US 2025 defense budget to cut semiconductor spending

On March 11, 2024, the US Department of Defense (DoD) revealed the Biden-Harris Administration's proposed fiscal year 2025 defense budget request totaling US$849.8 billion. In accordance with the government's 2022 Nationa Defense Strategy, the proposed budget considers defense against the "multi-domain challenge" posed by China and the building of a "resilient joint force and defense ecosystem" as two of its priorities. A total of US$143.2 billion has been proposed for the department's spending on Research, Development, Test, and Evaluation (RDT&E). The FY 2024 RDT&E budget was US$139.7 billion after Cost Reduction Adjustment, and the actual spending in FY 2023 was US$140.9 billion.

Among the RDT&E budget are spending on the Pentagon's microelectronics programs: Microelectronics Commons, Microelectronics Technology Development & Support, and Trusted & Assured Microelectronics. Apart from the first program funded by the CHIPS Act, the remaining two government programs have seemingly seen a decline in funding.

Microelectronics Commons

The Microelectronics Commons is a national network dedicated to bridging the gap between US microelectronics research and commercialization - a process dubbed "lab to fab." The Pentagon believes that the US is not an "innovative producer" even though it is an "innovative designer," and perceives the lack of marketability of new microelectronics innovations and their lack of access to production facilities as the two major roadblocks to domestic production. In this context, the CHIPS for America Defense Fund, created by the CHIPS Act, funds the Microelectronics Commons designated to address this valley of death. Under the Microelectronics Commons, regional hubs are created to connect researchers and designers to prototyping capabilities, focusing on six application areas focusing on edge computing, AI hardware, 5G/6G, and electronic warfare. Apart from the hubs, core facilities with 200mm wafer fabs for the CMOS process and 150nm wafer fabs for the non-CMOS process are also included in the Microelectronics Commons.

As seen in the Pentagon budget proposal, US$65 million was spent in FY 2023 to fund the applied research conducted under the Microelectronics Commons, while US$269 million was spent on advanced technology development. As the CHIPS for America Defense Fund consists of US$400 million per year in FY 2023 through 2027, the proposed defense budget designated no additional funding for Microelectronics Commons for FY 2024 and 2025.

Defense Microelectronics Activity

Microelectronics Technology Development and Support, commonly known as Defense Microelectronics Activity (DMEA), is a Defense Logistics Agency initiative to sustain weapon systems via partnerships with defense industrial bases. According to DMEA's strategic plan for the period between October 2023 and October 2026, its objectives include the provision of flexible, full-spectrum microelectronics solutions, the acceleration of microelectronics acquisition, and ensuring rapid access to advanced trusted microelectronics and accredited suppliers. In this context, the DMEA manages the Trusted Foundry program that provides the Pentagon with guaranteed access to advanced and secure microelectronics services such as prototype production and multi-project wafer runs on top of IP block library and packaging and testing services. As of February 2024, the accredited suppliers included fabs operated by GlobalFoundries (GF), SkyWater, Wolfspeed, Qorvo, and ON Semiconductor. GF's 12nm FinFET Low-Power (LP) technology (12LP+) is the most advanced node currently available in the Trusted Foundry Program.

Interestingly, the proposed budget for Microelectronics Technology Development and Support for FY 2025 is US$137.2 million - lower than the US$144.7 million (after Cost Reduction Adjustment) for FY 2024 and the actual spending of US$201 million in FY 2023.

Trusted & Assured Microelectronics (T&AM)

Likewise, the Trusted & Assured Microelectronics (T&AM) program, dedicated to modernizing defense systems through access to advanced microelectronics technologies that leverage state-of-the-art (SOTA), commercially driven capabilities, saw a drop in funding. For the Advanced Component Development & Prototype segment, T&AM saw its allocated budget dropping from US$624.3 million in FY 2023 to US$593.6 million in FY 2025, while the one for System Development & Demonstration went from US$245.4 million in FY 2023 to US$150.4 million in FY 2025. Currently, the T&AM program supports six "Technical Execution Areas", including access to advanced packaging and test, access to SOTA microelectronics, access to radiation-hardened microelectronics, and access to SOTA RF and optoelectronics microelectronics.

The State-of-the-Art Heterogeneous Integrated Packaging (SHIP) program, focusing on the development and delivery of prototype devices for military systems, alongside the Stimulating Transition for Advanced Microelectronics Packaging (STAMP) program dedicated to successfully transitioning SHIP program prototypes into military systems, are both under the T&AM program. Intel, for example, partnered with the SHIP program to develop prototype devices and delivered its first prototype – Multi-Chip Package (MCP-1) – in April 2023 and continues to be engaged in the follow-up STAMP program.

Source: US Department of Defense