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i 

97–497 2016

[H.A.S.C. No. 114–63] 

ASSESSING DOD’S ASSURED ACCESS 

TO MICROELECTRONICS IN SUPPORT OF 

U.S. NATIONAL SECURITY REQUIREMENTS 

HEARING 

BEFORE THE

SUBCOMMITTEE ON OVERSIGHT 

AND INVESTIGATIONS 

OF THE

COMMITTEE ON ARMED SERVICES 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

FIRST SESSION 

HEARING HELD 

OCTOBER 28, 2015 
(II) 

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS 

VICKY HARTZLER, Missouri, Chairwoman 

JEFF MILLER, Florida 

K. MICHAEL CONAWAY, Texas 

JOSEPH J. HECK, Nevada 

AUSTIN SCOTT, Georgia 

MARTHA MCSALLY, Arizona 

JACKIE SPEIER, California 

JIM COOPER, Tennessee 

HENRY C. ‘‘HANK’’ JOHNSON, JR., Georgia 

GWEN GRAHAM, Florida 

HEATH BOPE, Professional Staff Member 

MIKE AMATO, Professional Staff Member 

MIKE CASEY, Professional Staff Member 

SPENCER JOHNSON, Counsel 

LINDSAY KAVANAUGH, Professional Staff Member 

ABIGAIL GAGE, Clerk 
(III) 

C O N T E N T S 

Page 

STATEMENTS PRESENTED BY MEMBERS OF CONGRESS 

Hartzler, Hon. Vicky, a Representative from Missouri, Chairwoman, Subcommittee on Oversight and Investigations ...................................................... 1 

Speier, Hon. Jackie, a Representative from California, Ranking Member, Subcommittee on Oversight and Investigations ...................................................... 2 

WITNESSES 

Baldwin, Kristen, Principal Deputy Assistant Secretary of Defense for Systems Engineering ................................................................................................. 7 

Gudger, Andre ́, Acting Deputy Assistant Secretary of Defense for Manufacturing and Industrial Base Policy ....................................................................... 6 

Hamilton, Brett, Chief Engineer for Trusted Microelectronics, Naval Surface 

Warfare Center Crane Division .......................................................................... 9 

Mak, Marie, Director, Acquisition and Sourcing Management Team, Government Accountability Office .................................................................................. 4 

APPENDIX 

PREPARED STATEMENTS: 

Gudger, Andre ́, joint with Kristen Baldwin and Brett Hamilton ................. 39 

Hartzler, Hon. Vicky ........................................................................................ 27 

Mak, Marie ........................................................................................................ 29 

DOCUMENTS SUBMITTED FOR THE RECORD: 

[There were no Documents submitted.] 

WITNESS RESPONSES TO QUESTIONS ASKED DURING THE HEARING: 

[There were no Questions submitted during the hearing.] 

QUESTIONS SUBMITTED BY MEMBERS POST HEARING: 

Mrs. Hartzler .................................................................................................... 57 

Mr. Hunter ........................................................................................................ 62 

Mr. Wilson ......................................................................................................... 60 

(1) 

ASSESSING DOD’S ASSURED ACCESS TO MICROELECTRONICS IN SUPPORT OF U.S. NATIONAL SECURITY 

REQUIREMENTS 

HOUSE OF REPRESENTATIVES, COMMITTEE ON ARMED SERVICES, SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS, Washington, DC, Wednesday, October 28, 2015. 

The subcommittee met, pursuant to call, at 3:46 p.m., in room 

2118, Rayburn House Office Building, Hon. Vicky Hartzler (chairwoman of the subcommittee) presiding. 

OPENING STATEMENT OF HON. VICKY HARTZLER, A REPRESENTATIVE FROM MISSOURI, CHAIRWOMAN, SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS 

Mrs. HARTZLER. Welcome, everyone. Thank you so much for your 

patience and for coming today and for being here. 

The Department of Defense is highly reliant on acquiring customized and commercial off-the-shelf computers, communications 

equipment, integrated circuits, application software, and other information communications technology to maintain its crucial advantage over our adversaries, and in support of partner nations 

and allies around the world. 

The Department strives to develop cutting-edge technology that 

provides superior capabilities to the warfighter to fulfill critical 

mission operations. In order to achieve that goal, the Department 

is dependent in part on its ability to incorporate rapidly evolving 

leading-edge microelectronic devices into its defense systems, including technologies for which there is little or no commercial demand. 

More concerning, and with increasing frequency, commercial 

business trends are forcing the Department and its commercial 

supplier base to rely on foreign-owned companies to produce some 

of the most advanced technology solutions. 

Although the globalization of the semiconductor industry has increased the pace of technological innovation, it also raises national 

security concerns for the United States. The functionality of the 

Department’s mission-critical systems and networks extensively 

leverages commercial, globally sourced microelectronics. However, 

this consequently provides state and non-state adversaries an opportunity to corrupt our supply chain. 

At one end are counterfeit microelectronics, which can have detrimental performance impacts on our systems, all the way to systems specifically designed to introduce malicious code into the supply chain and otherwise gain illicit access to the Department’s military systems and networks. 
2 

In 2003, the Defense Science Board Task Force on High Performance Microchip Supply concluded that the Department had, and I 

quote, ‘‘no overall vision of its future microelectronics components 

needs and how to deal with them. Technology and supply problems 

are addressed as they arise. An overall vision would enable the Department to develop approaches to meeting its needs before each 

individual supply source becomes an emergency,’’ unquote. 

Not until 6 years later, in 2009, and in response to legislation 

contained in the fiscal year 2009 National Defense Authorization 

Act, did the Department develop a strategy to address the issue of 

assured access to secure and reliable microelectronics. But even 

today the implementation and successful execution of that strategy 

is questionable, and the uncertainty of the Department’s ability to 

maintain military superiority in critical leading-edge microelectronics technology is in doubt by many on this committee. 

Recently, the Committee on Foreign Investment in the United 

States approved the acquisition of IBM’s [International Business 

Machines] microelectronics foundry, the Department’s sole source 

U.S.-based supplier for leading-edge microelectronics, by a foreignowned company. Now that the IBM is no longer available as a 

guaranteed source for the Department’s needs for trusted microelectronics, the Department is facing potentially alarming vulnerabilities as a consequence of relying on a sole source supplier for 

leading-edge microelectronics for the past 10 years. 

The risk to the Department increases dramatically with the loss 

of IBM’s Trusted Foundry and will be further exacerbated as long 

as no clear solution exists for how the Department plans to mitigate this challenge. Together, we must solve the challenges confronting the Department’s assured access to trusted microelectronics in a long-term, sustainable, efficient, and most important, 

affordable fashion. 

Today at this hearing we hope to learn more about the risks and 

issues confronting the Department in acquiring secure, trusted 

leading-edge microelectronics. And we hope to understand more 

about the Department’s strategy and any course corrections needed 

to address these issues. 

But before I introduce the witnesses, I turn to the Oversight Investigation Subcommittee ranking member for her opening remarks, anything she would like to make. 

[The prepared statement of Mrs. Hartzler can be found in the 

Appendix on page 27.] 

STATEMENT OF HON. JACKIE SPEIER, A REPRESENTATIVE 

FROM CALIFORNIA, RANKING MEMBER, SUBCOMMITTEE ON 

OVERSIGHT AND INVESTIGATIONS 

Ms. SPEIER. Thank you, Madam Chair. 

I would like all of us to imagine the following frightening scenario: Hostilities in the South China Sea are at their peak, the 

U.S. Navy has formed a blockade around disputed islands, and 

alarms sound on the bridge of one of our ships. There are aircraft 

approaching our blockade when suddenly all the monitors on the 

bridge go dark. 

Why is this happening? Well, in our hypothetical story, because 

the semiconductor manufacturers who created parts for the ship’s 
3 

radar system was based in China, and 5 years earlier the Chinese 

Army had placed a kill switch in our radar. We have just lost the 

war without ever firing a shot. 

This is a stark example, but it is entirely possible. As our reliance on microelectronics grows and the world’s production of these 

components continues its overwhelming shift to Asia, the risk 

grows right alongside it. 

We must be acutely aware that production of these components 

overseas is a critical vulnerability for the United States. It allows 

our adversaries an opportunity to corrupt critical infrastructure 

and introduce malicious code, greatly increases the loss of intellectual property, and it could cut off our access to critical technologies 

or disrupt supply. 

We know that our adversaries are committed in their effort to 

counter, copy, or kill our weapons and target our technological 

edge. We should not make it easy for them. We should also be 

doing everything we can to harness the innovative power of technology companies right here in the United States so that we can 

pull ourselves back ahead of the curve on this issue. 

As the microelectronics production migrates to Asia, we should 

be investing in the work of capable entrepreneurs and researchers, 

like those in Silicon Valley, to ensure they develop future technologies that will give us assured access to alternative trusted 

sources of leading-edge components. 

Hardware is an especially critical part of this puzzle. Compared 

with software, hardware vulnerabilities are harder to detect, more 

destructive, and harder to repair. 

Integrated circuits in microelectronics are used in everything 

from cruise missiles to drones and classified computer systems. 

Building a kill switch into a computer chip could mean embedding 

as few as 1,000 transistors hidden throughout the hundreds of millions that are already in the original design. It could shut down a 

radar system, steer a missile off course, or cause an airplane engine to fail catastrophically. 

The steps we have already taken, such as establishing the Trusted Defense System Strategy, the Trusted Access Program, and the 

Trusted Foundry Program, are critical. But we must do more. We 

have to figure out a way to stay ahead of this threat and provide 

the Department of Defense and the intelligence community with a 

stable domestic supply chain while maintaining a leading edge on 

microelectronic devices that have no commercial demand. 

We must also do more to collaborate with the private sector and 

develop innovative ways around this problem. Technology innovators throughout my district push the envelope of what is possible 

every day. But as we all know too well, pushing the envelope inside 

the halls of the Pentagon often takes time, too much time. 

I look forward to hearing from our witnesses and their analyses 

of future technological developments and the current progress towards ensuring access to trusted mission-critical microelectronics. 

And I would like to thank Mrs. Hartzler for holding this hearing 

today, and I yield back. 

Mrs. HARTZLER. Thank you, Ranking Member Speier. 

