DoD partners GF to manufacture more chips in US

US specialty contract chip manufacturer Global Foundries (GF) has partnered the US Department of Defense (DoD) to manufacture chips for sensitive military applications at its facility in upstate New York, underlining efforts to strengthen domestic semiconductor supply chains.

GF will manufacture chips for DoD air, sea, land and space systems on a differentiated 45 nanometer silicon-on-insulator platform at its most advanced fabrication plant, Fab 8, in Malta, New York state. Deliveries are expected to start in 2023. GF has invested over $13bn in Fab 8, which is compliant with restrictions on civilian-military dual-use goods and US international traffic in arms regulations (Itar).

The company currently supplies the DoD with chips from its Fab 10 site in East Fishkill, New York, and Fab 9 in Burlington, Vermont.

"This agreement with Global Foundries is just one step the Department of Defense is taking to ensure the US sustains the microelectronics manufacturing capability necessary for national and economic security," the DoD said.

Legislation

Two key pieces of legislation were merged into the 2020 National Defence Authorisation Act (NDAA), which passed into law at the end of last year — the Creating Helpful Incentives to Produce Semiconductors (CHIPS) for America Act, and the American Foundries Act of 2020. Along with a 40pc tax credit for semiconductor equipment and facilities, and $7bn for advanced research and development over five years, the legislation provides for $10bn in grants to attract manufacturing capacity to the US.

GF is the largest US foundry and ranks among the top three in the world. The largest globally is Taiwan's TSMC, which has over 50pc of the foundry market and meets a large share of the world's demand for chips.

The US still dominates in design, but the gap is closing and the ability to manufacture chips is increasingly critical. The high cost of building new manufacturing capacity, with large advanced fabrication plants costing up to $20bn, has led to a separation of the design and manufacturing processes across a large swathe of the industry — the so-called fabless-foundry model. The US share of global manufacturing capacity is forecast to fall to 6pc by the end of this decade without more investment.

Taiwan accounts for 22pc of global manufacturing capacity, followed by South Korea with 21pc, and China and Japan with 15pc each. The US has just 12pc, down from 40pc in the 1990s.

By Caroline Messecar