Globalfoundries, the top US contract chip manufacturer, said it is expanding its supply agreement with the Department of Defense, manufacturing military-grade chips at its most advanced semiconductor fab for use in satellites, missiles, tanks, airplanes and other sensitive aerospace and defense gear.
As part of the deal, the Santa Clara, California-based company said it will provide a secure supply of chips for use in future land, air, sea, and space systems at its Fab 8 production plant located in upstate New York. Under the agreement, Globalfoundries said it will start shipping the first chips, which will be based on its 45-nanometer silicon-on-insulator (SOI) process technology, to the Pentagon in 2023.
Thomas Caulfield, CEO of Globalfoundries, said the semiconductor foundry was "pleased" to strengthen its long-standing partnership with the Defense Department. He added in a statement that the pact will “ensure America has the manufacturing capability it needs to meet the growing demand for US made, advanced semiconductor chips for the nation’s most sensitive defense and aerospace applications."
The contract chip manufacturer said it was able to expand the agreement after upgrading the plant to meet US International Traffic in Arms Regulations (ITAR) and Export Administration Regulations (EAR) standards. Globalfoundries said it's also looking to gain "trusted foundry" status for the fab, a coveted certification that would allow it to supply chips for more sensitive US defense and aerospace systems.
The deal boosts the company's status as a key supplier to the US defense and aerospace sector. Today, the company build chips for the US Department of Defense at its other US production plants—Fab 10 in upstate New York and Fab 9 in Vermont, both of which maintain "trusted foundry" status. The Fab 9 plant, which Globalfoundries acquired from IBM, became the first trusted fab in the country in 2005.
US chip executives, including at Globalfoundries, have also urged President Biden to funnel more federal funding to US fabs to reinforce US leadership in chips and securely supply such components to the DoD.
In all, Globalfoundries said it has invested more than $15 billion in its US fabs within the last decade.
The Department of Defense said the deal is a “precursor” to other programs that promise to bring more chip manufacturing to the US, such as the CHIPS for America Act, championed by politicians from both parties, including Senate Majority Leader Chuck Schumer (D-NY). The program was enacted last year to roll out subsidies for fab construction. But Congress still needs to set out specific funding for the effort.
Today, many US semiconductor firms are fabless and outsource the production of their most advanced chips to Asia. TSMC and Samsung Electronics are the largest contract chip makers in the world by far. Worries about chip manufacturing in the US have come into focus in recent years as industry leaders highlight the sharp drop in the US share of global chip production, which slipped to about 12% in 2020.
Intel is not a major player the business of building chips for other firms and it has been hammered by delays in rolling out its new production processes. Globalfoundries has also halted development of its most advanced chips due to cost pressure. These stumbles have raised concerns about US access to advanced logic chips, which are key elements of everything from missile defense radar to combat jets.
The demand for more self-sufficiency in semiconductors is growing as the US wages a technology cold war with China, which is spending billions of dollars to boost its domestic chip production and uncouple its technology supply chain. A global shortage of chips, which has upended the automobile industry and set the electronics industry on its heels, has also put the spotlight on semiconductors in recent months.
Globalfoundries employs almost 3,000 people at Fab 8 and has invested $13 billion there. The company is also considering whether to expand the plant to handle higher demand from defense, aerospace, and other customers.