Our witnesses with us today are Ms. Marie Mak from the Government Accountability Office [GAO]. And she is the Director of the 
4 

Acquisition and Sourcing Management Team for GAO. Mr. Andre ́

Gudger from the Office of the Secretary of Defense. He is the Acting Deputy Assistant Secretary of Defense for Manufacturing and 

Industrial Based Policy. Ms. Kristen Baldwin, also from the Office 

of the Secretary of Defense. And she is the Principal Deputy Assistant Secretary of Defense for Systems Engineering. And Mr. Brett 

Hamilton, a government representative of the United States Navy. 

He is the Chief Engineer for Trusted Microelectronics in the Flight 

Systems Division of the Global Deterrence and Defense Department at the Crane Division of the Naval Surface Warfare Center 

located in Crane, Indiana. 

So thank you all for being with us today. And we will now begin 

with our opening statements. 

So, Ms. Mak, we will begin with you as soon as you are ready 

to proceed. Thank you. 

STATEMENT OF MARIE MAK, DIRECTOR, ACQUISITION AND 

SOURCING MANAGEMENT TEAM, GOVERNMENT ACCOUNTABILITY OFFICE 

Ms. MAK. Thank you. Good afternoon, Chairwoman Hartzler, 

Ranking Member Speier, and members of the subcommittee. Thank 

you for inviting me here today to discuss GAO’s work on DOD’s 

[Department of Defense’s] effort to provide access to trusted leading-edge microelectronics. 

DOD’s ability to provide superior capabilities to the warfighter is 

dependent in part on its ability to incorporate rapidly evolving 

leading-edge microelectronic devices into its defense systems while 

balancing national security concerns. However, market trends have 

created challenges for DOD. Increasing capital costs to make and 

produce these devices can be several billion dollars annually. This 

has resulted in increased specialization and consolidation by industry. 

Once dominated by domestic sources, microelectronics manufacturing is now largely conducted outside the U.S., primarily in Asia, 

and largely focused on high-volume production and short life cycles 

driven by demand for customer electronics. In contrast, DOD requirements for microelectronics tend to be low volume, with unique 

requirements, that generally are needed for very long periods because weapon systems are often sustained over decades. 

My statement today largely leverages off of our April 2015 sensitive but unclassified report on this topic. The two areas that I 

would like to highlight today are, first, the implementation of the 

Trusted Supplier Program, and, second, the extent the Trusted 

Supplier Program provides for DOD’s current and future access to 

leading-edge trusted microelectronics. 

DOD developed the Trusted Supplier Program as part of its overall Trusted Defense System Strategy. This strategy focuses on assessing DOD programs for their vulnerabilities and developing policies for requiring trust, meaning all the people and processes used 

to design, manufacture, and distribute national security critical 

components must be assessed for integrity. In 2006, DOD began expanding the number of trusted suppliers through an accreditation 

process, but only one had the capabilities to provide leading-edge 

technologies that meet their needs. 
5 

Despite DOD’s efforts to expand the number of trusted suppliers, 

it did not address alternative sources for leading-edge microelectronics. It largely focused on two elements of risk: integrity, keeping malicious content out, and confidentiality, keeping critical information from getting out. However, the strategy did not address 

the risk of relying on a single supplier, leading to DOD’s dependence on it for over a decade. As a result, DOD is currently in a situation where, potentially, there are no good answers to address the 

‘‘what now?’’ question. 

And that brings me to my second point: DOD’s current and future access to leading-edge trusted microelectronics. Over 10 years 

ago, a Defense Science Board Task Force stated that the pace of 

these technologies being manufactured offshore was alarming due 

to its strategic significance to the U.S. economy and DOD’s ability 

to maintain a technological advantage, and concluded at that point 

that urgent action was needed. 

DOD sought to mitigate this risk by awarding a contract to the 

only U.S.-owned corporation that could meet DOD’s needs for trusted leading-edge microelectronics. Yet relying on this single supplier 

all this time created uncertainty regarding current and future access and its capabilities. In July 2015, the single provider transferred its microelectronics fabrication business to a U.S.-based foreign-owned entity, resulting in increased uncertainties about 

DOD’s access. 

Our work this past year found that in the short term, DOD has 

no alternatives to the leading-edge microelectronics. As a result, 

there are risks for the DOD programs that use these technologies. 

For the longer term, we reviewed various options, including ongoing research and the possibility of a government-owned fabrication 

facility, the details of which are sensitive and therefore cannot be 

discussed in this forum. However, I would be happy to discuss 

them at a later time at your convenience. 

But the bottom line is that not only is the U.S. reliant on a single provider, it now faces the unknown risk of relying on one that 

is foreign owned. DOD is in a position where it faces some very difficult and complex decisions with potentially significant costs and 

national security implications. 

Microelectronics is just the latest of several defense industrial 

base issues. Other examples include rare earth materials, specialty 

metals, and counterfeit parts. We need an industrial base strategy 

that is much more proactive and less reactive. 

Chairwoman Hartzler, Ranking Member Speier, members of the 

subcommittee, this completes my prepared statement. I would be 

pleased to respond to any questions that you may have at this 

time. 

[The prepared statement of Ms. Mak can be found in the Appendix on page 29.] 

Mrs. HARTZLER. Thank you, Ms. Mak. That was very informative. 

So, Mr. Gudger, you are now recognized for your opening statement. 
6 

STATEMENT OF ANDRE ́ GUDGER, ACTING DEPUTY ASSISTANT 

SECRETARY OF DEFENSE FOR MANUFACTURING AND INDUSTRIAL BASE POLICY 

Mr. GUDGER. Thank you. Madam Chairwoman Hartzler, Ranking 

Member Speier, and distinguished members of the subcommittee, 

my name is Andre ́ Gudger. I am the Acting Deputy Assistant Secretary for Defense for Manufacturing and Industrial Base Policy, 

and I appreciate the opportunity to testify today. I am joined here 

to my left with Ms. Kristen Baldwin, Principal Deputy Assistant 

Secretary of Defense for Systems Engineering, and to her left, Mr. 

Brett Hamilton, Naval Surface Warfare Center Crane. 

The role of the Office of Manufacturing and Industrial Base Policy is to advise the Secretary of Defense on all matters related to 

the defense industrial base. My office assesses proposed mergers, 

acquisitions, and foreign investment involving defense-related companies. Additionally, we assess the entire defense industrial base, 

make recommendations to the Secretary about its health, and then, 

when necessary, utilize DOD authorities to advance, sustain, 

shape, and support the industrial base. 

In particular, the global semiconductor industry is a key growth 

sector in the global economy. The U.S. semiconductor industry 

dominates 50 percent of the global market share. However, as technology and demand have advanced, it has driven the dynamics of 

this industry in a way that presents distinct challenges for DOD. 

The Department relies on innovation and commercialization of 

the U.S. semiconductor industry to maintain a healthy industrial 

supply for its systems. The escalating costs of investment for innovation in this industry is the single biggest factor facing U.S. suppliers wrestling with the decision to either join forces with other 

cash-rich entities making the necessary billion-dollar investment or 

simply quit the costly manufacturing business altogether. 

The DOD is less than 1 percent market share and has minimal 

influence over the semiconductor industry. The Department considers the dwindling number of domestic microelectronics manufacturers as a significant risk and may affect the most advanced 

microelectronics for the defense systems and platforms that must 

remain technology superior to our adversaries who are gaining 

traction through global industry players. 

In July of 2015, GlobalFoundries purchased IBM’s U.S.-based 

Trusted Foundry, creating concerns associated with the Department’s reliance on a sole source and single-qualified IBM-based 

technology component. These components are designed specifically 

for and used in many of DOD’s major defense acquisition programs. 

DOD, the intelligence community, and the Department of Energy 

assessed how the loss of access to IBM’s Trusted Foundry would 

disrupt their current and future national security programs. For 

the DOD, the total cost of loss assessed would be greater than a 

billion dollars. And given the research, redesign, prototyping, requalification tests, reproduction costs required to replace the required Trusted Foundry components, it is unknown. Operationally, 

the consequences of interrupting the national security programs 

that use these components are incalculable. 

Based on this assessment, the Department determined that the 

top priority is continuity of supply for these unique trusted prod-
7 

ucts over the short- and mid-term. Concurrently, my office coordinated with other DOD elements, including the Defense Microelectronic Activity and the Defense Security Service, to ensure 

GlobalFoundries could obtain the appropriate accreditations to be 

a DOD trusted supplier post this transaction. The Department continues to work closely with GlobalFoundries as a source for the 

U.S.-based defense microelectronics. 

The Department continually conducts vigorous analysis of global 

markets to ensure the U.S. industrial base remains vibrant, competitive, and supporting all of DOD’s needs. The Department’s conducting a microelectronics industrial base study. The study goal is 

to lay a foundation for a dynamic partnership with key microelectronic industry players. A team of government experts interviewed, 

conducted site visits at several selected microelectronic companies, 

exchanging views with the Department on how we could pursue 

business models that would be consistent with industry. 

The study both made assessments of industry current capabilities, it summarized the voice of industry, and it is making recommendations on how the Department can engage the microelectronics marketplace not just today, but beyond. At the study’s conclusion, the team will recommend strategies to the Department’s 

requirements while addressing sustainable commercial strategy for 

the future. 

Additionally, the Department is taking steps to proactively identify our current and future critical suppliers in fragile sectors, like 

that of the microelectronics industry. The Department is deploying 

business intelligence tools utilizing big data principles to leverage 

the latest technologies and analysis techniques. This will allow 

DOD to engage proactively in the future to ensure that we have access to commercially driven technologies that maintain the military 

advantage on the battlefield. 

I would like to thank the committee for allowing me to speak 

today. As you can see, the Department is focused on addressing the 

challenges that are stemming from domestic and global microelectronics industry trends as DOD expands its Trusted Defense System Strategy. I look forward to answering any questions that you 

may have. Thank you. 

[The joint prepared statement of Mr. Gudger, Ms. Baldwin, and 

Mr. Hamilton can be found in the Appendix on page 39.] 

Mrs. HARTZLER. Thank you. 

Ms. Baldwin, you are now recognized for your opening statement. 

