CHIPS Act to Reshape Microelectronics for Decades.

• Author: Fritze, Michael

The CHIPS and Science Act, which appropriated more than $52 billion for semiconductor research and development and manufacturing, is one of the most significant industrial policy efforts in recent history. The funds, which will be largely administered by the Department of Commerce, follow the 2021 CHIPS Act, which authorized more than $280 billion in funding for U.S.-based semiconductor research and manufacturing.

While CHIPS is poised to reshape the commercial U.S. semiconductor industry, the Defense Department and the defense industrial base have a distinct set of microelectronics needs. Today, the department uses an ever-changing combination of state-of-the-art, commercial state-of-the-practice, and in some cases, commercially obsolete microelectronics in its systems.

Though the department and its industrial base must overhaul their approach to microelectronics to match commercial timelines and fully leverage current commercial capabilities, defense platforms still rely on legacy technologies, resulting in a business model mismatch with a fast-changing commercial industry.

When the commercial market moves on before the military is prepared to upgrade its systems, the department frequently makes expensive bulk "end-of-life" purchases to anticipate future sustainment needs. Additionally, defense requires access to chips designed for special applications, including high temperature, high shock and high radiation environments.

These boutique applications require defense semiconductor suppliers to retain the workforce and infrastructure to produce key mature chip designs and rapidly transition relevant innovation into defense systems.

Such activities are not always a priority for commercial industry, especially given that the Defense Department represents less than 2 percent of the overall chip market. The department and its contractors, until now, often relied on a select group of suppliers to meet unique requirements, leading to market inefficiencies and high costs.

The CHIPS and Science Act provides $2 billion for the Pentagon's "Microelectronics Commons" program, designed to build partnerships between researchers, commercial semiconductor industry and the Pentagon. Recognizing an economy-wide need, Commerce also plans to invest nearly $10 billion into mature chip manufacturing capacity.

Additionally, its National Semiconductor Technology Center, National Advanced Packaging Manufacturing Program and the new Manufacturing USA institutes...