a turn toward an earlier engagement model, operational in the latter part of the 20th century, in which DoD was a valued partner to companies in this sector by supporting new advances, and less an arm’s length chip customer. Overall, DoD needs to become nimbler, adjust its bureaucracy, and move beyond its system of captive fabricators and trusted fabricators toward a more flexible engagement with the sector. Clearly, PPPs can continue to be important vehicles for nurturing these relationshipsby providing trusted forums for knowledge sharing and partnership formation. This report cautions, however, that there are already many PPPs operating in the semiconductor space. Rather than DoD launching more PPPs, it would be wise to first make every effort to work within the existing network of PPPs to achieve DoD’s strategic objectives. This caution reflects the findings of many prior reports that concluded that successful PPPs take considerable time and careful leadership to establish and to set on the path to productive outcomes, and also require significant, sustained, multi decade investments to yield the results the committee seeks in terms of an energized supply chain and a coordinated, coherent technology strategy that yields competitive differentiation. In executing its charge, the committee met 29 times, with 11 closed sessions and 18 public sessions between May and December 2023, and 8 times, with 5 closed sessions and 3 public sessions in January and February 2024. The committee is particularly grateful to the many people and organizations that have generously provided the information needed to compile this report. A broad array of speakers from government, industry, consultant organizations, nonprofit trade organizations, and academia gave input to the committee. The committee thanks the individuals who made contributions to this study and participated in the committee’s meetings. PREPUBLICATION COPY – SUBJECT TO FURTHER EDITORIAL CORRECTION xvii 

The committee also thanks the director of the National Materials and Manufacturing Board, Michelle Schwalbe, and senior program officer and study director, Brystol English, for their help and guidance in performing this study. We also express special appreciation to project staff Erik Svedberg, Amisha Jinandra, Joe Palmer, Sudhir Shenoy, and Mason Klemm for assistance with meeting arrangements. Liesl Folks, Chair Committee on Global Microelectronics: Models for the Department of Defense in Semiconductor Public– Private Partnerships PREPUBLICATION COPY – SUBJECT TO FURTHER EDITORIAL CORRECTION xviii