STATEMENT OF KRISTEN BALDWIN, PRINCIPAL DEPUTY ASSISTANT SECRETARY OF DEFENSE FOR SYSTEMS ENGINEERING 

Ms. BALDWIN. Madam Chairwoman Hartzler, Ranking Member 

Speier, members of the committee, I am pleased to come before you 

today to testify about the Department of Defense’s assured access 

to microelectronics. 

For a number of years the Department has been on a path to implement a Trusted Defense System Strategy. Codified in policy in 

2012, this strategy manages risks to our systems from foreign intelligence collection, supply chain exploitation, and battlefield loss. 
8 

DOD acquisition programs conduct program protection planning 

activities throughout the life cycle to mitigate opportunities for adversaries to sabotage or subvert mission-critical system functions, 

system designs, and critical components of our systems. 

Critical components may be comprised of software, firmware, or 

hardware, whether specifically designed for DOD or commercially 

sourced. The protection of critical components is addressed through 

secure engineering designs and architectures, supply chain risk 

management practices, software and hardware assurance activities, 

and antitamper techniques. 

Program protection planning gives special attention to application specific integrated circuits, or ASICs. For ASICs that are custom designed, custom manufactured, or tailored for specific DOD 

military use, DOD requires they be procured from a trusted supplier accredited by the Defense Microelectronics Activity, or DMEA. 

DMEA manages the Trusted Supplier Program. 

DMEA accredits suppliers as trusted in the areas of integrated 

circuit design, aggregation, brokerage, mask manufacturing, foundry, post-processing, packaging and assembly, and test services. 

These services cover a broad range of technologies and are intended 

to support both new and legacy applications, both classified and 

unclassified. 

There are currently 72 DMEA-accredited suppliers covering 153 

services, including 22 suppliers that can provide full-service trusted 

foundry capabilities. One of these full-service trusted foundries is 

the GlobalFoundries trusted foundry. 

In addition to trust, this trusted foundry provides the U.S. government guaranteed access to leading-edge trusted microelectronic 

services. For these leading-edge, state-of-the-art microelectronics 

technology needs, the Department is concerned not only with trust 

and protection of our designs, but also the ability to compete for access to these technologies with commercial customers who command high-volume production requirements in comparison with 

typical low-volume needs of the Department. The trusted foundry 

has served DOD and interagency needs since 2003. 

Another important aspect of program protection is hardware and 

software assurance or the evaluation of our microelectronics components and our software to ensure they function as intended and 

have not been altered. Last year the Department established a 

Joint Federated Assurance Center, federating expertise, tools, and 

methods to support acquisition program hardware and software assurance needs. The Naval Surface Warfare Center at Crane serves 

as the chair of this federation, the Hardware Assurance Technical 

Working Group. In this role, Crane leads coordination of the core 

hardware assurance laboratories across the Army, Navy, Air Force, 

and NSA [National Security Agency]. 

Looking ahead, the Department must seek options that enable 

both trust and access to needed microelectronics capability from 

the commercial marketplace. Research is ongoing at the Defense 

Advanced Research Projects Agency, the Intelligence Advanced Research Project Agency, and also in our military departments, to advance technologies such as improved hardware and software assurance tools for analyzing provenance and functionality; embedded 

sensors that can uniquely identify and track a device and whether 
9 

any tampering has occurred; new microelectronics design techniques to enable transfer of production from one foundry to another, mitigating risk from losing access to a particular supplier; 

and the ability to disaggregate chip designs and manufacture subcomponents in different locations. 

Demonstration and transition of technologies such as these will 

augment the enduring foundations of program protection planning, 

supply chain risk management, systems security engineering, our 

DMEA, and the network of certified trusted microelectronics suppliers, and the federation of tools and expertise to evaluate hardware and software that are central to the Department’s Trusted 

Systems Strategy. 

Thank you very much. 

[The joint prepared statement of Ms. Baldwin, Mr. Gudger, and 

Mr. Hamilton can be found in the Appendix on page 39.] 

Mrs. HARTZLER. Thank you, Ms. Baldwin. 

And now last but certainly not least, Mr. Hamilton, very excited 

to see your show-and-tell that you brought as well. 

STATEMENT OF BRETT HAMILTON, CHIEF ENGINEER FOR 

TRUSTED MICROELECTRONICS, NAVAL SURFACE WARFARE 

CENTER CRANE DIVISION 

Mr. HAMILTON. Thank you, Madam Chairwoman Hartzler, Ranking Member Speier, members of the committee. I appreciate the opportunity to come before you today to testify about our efforts related to microelectronics assurance. 

So microelectronics hardware provides the root of trust for many 

DOD [and] intelligence community systems. It is absolutely critical 

that this hardware be both trustworthy and reliable to perform as 

designed when needed. This is a critical national issue as trustworthy microelectronics hardware is also prevalent in many vital 

areas of the global economy, such as energy, transportation, banking, and commerce industries. 

The Joint Federated Assurance Center laboratories, referred to 

as JFAC, have a long history of assuring microelectronics integrity, 

including support of the Navy Strategic Systems Program and 

NSA’s cryptographic systems. These government laboratories are 

unique in the expertise and the capability that address the malicious threat and have experience in safeguarding sensitive information relating to uncovered threats and vulnerabilities, specialized 

analysis techniques, and details of systems use. 

In order to better quantify the system risk, continued technical 

reconnaissance is needed to enable a more proactive stance in identifying potential vulnerabilities. Threats assessments can be greatly assisted by taking advantage of the capabilities of other government agencies, such as law enforcement and the intelligence community. The JFAC is exploring information-sharing opportunities 

with the intelligence, counterintelligence, and law enforcement 

communities to provide additional insight into the amount of risk 

associated with particular microelectronics components. 

For example, the Air Force Office of Special Investigation has 

made available select microelectronic components obtained through 

investigative liaison efforts for forensic analysis. The counterintel-
10 

ligence perspective enables a more thorough assessment of the 

threat. 

Microelectronics technology driven by the commercial sector is 

advancing at a very rapid pace. It is therefore critical that our 

JFAC labs establish technical capability in the area of emerging 

technology. For example, Naval Surface Warfare Center Crane has 

utilized Naval Innovative Science and Engineering R&D [research 

and development] opportunities and Naval Sea Systems Command 

capital improvement program to greatly enhance its microelectronics trust verification capabilities over the past few years. 

These capability enhancements also support the Navy’s traditional failure analysis and high reliability microelectronics missions 

which require similar expertise and equipment. The capability is 

currently supporting the Navy’s JFAC hardware assurance pilot 

program and several other programs of record in the area of trusted assurance, including extensive work with the Strategic Systems 

Program and Integrated Warfare Systems. 

Access to design information is very important to the ability to 

cost effectively perform independent verification of microelectronic 

components. If these files and other design information are delivered to the government as one of the deliverables in a contract, the 

time and cost to verify these components can be minimized. The 

term ‘‘acquire to verify’’ has been coined to promote this idea. 

JFAC members are compiling lessons learned from current and 

recent design efforts to generate a general design guide that will 

include best practices to support independent verification for trust 

assurance. 

It is also critical to establish and maintain relationships with 

microelectronic manufacturers. This is particularly important in 

the case of commercial parts where the design information is held 

by these manufacturers. A few such relationships have been fostered by DOD organizations, and they have proven to be very beneficial to trust verification efforts. 

Not only is the semiconductor manufacturing environment evolving, but so is the threat. There is a growing concern pertaining to 

unauthorized remanufactured parts, often referred to as clones, 

which not only pose a potential malicious threat, but also reliability 

concerns, as very poor quality has been observed in these parts. 

Finally, there has been an alarming increase in the number of 

academic publications discussing the implementation of hardware 

Trojans. Therefore, we must stay vigilant and evolve our approach 

to ensure trust in such a dynamic environment. 

Thank you. And I welcome your questions. 

[The joint prepared statement of Mr. Hamilton, Mr. Gudger, and 

Ms. Baldwin can be found in the Appendix on page 39.] 

Mrs. HARTZLER. Thank you, Mr. Hamilton. 

I would just start with you. You brought some examples there. 

Do you want to share a little bit about those, why you brought 

them, and what the implications to our hearing today? 

Mr. HAMILTON. Okay. The first example that I will pass up for 

you to examine is a traditional microcircuit, where we actually 

opened up the lid so you can see what is inside. So that particular 

part was from an actual counterfeit investigation that we did. 
11 

So that particular part is about a 15-year-old design. It was designed in 250 nanometers. So that is the actual size of the transistors in there. State of the art now is 10 nanometer. So that particular part there has probably around a million transistors in it. 

The current record for the most transistors in a commercial part 

is a Xilinx FPGA [field programmable gate array], which has 20 

billion transistors. 

So Ranking Member Speier mentioned 1,000 transistors in a device. So think about trying to find 1,000 transistors out of 20 billion 

if someone wanted to do something bad to a part like that. So it 

is a technical challenge, but there is work going on to try to address this through technical means. 

The second board is just a representation of a circuit board. And 

there was some mention of interest in 3D ICs [three-dimensional 

integrated circuits] and die stacking. So in this particular case, 

these are the individual integrated circuits on the board. 

In die stacking, those individual dies are stacked on each other 

into one package, and it greatly enhances the density. We have 

been seeing these in our laboratory, especially in flash memory and 

devices like that for the commercial sector where they want to pack 

as much memory as they can into your digital camera and things 

like that. But this technology is starting to show up in a much 

broader spectrum to increase performance and help scale the technology. 

Mrs. HARTZLER. What can you do maliciously with one transistor? 

Mr. HAMILTON. With one transistor, you could make something 

fail possibly, and denial of service. That is the simplest kind of 

tack. So the hidden kill switch gets a lot of attention. To do something to that level, you would have to have a lot of information 

about the design. If you don’t know much about the design and you 

just wanted to do something to cause random problems, intermittent failures, then a single transistor failing could potentially 

take that integrated circuit down. 

Mrs. HARTZLER. Wow. Okay. What is next? 

Mr. HAMILTON. So here is another integrated circuit. And this is 

an example of one without the lid opened up, and it is what is 

called a ball grid array. So you see the back, those little bitty solder balls? 

Mrs. HARTZLER. Yes. 

Mr. HAMILTON. That is placed onto the printed circuit board, and 

then the whole thing is heated up, and they all just make contact 

at one time. 

That particular part, I don’t remember exactly how many solder 

balls that has. I would say probably around 80 or 90. But there are 

parts now that have 1,000 of those solder balls on there. The complexity of these microelectronics is amazing. 

