The US Industrial Base is Sweating the Small Stuff


The US Office of the Secretary of Defense for Acquisition & Sustainment (OSD A&S) released its “Fiscal Year 2020 Industrial Capabilities Report to Congress” a few weeks ago. It focuses on the industrial base supporting the US armed forces broken down by both industrial sector and technology area. Of note, many critical “miniature” technologies were discussed with significant foreign dependency risk archetypes.

A Super-Short History of Silicon Valley

We talked about semiconductors a few weeks ago, but a history lesson is needed to understand why we are facing such a shortage and shrinking industrial base. Let’s go back in time to understand how the semiconductor industry took hold in the US starting in the 1950s.

1950s - The transistor, the foundational component of integrated circuits, was brought home to the Santa Clara Valley through the formation of the Shockley Semiconductor Laboratory by William Shockley in 1955. In 1957, the traitorous eight, including Gordon Moore (future founder of Intel), left the lab to start Fairchild Semiconductor. The US Navy, Air Force, and NASA took notice and set-up nearby in order to respond to Russia’s Sputnik. Silicon Valley firms begin to land large government contracts to supply the military with high performance integrated circuits.

1960s - The military kept the pressure on improving process technology to make semiconductors more reliable and smaller for military applications. NASA was said to be buying 60 percent of all integrated circuits produced within the US in the mid-1960s. By the end of the decade the cost of a integrated circuit reduced from ~$30 to ~$1.

1970s - Gordon Moore and Intel create the world’s first microprocessor chip in 1971 and make subsequent advances throughout the decade. The venture capital industry begins to take hold with the arrival of Kleiner Perkins and Sequoia Capital and culminates the decade with the IPO of Apple Computer. NASA, the US Air Force, and ARPA, conceive of ARPANET the precursor to the Internet.

1980s - Key software tools, designs, and protocols are developed to make use of microprocessors which have become smaller and use less power. Hardware (integrated circuits and microprocessors) designs and architectures continue to proliferate.

1990s - Venture capital starts flowing primarily to software firms that focus on Internet applications rather than hardware designs. US government involvement in the Silicon Valley microelectronics ecosystem largely evaporates.

2000s - The investment focus remains on software, as hardware companies struggle to overcome the large investment required to create foundries and new semiconductor manufacturing processes and pure-play software business models are identified.

2010s - The remaining national champions of semiconductor technology begin to show cracks (Intel) or outsource the manufacture of their chips completely (Qualcomm, NVIDIA, AMD).

Why Does this Matter?

The key takeaway away is that, “The government’s willingness to take risks on new technology and to promote its use were significant drivers in creating a strong industrial base in microelectronics” wrote Anna Slomovic while at the RAND corporation in a 1988(!) paper. Government investments spurred the development of thousands of small businesses and led to the creation of a few global behemoths and other countries quickly copied this model!

Now in the 2020s, the co-leading semiconductor foundry manufacturing technology nations such as Korea, Taiwan, and Japan have caught up to the US through the use of government investment over decades. In fact, “Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest semiconductor foundry, has echoed the government’s push to localize supply chains. The company seeks to increase its procurement of raw materials from domestic suppliers to 64 percent by 2030, 40 percent for backend equipment, and 60 percent for components” according to Taiwan News. The United States needs significantly more than a ‘Made in America’ Executive Order to maintain its manufacturing pre-eminence as China’s foreign direct investment eclipses the US for the first time ever in 2020.

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✍️ Author: Andy Harris

🔖 Topics: artificial intelligence, autonomous factory

🏢 Organizations: Autodesk

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✍️ Author: Prachi Patel

🔖 Topics: robotics

🏢 Organizations: Augmentus, IEEE

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✍️ Author: Anna-Katrina Shedletsky

🏭 Vertical: Computer and Electronic

🏢 Organizations: Instrumental

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✍️ Author: Rich Castagna

🔖 Topics: IIoT

🏢 Organizations: Adolus, Finite State

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✍️ Author: @BotJunkie

🔖 Topics: robotics

🏢 Organizations: Boston Dynamics

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✍️ Author: Bryon Moyer

🔖 Topics: AI, machine learning, edge computing

🏭 Vertical: Semiconductor

🏢 Organizations: Cadence, Hailo, Google, Flex Logix, BrainChip, Synopsys, GrAI Matter, Deep Vision, Maxim Integrated

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✍️ Author: Sridhar Leekkala

🔖 Topics: cloud computing

🏢 Organizations: Walmart

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