Defense Chip Procurement Needs a Recovery Test

A second semiconductor factory is useful to the Pentagon only if it can deliver the component a military customer needs when the first route fails. Spare fabrication capacity may still depend on an unavailable packaging plant, a specialist maintenance team, or the same transport corridor. A procurement file can show diversification while a maintenance unit faces a shortage.

An October 9 report from the Semiconductor Industry Association makes the distinction timely. It finds that 95% of the equipment and materials consumed by U.S. semiconductor producers comes from suppliers headquartered in the United States, Europe, and Japan, while those inputs are manufactured across the globe. A supplier’s headquarters can therefore give a reassuring picture of allied sourcing while leaving important production dependencies out of view.

Defense buyers should ask suppliers to demonstrate recovery for selected critical components. The demonstration should follow a part through production, packaging, and delivery, against the time its military user can tolerate an interruption. That would give procurement officers a firmer basis for deciding which promises of resilience deserve credit.

This proposal builds on an established understanding of the industry. The National Academies’ study of assured semiconductor access treats defense needs across a wider microelectronics system, including advanced packaging. NIST’s National Advanced Packaging Manufacturing Program likewise recognizes that manufacturing investment needs corresponding packaging capability. A recovery exercise would bring that systems perspective into a particular purchasing decision.

The customer should begin by specifying the operational need. How long will existing stocks last? Which substitutes have already been qualified? Would switching suppliers require redesign or new testing? These answers establish the recovery period that matters. They also keep an exercise proportionate: a readily replaceable commodity part should require less scrutiny than a component whose loss would ground a critical system.

For the components selected, suppliers should document the dependencies that could prevent recovery. Backup power depends on fuel and maintenance. An alternate packaging site must be technically qualified and contractually available. Two factories relying on the same specialist team may share a vulnerability despite their geographical separation. The review should identify where an asserted alternative becomes usable, and what must happen before then.

A tabletop discussion can expose these connections, but some claims need operational evidence. Participants could demonstrate that a qualified packaging facility can accept an order, test an alternate communication channel or establish a realistic delivery time for replacement material. Where a demonstration is impractical, the record should distinguish a verified capability from an assumption awaiting a test. That distinction helps a buyer judge the remaining risk.

The exercise must also make candor commercially possible. Suppliers incur costs in preparing evidence, reserving alternate capacity, and correcting weaknesses. Government should pay for defined additional work where appropriate and give firms a reasonable opportunity to repair problems. If identifying a weakness merely invites punishment, suppliers have an incentive to produce reassuring paperwork. Procurement should reward demonstrated correction while treating concealment and repeated failure differently.

Defense and Commerce officials could start with a small pilot involving willing suppliers and relevant partners in Taiwan, Japan, and Europe. Existing contractual authorities and commercial agreements should govern participation. Any new funding condition would need the appropriate legal review. Beginning with a manageable set of critical dependencies would let officials learn what evidence is useful before expanding the requirement.

Detailed facility weaknesses, inventories, and delivery routes should remain protected. Public reporting can describe the scope of the exercise, broad recovery times, and completion of corrective work. It should also show what remains untested, so that a successful demonstration for a few components does not become a claim about the entire network.

A procurement decision could then weigh an available, qualified packaging route more heavily than an additional fabrication announcement that leaves the bottleneck untouched. Consequences should follow the component’s importance and the terms of the contract. Where no feasible commercial backup meets the required time, military planners would have a clearer reason to consider larger stocks, redesign, or a different operational assumption.

A pilot template within six months, followed by an exercise and corrective review within a year, would be a practical starting point. The result should be a purchasing officer who can explain how a critical part would reach its user after a disruption, which links have been tested and where supply could still fail. Defense spending should buy that knowledge along with capacity.

Percy Yixuanchen Yu is the Inaugural Visiting Fellow at the School of International Studies, Nanjing University; a Visiting Scholar at the Huazhi Institute for Global Governance; and a Non-resident Fellow at the Institute of Campaign Finance.