Mrs. HARTZLER. Really is. Next? 

Mr. HAMILTON. So the last example is just another circuit board, 

a little bit newer version. Some of the parts there have the different kinds of bonding package. That particular part also has a 

fan on it. A lot of our focus has traditionally been on the very critical parts. One thing important is that we have to look at this as 
12 

a system approach, and every part in the system is critical to a certain degree. Otherwise it wouldn’t be in the system. 

Mrs. HARTZLER. So we only have one foundry in our country that 

puts this together, right, the foundry that IBM had—that is now 

sold? 

Mr. HAMILTON. So the foundry makes the integrated circuits. 

They make the chips. 

Mrs. HARTZLER. Okay. Gotcha. Actually puts it together. 

So as co-chairman of the Joint Federated Assurance Center, 

what challenges and risks do you assess may affect DOD’s access 

to assured and secure microelectronics in the future? 

Mr. HAMILTON. Well, that is a tough question. I think to a certain degree the purpose of JFAC is going to be to perform an independent verification of the microelectronics no matter what the 

source. So a lot of the parts that enter the DOD today aren’t from 

the IBM Trusted Foundry. They are COTS [commercial off-theshelf] parts. If you look in the Navy systems, we buy racks and 

racks of circuit boards that are used in the systems. 

So the challenge is to come up with tools and techniques that can 

be used broadly across this. And that is where the working with 

the other communities of interest is important to help us better 

focus where we need to apply our limited resources to do these 

deep technical assessments. 

Mrs. HARTZLER. Do you feel confident now that there are systems 

in place to be able to do an in-depth analysis of that? 

Mr. HAMILTON. There are systems in place to do it on a limited 

basis. We actually, for some of our customers and sponsors, we 

have been doing this work for years. To try to spread it to the bigger DOD is a challenge because we just use so many microelectronics. 

And I like to say we can’t really test our way out of this problem. 

We can’t test and screen the hundreds of thousands of microelectronics that we use in DOD. So we have to be very smart and selective where we look and understand the threat and realize that really what we are doing is a threat assessment. 

We are always going to have a threat, no matter what the 

source. So the question is, how do we rank the threat and where 

do we put our resources where we think the threats are the highest 

or do things in the supply chain, other activities, to help reduce 

that threat. 

Mrs. HARTZLER. Great. I have more questions, but I will come 

back to that and turn to Ranking Member Speier for her questions. 

Ms. SPEIER. Thank you, Madam Chair. 

What is driving the decline in the United States of the microelectronics industry and its migration to Asia? 

Mr. GUDGER. Well, there are several factors. One is the cost. As 

the commercial markets are driving to newer, more state-of-the art 

needs, particularly in the consumer electronics and the mobile markets, it is a costly thing to update a fab [fabrication facility]. It is 

north of a billion dollars. Most fabs cost somewhere between $5 to 

$10 billion to update to a state-of-the-art space that they need to 

be competitive globally. 

So there are very few companies across the globe that can make 

that kind of investment and get the kind of yields they need in 
13 

order to maintain a profitable business. And so you see a decline 

in new entrants because the barrier is so high and you see an exit 

of current entrants because it is better to partner with sources 

globally to compete, not just domestically. 

Ms. SPEIER. Any other comments? 

Ms. BALDWIN. The United States is overall a net exporter of 

semiconductors. And so we need to understand that there are leading-edge capabilities and those foundries can take great investment 

to maintain and to operate. But largely, and with many of the capabilities that the Department of Defense systems, the U.S. Government systems use, as Brett mentioned, multiple types of microelectronics technologies are used in our systems. And so there is a 

spectrum of capabilities and production capabilities still in the 

United States. 

And so you need to distinguish the cost of the major fabs that 

have gone from—over the past 10 years the number of leading-edge 

foundries has drawn down from then about 10 major foundries to 

now we have about 4. And in comparison, we have got multiple capabilities of domestic manufacturing at other state-of-the-practice 

nodes and other technology types. 

Ms. SPEIER. Well, if we believe that this is a national security 

risk, which I think we could certainly make the argument that it 

could be, isn’t it in our best interest to maintain a foundry or supplier here and do whatever is necessary to make sure that their 

bottom line is reasonably successful so that the manufacturing continues to be done locally? 

Ms. BALDWIN. We do agree that there is a long-term need for a 

trusted supplier, a network of trusted suppliers, just like we have 

established. And we are taking action to make sure that we maintain that access. 

Ms. SPEIER. So what are the actions you are taking? We have one 

foundry that has now been sold to a non-U.S. company and it is 

unclear whether or not they are going to keep manufacturing here. 

What are you doing to make sure that that does not get exported? 

Mr. GUDGER. Well, just a couple points of clarity. There are more 

than one foundry in the United States, and there are more than 

one trusted supplier in the United States. There are over a dozen 

trusted suppliers in the DOD network. 

Yes, it is in the U.S. interest to maintain as much of the current 

and legacy capability in the United States as possible. But we are 

also looking to make investments in the future where technology 

is driving which gives us a different view. And so trust network as 

we know it today may look much different as we design for security 

throughout all of our major weapon systems and how we bring a 

consistent way of approaching microelectronics and future technologies and innovation into those major weapon systems. 

So there is a lot of programs that I use out of my office, particularly the Defense Production Act, Title III, that we have used, and 

we have funded many chip technology programs and made the investment, along with industry, to develop and maintain the capacity. We have used our Industrial Base Sustainment Fund to fund 

companies to keep design skills and engineering tradecraft moving 

forward. And so we will continue to look at those both as a part 
14 

of the short-term, mid-term, and long-term strategy for the United 

States. 

Ms. SPEIER. You know there is a lot of companies that have offshored a lot of money that they would like to repatriate. And I 

would think this would be a great opportunity to allow companies 

who are so inclined to repatriate their money if it were to go to 

manufacturing of microelectronics, because we could make the case 

that it is a national security issue. 

Ms. Mak, do you have any thoughts on that or any other incentives we can create for companies? 

Ms. MAK. I think, like you said earlier, why it was going offshore, 

there are so many other countries that have industrial base strategies that include more strategic investments, that encourage critical industries and innovation, where here in the defense industrial 

base it is much more reactive instead of proactive. So if there is 

more thought in terms of why do we wait until it is a potential crisis before we actually start coming up with alternatives, then that 

applied in this particular case with microelectronics. 

As to what DOD could do in this particular case, we tend to rely 

on the market to be able to figure out the best strategy. DOD has 

so little influence on the market when it comes to microelectronics, 

so this may not have been their best strategy. 

I think part of the issue was when we talked about leading-edge 

microelectronics, there wasn’t a sense of urgency when Defense 

Science Board first brought it up. IBM has been renewing the contract. It has been always there. DOD was addressing the risk because IBM was there. And if earlier steps had been taken to address some of the alternatives that they are considering now, we 

may not be in the same situation, especially when it comes to cost, 

because now you have all the cost that has to be addressed as soon 

as possible versus spread out over time. 

Ms. SPEIER. All right. Madam Chair, I yield back. 

Mrs. HARTZLER. Thank you. 

Mr. Scott from Georgia. 

Mr. SCOTT. Thank you, Madam Chair. 

And you will have to forgive me. This is certainly an area that 

is outside of my area of expertise by a long shot. 

But GlobalFoundries was owned by IBM and they sold them. Do 

I understand that correctly? 

Mr. GUDGER. No. IBM sold part of its microelectronics business 

to GlobalFoundries. 

Mr. SCOTT. To GlobalFoundries. Okay. All right. And GlobalFoundries has factories in many countries, Singapore and—— 

Mr. GUDGER. And Germany and in the State of New York. 

Mr. SCOTT. And then the U.S. companies that we have left I 

would assume would be Intel. Who would the others be that 

are—— 

Mr. GUDGER. Yeah. There is other very good U.S.—— 

Mr. SCOTT. Micron. 

Mr. GUDGER. Micron. We have had Freescale, Photronix. Cypress 

is here in the room. And there is others. I don’t want to single out 

any one because there is so many suppliers in this area. 
15 

Mr. SCOTT. Okay. But you do have a tremendous number of suppliers, it is just that we don’t have that many who are trusted suppliers. Is that where the problem is coming in? 

Ms. BALDWIN. So right. If I can just categorize. The leading-edge 

suppliers, that was the role that the IBM and now GlobalFoundries 

foundry was fulfilling. Our trusted supplier network, if I can just 

refer to my opening statement, we have 72 that are accredited 

trusted now suppliers. Twenty-two of those can provide full-service 

foundry operations similar to what the IBM Trusted Foundry was 

able to provide. 

Mr. SCOTT. Okay. And so in many instances when we contract 

with a private vendor to build a weapons system, for example, we 

have DOD employees that are on-site at that manufacturer to double-check and to look at quality control and make sure that there 

are no problems there. Are we doing that with the foundries as 

well, are we checking the chips once they come to us? How do we 

do that with regard to—are we on-site, in other words, at the 

foundries? 

Ms. BALDWIN. No. Great question. Part of this accreditation that 

the Defense Microelectronics Activity does is works with these companies that are interested in becoming trusted suppliers and certifies that those companies are able to process classified information as well as unclassified information and that they possess the 

right checks and balances, that they can provide an assured chain 

of custody, that they have processes in place to ensure that there 

would be no threats related to disruption of the supply, that they 

have processes in place to prevent intentional or unintentional 

modification of the designs during the manufacture or the services 

that that supplier is providing, and that they protect the design information from any reverse engineering or other exploitation to 

prevent the loss of that U.S. technology. 

And that is the process by which these suppliers that wish to become accredited must go through, and the DMEA inspects that capability. 

Mr. SCOTT. And so for the suppliers who want to become accredited, one of the challenges with doing business with the government is that if you are a small business, it becomes such a large 

percentage of your volume that if you ever lose the contract it 

would effectively bankrupt you. 

And so what is the average volume that we spend with one of 

these suppliers? And do we do multiyear buys or is it something 

where we just every 12 months we do a new contract? 

Ms. BALDWIN. Right. So when we accredit one of these suppliers, 

these are suppliers that provide services on a regular basis to 

broader than just the DOD. So we basically give them sort of a seal 

of approval, if you will. And then many of the suppliers actually 

see it as a competitive advantage, you know, because they have 

been through this rigor, and it actually can have the effect of potentially increasing their future business space. 

