Developing ways to ascertain and monitor the provenance of semiconductor products will become ever more important. Related issues of hardware and software verification and validation will continue to be critical issues, particularly as the complexity of systems continues to rise.

In addition to challenges related to integrity and security, the global interdependence of design, component fabrication, and assembly means that risks of disruption due to natural disasters, political conflict, or constrained access to raw materials become greater. A single event, such as the March 2011 earthquake-tsunami in Japan or the more recent floods in Thailand, can disrupt global product deliveries for months.6 Similarly, restrictions on shipments of rare earths, key elements of chip fabrication, can stall production lines. The globalization of science and technology (S&T) and of the computing marketplace in combination with specialization (only a few suppliers of a particular component) and just-in-time inventory practices all add to the risk as well. More generally, a disaster or a well-targeted action from an adversary could constrain or interrupt global supplies, potentially placing the United States in a defensive position due to competing demands between U.S. defense needs, commercial production requirements, and the producing region’s own needs.

4.3 Decline of Custom Production

A decrease in the number of specialized companies able to make custom products for defense needs is also relevant to national security. Although commercial off-the-shelf (COTS) products are widely used in defense materials, there are specialized components and products that are not commodity products.

This reduction is driven in part by the exponentially rising cost of state-of-the-art fabrication facilities, which places a premium on volume production. In turn, this limits the economic incentive for any company to respond to the defense needs for specialized devices—for example, the capacity to design and fabricate radiation-resistant integrated circuits (ICs). Further, the concentration of design and production to a small group of dominant market players that make commoditized products may significantly increase costs.

4.4 Convergence of Civilian and Defense Technological Capabilities

The convergence of civilian and defense technologies is accelerating, driven by rapid and cost-effective technological progress in a highly competitive commercial marketplace, especially as compared with the often lengthy and rigid procurement processes in the defense sector. Convergence is most evident in electronics, where a growing proportion of U.S. defense needs are being met by COTS technologies. At the same time, the U.S. defense establishment’s ability to influence the development of the global semiconductor industry, similarly to what happened with supercomputers (which create the chip components of COTS products) through sheer volume has been reduced. For instance, the U.S. military accounted for a large proportion of sales from the global semiconductor industry in that industry’s formative years, but that proportion had fallen to just 1 percent of global microcircuit sales by the late 2000s.7

The convergence between civilian and defense hardware capabilities and ease of access to openly available technological products that may be just as good or even more advanced than equivalent defense technologies has implications for U.S. defense.8 In particular, such convergence allows greater opportunity for adversaries to narrow the technological gap with the United States. In such an environment, time to integration and time to deployment will be the primary factors that determine technical superiority, rather than who is the first to develop a particular technology.

This suggests that deeper awareness of the differing processes and timescales for hardware and software development must be part of the design and procurement process. Semiconductor design and fabrication, as well as subsequent integration of fabricated chips, have a substantial lead time. Although it is possible to develop portions of new software systems with simulators and emulators, integration and complete testing is dependent on hardware availability. Thus, the overall time to deployment of new hardware and software systems will be especially critical when the software requirements for

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Trusted_Integrated_Circuits_%28TRUST%29.aspx, last accessed on February 7, 2012) that seeks to “provide trust in the absence of a ‘trusted foundry’.”

6As an example, the shortages of disk drives and flash memory resulting from the Japan and Thailand natural disasters affected many devices and vendors. See http://www.isuppli.com/Home-and-Consumer-Electronics/News/Pages/IHS-iSuppli-NewsFlash-Thailand-Flood-Spurs-Nearly-4-Million-Unit-Shortfall-in-PC-Shipments-in-Q1-2012.aspx Last accessed on February 7, 2012.

7Annual Industrial Capabilities Report to Congress, 2008 (Washington D.C.: Office of Under Secretary of Defense Acquisition, Technology and Logistics Industrial Policy, February 2008).

8An ongoing NRC study, Ethical and Societal Implications of Advances in Militarily Significant Technologies that are Rapidly Changing and Increasingly Globally Accessible is exploring these issues.



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