Consensus Study Report

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 N. KINGSCOTT, Alliance of Professionals and Consultants/IBM Research

BHAVYA LAL, NASA (retired)

OMKARAM (OM) 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 LOZOWSKI, Senior Finance Business Partner

SUDHIR SHENOY, Associate Program Officer

NOTE: See Appendix F, Disclosure of Unavoidable Conflicts of Interest.

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

RAMULU MAMIDALA, University of Washington

Y. 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

JONLYN (BRYSTOL) B. ENGLISH, Senior Program Officer

AMISHA JINANDRA, Senior Research Analyst

JOSEPH PALMER, Senior Project Assistant

HEATHER LOZOWSKI, Financial Officer

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

This page intentionally left blank.

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.

Acknowledgments

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, GlobalFoundries; 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 Under Secretary of Defense for Research and Engineering, including Dev Shenoy, Jayson McDonald, Syd Pope, Daniel Radack, and Estelle McKnight.

Contents

PREFACE

SUMMARY

1 INTRODUCTION

Study Background and Statement of Task

The Study Process and Data Gathering

The Structure of the Report

2 THE COMPETITIVE POSITION OF THE UNITED STATES IN THE SEMICONDUCTOR SECTOR

The Position of the U.S. Semiconductor Sector

Prior Periods of Government-Supported Semiconductor Public–Private Partnerships

Current State of the U.S. Semiconductor Sector as Compared with Other Nations

International Competition: The Role of National Subsidies in Semiconductor Fabrication

A Third Governmental Public–Private Partnership in Semiconductors: The CHIPS Act

Accompanying Export Controls

National Security and Economic Security Issues

Lessons for the Department of Defense from Semiconductor History

3 REDUCING BARRIERS TO SUSTAINABLE AND RESILIENT SEMICONDUCTOR PRODUCTION

Overcoming Barriers to Manufacturing

Overcoming Barriers to Lower-Cost Design

Overcoming Research and Development Barriers to Next-Generation Semiconductors

Packaging, Integration, and Other Near-Term Technologies

Post-Complementary Metal-Oxide-Semiconductor Advances

Overcoming Regulatory Barriers

Immigration

Overcoming Barriers to Modernization

Overcoming Workforce Education Barriers

4 THE ROLE OF PUBLIC–PRIVATE PARTNERSHIPS IN SUPPORTING SEMICONDUCTOR MANUFACTURING

Potomac Institute: Consortia Analysis and Recommendations Trade Study

Institute for Defense Analyses: Lessons Learned from Public–Private Partnerships and Options to Establish a New Microelectronics Public–Private Partnership

Public–Private Partnerships and Direct Support to Semiconductor Manufacturing

Public–Private Partnerships and Indirect Support to Semiconductor Manufacturing

Key Features of Successful Public–Private Partnerships

Targeting Public–Private Partnerships to Address Specific Department of Defense Equities in the Semiconductor Supply Chain

5 CHALLENGES FOR THE DEPARTMENT OF DEFENSE IN SUPPORTING SUSTAINABILITY IN THE SEMICONDUCTOR ECOSYSTEM

Background and Context

Addressing Research and Development Barriers

Artificial Intelligence Advances

Addressing Design Barriers

Addressing Bureaucratic and Regulatory Barriers

Addressing Barriers to Managing Intellectual Property Rights

Addressing Manufacturing Barriers

Addressing the Breadth of the Department of Defense’s Semiconductor Challenges

6 GENERAL PRINCIPLES FOR THE DEPARTMENT OF DEFENSE (DoD) TO FOLLOW FOR ACCELERATING THE ADOPTION OF DISRUPTIVE TECHNOLOGIES TO BENEFIT DoD AND COMMERCIAL NEEDS

Principle 1: Be a Fast Follower

Principle 2: Simplify Procurement

Principle 3: Establish Upgrade Schedules for Microelectronics Systems

Principle 4: Coordinate Closely with the Department of Commerce and Other Agencies

Principle 5: Collaborate with Leading Companies for Custom Needs

Principle 6: Ensure University Researchers and Start-Ups Have Access to Advanced Equipment

Principle 7: Support Access to Scale-Up Capital

Principle 8: Support the Transition from Prototyping to Manufacturing

Principle 9: Build International Collaborations for Access to the International Semiconductor Ecosystem

Principle 10: Streamline Environmental Reviews

Principle 11: Foster Information Exchange

7 WORKFORCE DEVELOPMENT IN THE SEMICONDUCTOR INDUSTRY

Workforce Development Gaps in the Semiconductor Sector

Workforce Development Challenges in Higher Education

Best Practice Examples for Professional Workforce Education

Workforce Development Challenges for the Technical Workforce

Best Overall Practices for Technical Workforce Education

Examples of Best Practices in Semiconductor Technical Workforce Education

Mechanisms for Support of Workforce Education for the Department of Defense to Consider

Access to Foreign-Born Scientists and Engineers

8 RECOMMENDATIONS

Modernization

Research

Design

Manufacturing

Regulatory Concerns

Intellectual Property

Workforce Development

Agency Coordination

APPENDIXES

A Statement of Task

B Public Meeting Presentations

C A Semiconductor Public–Private Partnership Playbook

D Summary Description of the CHIPS and Science Act of 2022

E Committee Member Biographical Information

F Disclosure of Unavoidable Conflicts of Interest

G Acronyms and Abbreviations

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 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 both for 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 they 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.

The committee also thanks the director of the National Materials and Manufacturing Board, Michelle Schwalbe, and senior program officer and study director, Jonlyn (Brystol) B. 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