Mr. SCOTT. But it would take a billion dollars to build a small 

foundry? 

Ms. BALDWIN. Correct. As you go down into the technology, as 

you increase the technology, as you move down the Moore’s Law of 

these sizes of these microelectronics components that Mr. Hamilton 
16 

was describing, the cost to maintain those foundries increases exponentially. So that leading-edge foundry is the one where we were 

talking about, that is in the billions of dollars to maintain and operate, because in order to be able to produce the yield of microelectronics that are useable, you have to have a certain amount of production that is running through that foundry. 

Mr. SCOTT. Sure. 

Ms. BALDWIN. It operates 24/7. And I would just say again that 

the DOD and the U.S. Government orders for that don’t rise to that 

level. We have typically low-volume orders. Which is why looking 

forward we need to find ways that we can—technologies, new approaches to be able to make use of more commercial sources, because that would allow us to protect our designs and our IP [intellectual property] and ensure that the microelectronics would perform as intended, but also enable us a much broader set of options 

so we are not narrowly focused on a sole source supplier, because 

we recognize that that is not a good risk posture. 

Mr. HAMILTON. If I could just add one thing to that. So in this 

recent Chip Scale magazine, there is a chart that plotted the escalating design costs for custom ASICs manufactured at state-of-theart technology node, which is estimated to be over $300 million for 

a 10-nanometer design. This makes COTS a very appealing approach to program managers where performance is a driver, especially given the performance exhibited in commercial FPGAs, an industry that is pushing state of the art. 

Basically the FPGA manufacturers are pushing state of the art, 

and they are using these twenty-eight 14-nanometer nodes, because they have enough volume that they can take the $300 million 

design cost. The problem is there aren’t that many DOD programs 

that can afford to put $300 million into a single design. There are 

cases potentially where a common part could be used across multiple programs and then you might be able to do something like 

that more cost-effectively. 

Mr. SCOTT. Thank you for being here. I have an appointment in 

my office, so I will be missing the rest of the meeting. But thank 

you for what you have done. 

Mrs. HARTZLER. Thank you, Mr. Scott. 

Ms. Graham from Florida. 

Ms. GRAHAM. Thank you, Ms. Chairman. I appreciate it very 

much. 

And thank you for you all being here today. I really appreciate 

it. 

This is kind of scary. So I have a question. Really what I would 

like to know, I mean, how reliant are we on these microelectronics? 

What is our level of risk? It seems like there aren’t many systems 

that aren’t exposed. And I have a follow-up question after that one. 

Ms. BALDWIN. So we are very reliant on microelectronics, and it 

is not only these ASIC chips that we have been talking about, but 

multiple types of microelectronics components. Mr. Hamilton just 

mentioned FPGAs as an example. 

I think a point that I would like to make is that it takes a spectrum of risk-reduction measures. In some cases we would want to 

restrict where we procure that item, from only a trusted supplier. 

In some cases another option is to be able to evaluate the compo-
17 

nent or the software that is contained in that component, because 

in an FPGA [field programmable gate array]—there are no FPGAs 

that are made onshore. The two major FPGA companies are U.S. 

companies, but they fab offshore. 

But when you take a look at what the risk is of an FPGA device, 

that is largely in the software, because that is a reprogrammable 

device, which means that regardless of where I might manufacture 

that device, I can change the software. And so if an adversary 

wanted to have an effect and could get access to that software, 

which is all very difficult to do, but it is a real opportunity, then 

the threat comes in making sure that the software that is programmed on that device is assured. And so then we want to bring 

to bear additional software evaluation tools, and we are doing that 

as well. 

We may also want to design our systems. I mentioned the approach of system security engineering, because we realize many of 

our systems do need to use commercial devices, and we absolutely 

do, for reasons of cost and functionality. But we are able to design 

our systems with architectures in a way that we don’t use those 

commercial components necessarily in sort of the core or heartbeat 

of the system, that critical portion of the system. 

So the way that we approached, the way that we built this trusted system design strategy, the methodology that our programs go 

through and our engineers go through is to sort of decompose the 

system and understand the functions of that system, and then 

allow us to focus on what are the critical components. And then for 

those critical components, select from a menu of opportunities, riskreduction opportunities, which could be procure from a certain supplier, test it through laboratories, and equipment and tools like we 

have assembled, or architect the system in such a way that if that 

component is a bad component, it will not have the overall effect 

to degrade the operation of the performance of the system. So we 

could have sensors on the system that would just shut that part 

of the system down. So there is a menu of options that we have. 

Ms. GRAHAM. Thank you very much. That was a very thorough 

answer, and I really appreciate it. 

Ms. Mak, you mentioned the potential of possibly bringing this 

within DOD. I don’t want to violate any security, clearly, in an unclassified hearing. But is that, based on what Ms. Baldwin just 

said, is that something considering the private sector’s innovation 

or would we be able to compete, or is this something that we are 

sort of tied to because of the need to have that innovation that is 

available in the private sector? 

Ms. MAK. I think the opportunities to compete are definitely 

there, but let me make it clear, for the FPGAs that have been discussed, those are offshore, those are commercial uses, it is not in 

a trusted environment. When we are talking about leading-edge 

technologies that are in mission-critical defense systems, it has to 

be in a trusted environment, so that means the offshore companies, 

it doesn’t even qualify. So it is going to take a lot of time and it 

is going to take a lot of cost. 

I mean, we have talked to several major defense contractors, and 

their concerns were that even if there was a supplier that could 

meet leading edge at this point, which is not, except for IBM and 
18 

now GlobalFoundries, if it could, it would take them significant 

time, talking about years, and significant cost, talking at least millions, to do redesign work to be able to work with those suppliers, 

assuming that they exist. 

Ms. GRAHAM. Okay. I am about out of time, so thank you very 

much. I would just say that I think the conclusion is that we just 

need to make sure that our public-private partnerships, that the 

threat level is, whether it is in the supply chain or just in general, 

keeping track of the threat assessment, and we are focused on that 

on a regular basis. 

I am sorry, Ms. Chairman, I will conclude with this. My son is 

a computer engineer, so I understand the importance of the microelectronics. And if we are not certain that our microelectronics are 

secure, our system is not going to be secure. 

So thank you very much. I yield back what time I don’t have, Ms. 

Chairman. 

Mrs. HARTZLER. All right. That is okay. Well said. Maybe your 

son can help solve this problem. So that is very good. 

I wanted to go back to you, Ms. Baldwin, though. You mentioned 

there were 72 trusted suppliers, and that may be true, but not 

leading-edge suppliers. There was one, IBM, which has been sold. 

And so how are you going to make up for that shortfall? 

Ms. BALDWIN. So we have been work looking into this situation 

obviously for some time now. And when you look at the types of 

leading-edge technologies that the IBM foundry was providing, it 

was over a series of technology nodes. They had a series of products that we could acquire through that one foundry. And there 

was no single provider that was available domestically that could 

replace, no one single source that could replace all of those product 

lines. 

So finding number one is we knew we had to develop, we knew 

we had to take a look at a menu of options. So we are in the process of doing that right now. And we are in the process of, as has 

been mentioned, reaching out to the industrial base and really getting a sense of where they are going and taking all that into account. 

We also want to look at the future of the economics of the situation, and we do not want—the last thing we want to do is find ourselves in a similar situation of a sole source supplier. I think long 

term, the types of solutions that we see as being needed in this 

menu are we do need to have alternative sources for critical components. We do need to have a capability to evaluate microelectronics, 

because of this threat, so the types of labs that we federated are 

a continuing need. And we do think that there are technology opportunities to maybe allow us to take a look at this problem from 

a different standpoint. 

Some of the technologies that are being invested in right now by 

some of the performers that I mentioned before could potentially 

allow us to utilize different manufacturing sources, but still be able 

to protect our critical IP and our critical intellectual property and 

the functionality of the chip and provide that level of assurance 

just by the way—by these manufacturing processes and design 

techniques. 
19 

Or these embedded sensors that we might be able to, if the technology is demonstrated and can transition, can really provide a 

chain of custody, so that we could potentially use a commercial 

source but then have an ability to control the critical design intellectual property domestically. 

And so it is these types of technologies. And so I think in summary, we see going forward that we must get out of this sole source 

problem that we are in right now and we must create a menu of 

options for the Department and its agency partners, and that is exactly what we are studying and seeking to do. 

Mrs. HARTZLER. So this is happening right now, you are doing 

this study. You say over time—I know Mr. Gudger, you talked 

about doing a study that you are doing—but at this point in time 

our only foundry has been purchased, correct, by another—a leading-edge supplier. So we have all kinds of defense assets and platforms that are being built today. 

So how vulnerable and how big a problem is this right now, because we don’t have a solution today, even though we have all 

kinds of platforms being manufactured? 

Mr. GUDGER. Today, on the short term, we are getting essentially 

what we were getting prior to the acquisition. Part of what we 

worked through the interagency process when we evaluated this 

very complex transaction was its national security implication and 

could the Federal agencies and major weapon systems still have access to the critical technologies that we needed. And on the short 

term, the answer was we were able to come up with an agreement, 

a way to work through getting the Department and getting its 

brother and sister agencies the current access that they had by 

way of trust or something very close to trust. 

And that was part of the process in evaluating the acquirer’s 

ability to become a trusted partner and, quite frankly, as Kristen 

said earlier, gain the halo effect to allow them to do business with 

the Federal Government. 

So we believe in the short term that we have addressed the 

short-term need and issue and we can continue to get what we 

need today and for the foreseeable next few years, but we are working in real time on what the future will look like. And the study 

is to address things beyond fiscal year 2017 and what the menu of 

options will be. 

Mrs. HARTZLER. So your study looks for beyond 2017? But until 

then, you feel comfortable at this point—— 

Mr. GUDGER. Yes. 

Mrs. HARTZLER [continuing]. That we will be able to access what 

we need. 

You mentioned, Ms. Baldwin, an accreditation process, that you 

are reaching out. So are you reaching out to these other suppliers 

and talking to them about how they can become accredited in defense-related work to become more trusted? 

