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Pentagon Makes First Major Awards Under Chips Act

(Bloomberg) —

The Pentagon made its first major awards under the Chips Act, designating eight regional semiconductor technology hubs Wednesday in an effort to boost US production of the advanced electronics components used in military equipment. 

The awards, totaling $238 million across applicants that represent more than 360 organizations, will go to hubs in Massachusetts, Indiana, North Carolina, Arizona, Ohio and New York, plus two in California. The Chips Act allotted the Defense Department $2 billion across five years for its Microelectronics Commons Program, which aims to spur private investment in specific chip technology needed by the military.

“That’s what we’re going to be able to do here — drive with our dollars the specific investment areas we need,” Deputy Secretary of Defense Kathleen Hicks said in a press briefing. When it comes to purchasing chips for military use, she said, “the fact that we can get that out of United States manufacturing is more secure for our supply chain.”

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The hubs are the first major investment from last year’s Chips Act, a massive, national-security driven effort to boost semiconductor manufacturing in the US and reduce reliance on Asian supply chains. Much of that effort is housed in the Commerce Department, which is gearing up to disperse about $100 billion worth of direct subsidies, loans and loan guarantees to chipmakers and suppliers, plus designate some of its own technology hubs.

The Defense Department effort targets specific aspects of chip production relevant to military use: secure-edge computing, 5G and 6G, artificial-intelligence hardware, quantum technology, electromagnetic warfare and commercial “leap-ahead” technologies. 

“DoD and its industrial base will benefit from each of these areas,” said David Honey, the deputy undersecretary for research and engineering. “We also believe that much of the work that will take place in these topic areas has a high potential for purely commercial purposes as well.”

The Microelectronics Commons program drew 83 applications, evaluated by an interagency team spanning the Departments of Commerce, State and Energy. The Defense Department doesn’t anticipate designating additional hubs in coming years, Honey said, but rather will use remaining funding to support specific semiconductor projects.

President Joe Biden’s administration is under pressure to stand up chips programs as quickly as possible, particularly given recent advances in China’s chipmaking capacity that call into question the effectiveness of US efforts to keep its most advanced technology out of Beijing’s hands. 

Honey said he anticipates the Microelectronics Commons program to produce results faster than a typical Defense Department effort. “My expectation is that you’ll probably see chips coming through this well before the five years of the program is over,” he said.

© 2023 Bloomberg L.P.


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