Ms. BALDWIN. Yes. Actually we work pretty regularly with industry associations, and several working groups have stood up. And 

that allows us a vehicle to communicate. So the existing trusted 

supplier network, we engage with regularly. And there has grown 

an industry consortium or working group through our National Defense Industrial Association, as an example, which is an oppor-
20 

tunity for the Department and our agency partners and the services to meet with these industries. Yes. Thank you. 

Mrs. HARTZLER. Ms. Mak, what are your thoughts on this strategy that DOD has presented for moving forward to maintain 

longer-term access to leading-edge microelectronics? 

Ms. MAK. I agree with what Ms. Baldwin talked about in terms 

of a menu of options. It is pretty much like a patchwork-type approach, because what IBM offered was that wide spectrum of options to meet their needs. There are definitely trusted suppliers in 

the U.S., but they don’t provide the leading edge. Could they get 

there? Potentially. It is going to cost and it is going to take time. 

I would like to go back to the one question that you mentioned 

earlier to clarify. With respect to the short term, from our work we 

found that the agreements that they went through, we are not convinced that they are going to be able to provide continued access 

even for the next year unless there are still discussions ongoing for 

that. So short term, it may be a bigger issue than we are acknowledging here, I think. 

Mrs. HARTZLER. Okay. Thank you. 

Ms. Speier. 

Ms. SPEIER. Thank you, Madam Chair. 

I would like to go back in time. IBM had a 10-year contract, it 

had a sole source contract in a very rarefied position. Are we basically saying we didn’t have a contract with them that was so ironclad that they would be required to maintain that operation in 

terms of providing leading-edge microelectronics as a component of 

that sole source contract? And why wasn’t it for 30 years or 40 

years? Was this a contract that was only for 10 years or was this 

a contract that was renewed every year so they were in a position 

to sell it? And they do business with us in lots of other areas, so 

why are we tiptoeing around this? 

Mr. GUDGER. Well, I agree with you. I am in violent agreement 

with you. Back up. So IBM’s contract was a competitive bid. What 

happened as a successful offerer, they became the sole supplier because they were the successful offerer on the competitive bid. It 

was for 10 years with 1-year options. And IBM found themselves 

in a very difficult place with this business, where they were losing 

a lot of money. I think in the last balance sheet they stated they 

were going to lose $750 million a year by maintaining the capability. 

And so having a contract with the U.S. Government and then 

forcing them to stay in business in something that they are losing 

money in, it is a very difficult balance. We don’t have the tools and 

the authorities through the regulatory process, whether it is antitrust or foreign investment, to make anyone stay in business when 

they are losing money. 

And so they searched aggressively and they worked with GlobalFoundries to find a partner that they thought that they would still 

continue to need to get access from that they could have as a trusted supplier to them, not just to the Federal Government. And so 

I think those things went into the reason why IBM decided to exit 

the business and turn it over to GlobalFoundries, because they 

maintain a state-of-the-art facility not far from the ones that 
21 

they—GlobalFoundries, that is—not far from the ones that they acquired. 

Ms. SPEIER. So when did they notify you that they were going to 

sell off the business? 

Mr. GUDGER. I think the official notification happened in the second quarter of the calendar year of this year, that the official notification—— 

Ms. SPEIER. So when were you first aware? When did they first 

tell you they were having trouble and that they needed some workout? 

Mr. GUDGER. I am not sure on that answer. But the first that 

I heard about it was when they made the official announcement 

and filed with the interagency committee, is when it became real. 

Ms. SPEIER. Well, at some point, if it was a 10-year contract, you 

would start negotiating a new contract in year 8, right? 

Mr. GUDGER. They still had multiyears left on the contract that 

they were maintaining. So it wasn’t a year 8—— 

Ms. SPEIER. I am not following you. I thought you said that it 

was a 10-year contract and at the end of the 10 years, they chose 

not—— 

Mr. GUDGER. No. We had just awarded the contract. 

Ms. SPEIER. What? 

Mr. GUDGER. Yeah. We were about 2 years into it. And I will let 

Kristen pick up on—— 

Ms. SPEIER. Wait a second. You are saying it was a 10-year contract and they were 2 years into it, and now they are not going to 

comply with the contract? 

Ms. BALDWIN. It was a 10-year multi—it was an option year— 

it was a 10-year contract that was awarded with 10 option—it was 

a 1-year contract with 10 option years. 

Ms. SPEIER. Oh, that is really smart, isn’t it? 

Ms. BALDWIN. There was—right. 

Ms. SPEIER. So you are saying that for something as important 

for our national security as leading-edge microelectronics, we were 

awarding a 1-year contract with options to renegotiate? So we were 

setting ourselves up—— 

Ms. BALDWIN. Right. 

Ms. SPEIER [continuing]. In a very bad negotiating position. 

Ms. BALDWIN. That was what the offerer was willing to negotiate 

with the Department of Defense and that they were the—we did 

run a full and open competition, and they were the sole offerer. 

Ms. SPEIER. I thought you said there were two. 

Mr. GUDGER. No. 

Ms. SPEIER. And that one went out of business or one—— 

Mr. GUDGER. I didn’t say that. 

Ms. BALDWIN. No. 

Ms. SPEIER. All right. So this foundry, this building still exists, 

right? 

Mr. GUDGER. Yes. 

Ms. SPEIER. Because it cost so much money to create. This billion 

dollar facility exists? 

Mr. GUDGER. Yes. Essentially, though, the two facilities that 

GlobalFoundries had acquired through this process still exist today 

and they still produce the products that the U.S. Government 
22 

needs. It is just owned by a different company, GlobalFoundries. 

Many of the same processes, the same people are there. They acquired the assets from IBM. 

Ms. SPEIER. All right. I yield back. 

Mrs. HARTZLER. Thank you. 

And we are taking votes, so you have the last question. 

Ms. GRAHAM. No. Thank you. I have no questions. 

Mrs. HARTZLER. So we very much appreciate you being here. This 

has been very enlightening, very concerning at the same time, but 

certainly raises the issue of how we need to address this for our 

national security. And I appreciate your efforts, all of you, to help 

in this endeavor as we move forward. So thank you so much for 

being here. 

And this will conclude our hearing. 

[Whereupon, at 4:56 p.m., the subcommittee was adjourned.] 
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QUESTIONS SUBMITTED BY MEMBERS POST HEARING 

OCTOBER 28, 2015 

(57) 

QUESTIONS SUBMITTED BY MRS. HARTZLER 

Mrs. HARTZLER. You mentioned in your oral statement that DOD’s Trusted Defense Systems Strategy did not address the risk of relying on a sole source provider. 

What more could DOD have done to prevent this situation? 

Ms. MAK. DOD has been aware of the risk of using a sole source supplier for 

about a decade, but did not begin to take actions to assess and address this risk 

until late last year when IBM announced the proposed transfer of its microelectronics fabrication facilities to GlobalFoundries. Had DOD taken actions earlier, investments in alternative suppliers may have reduced the risk programs now face 

due to potential gaps in availability for specific technologies. 

Mrs. HARTZLER. What are your thoughts on the strategy DOD has presented for 

moving forward to maintain longer-term access to leading-edge microelectronics? 

Ms. MAK. GAO is in the process of reviewing DOD’s strategy as part of our ongoing work and will report our findings in mid-2016. 

Mrs. HARTZLER. For DOD programs, is the purchase of all of the integrated circuits needed for a given technology, otherwise known as making lifetime buys, a 

possible alternative if access to former IBM leading-edge technologies is no longer 

available? 

Ms. MAK. Because the response involves sensitive or proprietary information, it 

is provided in a separate document marked ‘‘For Official Use Only//Proprietary Information Involved’’ and must be protected from disclosure. (Document in Committee Possession.) 

Mrs. HARTZLER. What commitments has GlobalFoundries provided to the U.S. 

Government regarding access to the trusted leading-edge microelectronics formerly 

provided by IBM, including the status of the contract between the U.S. Government 

and GlobalFoundries? 

Ms. MAK. Because the response involves sensitive or proprietary information, it 

is provided in a separate document marked ‘‘For Official Use Only//Proprietary Information Involved’’ and must be protected from disclosure. (Document in Committee Possession.) 

Mrs. HARTZLER. Are other trusted suppliers able to provide technologies similar 

to the IBM technologies now provided through GlobalFoundries? 

Ms. MAK. As GAO noted in its report GAO–15–422RSU, as of August 2014, in addition to IBM, there were 63 other trusted suppliers, including 15 with fabrication 

capabilities. These other suppliers do not have the leading-edge capabilities of IBM/ 

GlobalFoundries (below 90 nanometers), but provide access to a range of mature 

technologies. 

Mrs. HARTZLER. What will it take for other trusted suppliers to be able to provide 

leading-edge microelectronics needed by DOD? 

Ms. MAK. Because the response involves sensitive or proprietary information, it 

is provided in a separate document marked ‘‘For Official Use Only//Proprietary Information Involved’’ and must be protected from disclosure. (Document in Committee Possession.) 

Mrs. HARTZLER. For DOD programs, are there any near-term (within 3 years) alternatives for the former IBM technologies? 

Ms. MAK. Because the response involves sensitive or proprietary information, it 

is provided in a separate document marked ‘‘For Official Use Only//Proprietary Information Involved’’ and must be protected from disclosure. (Document in Committee Possession.) 

Mrs. HARTZLER. Are Field Programmable Gate Arrays (FPGAs) a possible alternative to the trusted microelectronics formerly provided by IBM? 

Ms. MAK. Because the response involves sensitive or proprietary information, it 

is provided in a separate document marked ‘‘For Official Use Only//Proprietary Information Involved’’ and must be protected from disclosure. (Document in Committee Possession.) 

Mrs. HARTZLER. Is there anything DOD or the U.S. Government can do to 

incentivize the microelectronics industry to locate or maintain manufacturing onshore in the U.S.? 
58 

Mr. GUDGER and Ms. BALDWIN. The microelectronics industry is very capital intensive. DOD endorses public-private manufacturing partnerships that produce new 

and advanced manufacturing techniques and ecosystems on-shore in the U.S. DOD 

supports initiatives like the President’s manufacturing institutes where DOD is investing hundreds of millions of dollars to incentivize and grow on-shore microelectronics manufacturing. 

DOD is concurrently working to remove barriers to commercial technology utilization in areas such as the microelectronics industry by seeking out novel and flexible 

acquisition authorities and practices that will allow microelectronics manufacturers 

to have speedier, less encumbered contracting with the Department. 

Mrs. HARTZLER. Given GAO’s assessment that access to leading-edge technology 

for DOD is uncertain, are there any actions that DOD is undertaking to communicate to DOD components, programs, and contractors regarding actions they should 

be taking to mitigate any potential risk? 

Mr. GUDGER and Ms. BALDWIN. The DOD meets regularly with industry associations and companies to promote the integrity of microelectronics and the supply 

chain that provides them. For example, the DOD participates in the National Defense Industrial Association (NDIA) Trusted Systems Steering Group, which represents the Defense Microelectronics Activity (DMEA)-accredited Trusted Suppliers, 

NDIA Systems Engineering Division, and the space community’s Mission Assurance 

Improvement Working Group. 

Mrs. HARTZLER. Is the Department considering lifetime buys or other near-term 

mitigation strategies, given the uncertainty of access? Is there an indication of the 

cost of these possible actions? 

Mr. GUDGER and Ms. BALDWIN. In a memorandum dated November 13, 2015, the 

Assistant Secretary of Defense for Acquisition asked the DOD Component Acquisition Executives, National Reconnaissance Office, and National Security Agency to 

adjust Fiscal Year (FY) 2018 through FY 2020 budgets to accommodate Life Time 

Buys (LTBs) of at-risk Trusted microelectronic products and avoid costly program 

disruptions. DOD acquisition programs are considering the use of LTBs of at-risk 

Trusted microelectronic products, as well as other options, to address the risk of loss 

of access to Trusted microelectronic technologies. This analysis is done on a caseby-case basis, and includes the cost-benefit of LTBs of production-ready applicationspecific integrated circuit (ASIC) designs versus the redevelopment of ASICs using 

alternate design and foundry technologies and any components using those ASICs. 

In many cases, dollars are programmed in future years for these ASICs. 

In addition, the DOD is in the process of expanding DMEA’s capabilities to fabricate ASICs. 

Mrs. HARTZLER. What is the status of DOD access to former IBM technologies, 

and how long is that access expected? 

Mr. GUDGER and Ms. BALDWIN. DOD has uninterrupted access to all pertinent 

IBM technologies that were commercially available prior to the transaction. The 

contract with IBM was novated to GlobalFoundries U.S. 2, LLC (GF2) to prevent 

any interruption in access. According to the existing contract and other methods, the 

access to former IBM technologies is assured through June 2017 with an option to 

extend. DOD is currently negotiating a new multi-year manufacturing contract 

which will assure longer-term supply of former IBM technologies. 

Mrs. HARTZLER. Will DOD maintain any government purpose rights to IBM leading-edge technology semiconductors after the year 2017? If possible, how could that 

arrangement be implemented? 

Mr. GUDGER and Ms. BALDWIN. DOD’s access to IBM leading-edge technology will 

continue beyond 2017, provided a new manufacturing contract is executed with 

GlobalFoundries U.S. 2, LLC (GF2). To assure long-term supply, DOD is working 

with GF2 to transfer the intellectual property for certain technologies to DMEA and/ 

or to alternate foundries. 

Mrs. HARTZLER. What is the potential effect to DOD programs in terms of cost, 

schedule or performance if current access to trusted leading-edge technologies is 

lost? 

Mr. GUDGER and Ms. BALDWIN. A recent survey of USG customers using the National Security Agency Trusted Access Program Office contract revealed that 139 

programs were using the GlobalFoundries U.S. 2, LLC (GF2) Trusted Foundry, and 

120 (86%) of them required Trusted services. Therefore, the total cost and schedule 

effect from losing access to Trusted microelectronics would be significant; roughly 

estimated in $100s of millions. 

Mrs. HARTZLER. What actions has DOD taken or is planning to take to mitigate 

the near-term risk of loss of access to former IBM technologies? 

Mr. GUDGER and Ms. BALDWIN. DOD has taken prudent steps to assure access 

to all pertinent IBM technologies that were commercially available prior to the 
59 

transaction. The contract with IBM was novated to GlobalFoundries U.S. 2, LLC 

(GF2) to prevent any interruption in access. According to the existing contract, the 

access to former IBM technologies is assured through June 2017 with an option to 

extend. DOD is currently negotiating a new multi-year manufacturing contract 

which will assure longer term of supply of former IBM technologies. 

The Department is considering its near- and long-term Trusted Foundry options 

and alternatives to address supply chain risks and preserve state-of-the-art microelectronics access and trust. Recent and ongoing studies are providing the basis for 

budget proposals and future investments, which are currently being evaluated by 

Department leadership. 

In addition, the Department has formed a federation of technical experts and laboratory capabilities. The Joint Federated Assurance Center (JFAC) supports programs throughout their life cycle by providing microelectronics expertise, capabilities, guidance and best practices for mitigating risks associated with preserving access and trust. 

Mrs. HARTZLER. What assurances, if any, does the Department have from GlobalFoundries that they will remain a Trusted Supplier? 

Mr. GUDGER and Ms. BALDWIN. DMEA has granted an interim Trusted Supplier 

accreditation for facilities acquired from IBM. According to the existing contract, the 

former IBM foundries are required to remain a Trusted Supplier until March 31, 

2016. DOD is currently negotiating a new multi-year manufacturing contract with 

GlobalFoundries U.S. 2, LLC (GF2) to remain a Trusted Supplier. 

Mrs. HARTZLER. Were DOD’s national security concerns adequately addressed in 

the CFIUS process? 

Mr. GUDGER and Ms. BALDWIN. DOD is a member of an interagency process and 

can present any national security concerns it deems important regarding a transaction to the Committee that may cause concern. 

Mrs. HARTZLER. Is DOD monitoring China’s efforts to acquire U.S. semiconductor 

companies (including GlobalFoundries), and what steps is DOD taking to ensure the 

security of the U.S. semiconductor industrial base? 

Mr. GUDGER and Ms. BALDWIN. DOD actively identifies and tracks foreign acquisitions of U.S. companies. This includes tracking the Chinese government’s public initiatives to develop a self-sufficient domestic semiconductor industry and its plan to 

encourage foreign acquisitions as part of its strategy. If needed, DOD could utilize 

its membership on CFIUS to evaluate a Chinese acquisition of a U.S. semiconductor 

company for national security concerns. DOD has seen and is monitoring public reports regarding China’s interest in GlobalFoundries. Furthermore, DOD has regular 

engagements with GlobalFoundries U.S. 2, LLC (GF2), as a Trusted Supplier, and 

has discussed these public reports. As a cleared defense contractor, GF2 is required 

to report to DOD any potential foreign acquisition of its cleared facilities. 

Mrs. HARTZLER. Are there industrial base options for unique technologies that 

IBM supplied as a sole-source? 

Mr. GUDGER and Ms. BALDWIN. The microelectronics industrial base, while undergoing rapid consolidation, continues to maintain capabilities across the spectrum of 

DOD requirements. In specific instances where IBM supplied unique, sole-sourced 

technologies, the industrial base possesses capabilities that can be cultivated to fill 

technology gaps or develop different solutions to address the need. 

Mrs. HARTZLER. Is there anything DOD or the U.S. Government can do to 

incentivize the microelectronics industry to locate or maintain manufacturing onshore in the U.S.? 

Ms. BALDWIN. The microelectronics industry is very capital intensive. DOD endorses public-private manufacturing partnerships that produce new and advanced 

manufacturing techniques and ecosystems on-shore in the U.S. DOD supports initiatives like the President’s manufacturing institutes where DOD is investing hundreds of millions of dollars to incentivize and grow on-shore microelectronics manufacturing. 

DOD is concurrently working to remove barriers to commercial technology utilization in areas such as the microelectronics industry by seeking out novel and flexible 

acquisition authorities and practices that will allow microelectronics manufacturers 

to have speedier, less encumbered contracting with the Department. 

Mrs. HARTZLER. Is there anything DOD or the U.S. Government can do to 

incentivize the microelectronics industry to locate or maintain manufacturing onshore in the U.S.? 

Mr. HAMILTON. I defer this answer to the Office of the Undersecretary of Defense 

for Acquisition, Technology and Logistics. 

Mrs. HARTZLER. Is the Joint Federated Assurance Center sufficiently resourced to 

handle current and the predicted future workloads, with sufficient and timely 
60 

throughput, in assessing the security and authenticity of various microelectronics 

that will be used for DOD applications? 

Mr. HAMILTON. Respectfully defer to DOD for official department response. 

Mrs. HARTZLER. Given GAO’s assessment that access to leading-edge technology 

for DOD is uncertain, are there any actions that DOD is undertaking to communicate to DOD components, programs, and contractors regarding actions they should 

be taking to mitigate any potential risk? 

Mr. HAMILTON. I defer this answer to the Office of the Undersecretary of Defense 

for Acquisition, Technology and Logistics. 

Mrs. HARTZLER. Is the Department considering lifetime buys or other near-term 

mitigation strategies, given the uncertainty of access? Is there an indication of the 

cost of these possible actions? 

Mr. HAMILTON. Respectfully defer to DOD for official department response. 

Mrs. HARTZLER. What is the status of DOD access to former IBM technologies, 

and how long is that access expected? 

Mr. HAMILTON. Respectfully defer to DOD for official department response. 

Mrs. HARTZLER. Will DOD maintain any government purpose rights to IBM leading-edge technology semiconductors after the year 2017? If possible, how could that 

arrangement be implemented? 

Mr. HAMILTON. Respectfully defer to DOD for official department response. 

Mrs. HARTZLER. What is the potential effect to DOD programs in terms of cost, 

schedule or performance if current access to trusted leading-edge technologies is 

lost? 

Mr. HAMILTON. Respectfully defer to DOD for official department response. 

Mrs. HARTZLER. What actions has DOD taken or is planning to take to mitigate 

the near-term risk of loss of access to former IBM technologies? 

Mr. HAMILTON. Respectfully defer to DOD for official department response. 

Mrs. HARTZLER. What assurances, if any, does the Department have from GlobalFoundries that they will remain a Trusted Supplier? 

Mr. HAMILTON. Respectfully defer to DOD for official department response. 

Mrs. HARTZLER. Were DOD’s national security concerns adequately addressed in 

the CFIUS process? 

Mr. HAMILTON. Respectfully defer to DOD for official department response. 

Mrs. HARTZLER. Is DOD monitoring China’s efforts to acquire U.S. semiconductor 

companies (including GlobalFoundries), and what steps is DOD taking to ensure the 

security of the U.S. semiconductor industrial base? 

Mr. HAMILTON. Respectfully defer to DOD for official department response. 

Mrs. HARTZLER. Are there industrial base options for unique technologies that 

IBM supplied as a sole-source? 

Mr. HAMILTON. Respectfully defer to DOD for official department response. 

QUESTIONS SUBMITTED BY MR. WILSON 

Mr. WILSON. Please tell me what your office is planning to do in the immediate 

term to harden the defense industrial base as it relates to the USG’s need for microelectronics and semiconductors. Are there targeted investments that are being considered for FY16, or as part of the upcoming budget request? 

Mr. GUDGER. DOD has a growing concern that the United States’ technological 

superiority over potential adversaries is being threatened today in a way that we 

have not seen for decades. DOD recognizes that microelectronics and semiconductors 

are at the center of the threat with the remarkable leveling of the state of technology in the world, where commercial technologies with military applications such 

as advanced computing technologies, microelectronics, sophisticated sensors, and 

many advanced materials, are now widely available. The Deputy Assistant Secretary of Defense (DASD) for Manufacturing and Industrial Base Policy (MIBP), in 

conjunction with high priority Department initiatives, is working toward achieving 

dominant capabilities through innovation and technical excellence within the Department and specifically in the industrial base. 

For the integrated circuit, the fundamental building block of microelectronics, 

DOD is furthering its strength derived from the long-standing link between the 

high-tech community and the United States Government (USG) using Manufacturing Innovation Institutes in areas like flexible hybrid electronics and integrated 

photonics. 

DOD is partnering with a consortium of 96 companies, 41 universities, 14 state 

and local government organizations, and 11 laboratories and non-profits—to establish a new Manufacturing Innovation Institute focused on flexible hybrid electronics. 

This is an emerging technology that takes advanced flexible materials for circuits 
61 

with thinned silicon chips to ultimately produce the next generation of electronic 

products. DOD’s $75 Million investment over five years in ‘‘Flexible Hybrid Electronics’’ will be matched by $96 Million private ‘‘FlexTech Alliance’’ funding. Partner 

organizations include industrial base players across the technology spectrum that 

differentiate using the world’s most sophisticated technology, not the least of which 

is microelectronics capabilities. 

The Department stood up and is growing its Defense Innovation Unit Experimental (DIUx) specifically to scout for new technology and build a bridge to Silicon 

Valley. DIUx brings together the cutting-edge represented by the Silicon Valley tech 

industry and helps to foster the necessary open avenue between DOD and Silicon 

Valley. 

Mr. WILSON. The DOD seems to have been caught somewhat off guard by the IBM 

divesture and Global Foundries purchase, despite the fact that it had been rumored 

in the trade press for upwards of three years. Current industry trade press suggests 

that Chinese controlled entities may now be looking at purchasing a controlling 

share of Global Foundries. Are you aware of these industry reports? How are you 

planning for the impacts that this will cause? If a Chinese controlled entity were 

to purchase some or all of Global Foundries, what affect would that have on DOD 

plans for acquiring trusted microelectronics? 

Mr. GUDGER and Ms. BALDWIN. DOD has seen and is monitoring public reports 

regarding China’s interest in GlobalFoundries. Furthermore, DOD has regular engagements with GlobalFoundries U.S. 2, LLC (GF2), as a Trusted Supplier, and has 

discussed these public reports. As a cleared defense contractor, GF2 is required to 

report to DOD any potential foreign acquisition of its cleared facilities. 

Commercial sources of Trusted microelectronics remain in inherently unpredictable and constitute a continued supply chain risk despite USG investments. The Department is considering long-term Trusted Foundry options and alternatives to address its supply chain risk and preserve leading-edge microelectronics access and 

trust. Experts from across the community contributed to the recommendations to 

ensure continued access to advanced microelectronics while retaining the ability to 

employ them in a trusted manner. A portfolio of innovative technology solutions and 

business models is under review. 

Mr. WILSON. What functionality might be lost by prematurely moving to smaller 

design nodes and how does this impact the health of the industrial base given the 

reality that large geometries exist domestically and small geometries exist mostly 

overseas? 

Mr. GUDGER and Ms. BALDWIN. Although there are significant upsides to designing and manufacturing at smaller node sizes, the impact of shifting between nodes 

varies by system. Smaller node sizes would particularly benefit those systems that 

require high processing efficiencies. Many consumer electronics are therefore aggressively pushing towards more advanced nodes. Military systems that analyze large 

data sets in real-time, such as radar and electronic warfare systems, also depend 

on advances in technology node. More advanced nodes also benefit systems requiring difficult computational tasks with reduced size, weight, and power requirements, 

a critical metric for tactical systems including unmanned aerial vehicles and soldierborne equipment. 

The transition between nodes, however, could require that DOD replicate or port 

functionalities designed for less advanced nodes in order to apply them at more advanced nodes. In addition, jumping to advanced nodes can potentially sacrifice analog performance in certain systems. DOD will therefore need a suite of options, from 

smaller high-performance nodes to less advanced nodes, to meet the needs of its various systems. 

DOD is investing in concepts that utilize existing onshore fabrication facilities at 

less advanced nodes while providing advanced capabilities. However, the volume of 

electronic components purchased by DOD is very small. As a result, healthy foundries increasingly depend less on DOD as a primary revenue source and more on 

global commercial demand. 

Mr. WILSON. What would the approximate cost (rough order of magnitude) be of 

trying to establish domestic foundry capabilities for integrated circuits in the 65 nm 

to 45 nm node size range, or to up gun the capabilities for one of the other existing 

domestic foundries for capacity in that range? 

Mr. GUDGER and Ms. BALDWIN. The cost to establish such a facility would be 

roughly $500 Million to $2 Billion, depending upon the existing infrastructure. 

Mr. WILSON. With respect to the program itself, it was indicated that there are 

72 partner companies within the trusted supplier program. However, it is my understanding that there are only four foundry companies in the program with others addressing other aspects such as design and packaging. What are the impacts of the 
62 

limited number of foundry companies? Given the limited number, how might we use 

these companies to mitigate the risk of further capability loss? 

Ms. BALDWIN. There are 72 Trusted Suppliers within the DOD Trusted Supplier 

program that provide trusted services across the application-specific integrated circuit (ASIC) supply chain. Fifty of those Trusted Suppliers provide trusted design, 

aggregation, mask manufacturing, post-processing, packaging/assembly and/or test 

services. Twenty two of those Trusted Suppliers are Trusted Foundries, i.e., semiconductor manufacturers. There are three domestic foundries, i.e., GlobalFoundries 

U.S. 2, LLC (GF2), Intel Corporation, and Samsung, that produce state-of-the-art 

microelectronics, one of which is part of the Trusted Supplier program, i.e., GF2. 

The DOD will continue to rely upon the Trusted Supplier network, but is also considering additional solutions and business models to mitigate the risk of sole sources 

of supply, and further capability loss. 

Mr. WILSON. How would you characterize the effectiveness of DODI#5200.44 and 

the enforcement of Program Protection Plans for most suppliers? 

Ms. BALDWIN. Since the publication of DOD Instruction (DODI) 5200.44, Protection of Mission Critical Functions to Achieve Trusted Systems Networks (TSN), November 5, 2012, the Department has mandated that program protection plans address the use of trusted microelectronics design and manufacturing suppliers and 

practices for ASICs that are DOD-unique. Risk to system trust is now managed 

throughout the entire system life cycle beginning with design and before the acquisition or integration of critical components into covered systems. Programs are integrating robust systems engineering, supply chain risk management, security, 

counter intelligence, intelligence, cybersecurity, and software and hardware assurance. DMEA-accredited Trusted Suppliers report seeing an increase in interest in 

Trusted services from their customers since the implementation of DODI 5200.44. 

Mr. WILSON. What is the approximate total annual Federal expenditure on Trusted Supplier contracts (including the take-or-pay contract)? What is the average cost 

of an integrated circuit within the program and how does this compare to other integrated circuits bought outside of the program? 

Ms. BALDWIN. The recent total annual outlays to contractors for Trusted services 

is approximately $65 Million per year. The average cost per integrated circuit has 

a very large standard deviation due to the wide range of design sizes, manufacturing processes, and quantities of parts being ordered. For example, a 3mm x 4mm 

chip could cost less than $290 per good die in a dedicated prototype run using one 

process to over $3300 per device in a multi-project wafer run using an advanced 

process node. 

Products obtained through these contracts are comparable in price to what a similar volume commercial customer would pay if it contracted directly with the same 

foundry for similar services. 

Mr. WILSON. With respect to the program itself, it was indicated that there are 

72 partner companies within the trusted supplier program. However, it is my understanding that there are only four foundry companies in the program with others addressing other aspects such as design and packaging. What are the impacts of the 

limited number of foundry companies? Given the limited number, how might we use 

these companies to mitigate the risk of further capability loss? 

Mr. HAMILTON. Respectfully defer to DOD for official department response. 

QUESTIONS SUBMITTED BY MR. HUNTER 

Mr. HUNTER. Recently, Under Secretary Frank Kendall and you attended an 

event sponsored by Defense One, and during that event, he highlighted how integrated micro-electronics were an area of particular concern for the Department of 

Defense and how the Department was using a number of tools to ensure a reliable 

supply of these components to the Military Services and the Intelligence Community. 

a. What industrial base tools—such as Committee on Foreign Investment in the 

United States (CFIUS) reviews and the Defense Production Act (title I and title 

III)—has your office deployed with respect to micro-electronics, and what is the comparative effectiveness of these tools to achieving the objective of a reliable supply 

of micro-electronics? 

Mr. GUDGER. The Department maintains awareness and conducts detailed analyses of domestic and global industry trends affecting its available capabilities. As 

part of its mission to ensure the maintenance of a healthy defense industrial base, 

including in microelectronics, the Deputy Assistant Secretary of Defense (DASD) for 

Manufacturing and Industrial Base Policy (MIBP) has a number of tools and authorities at its disposal to support the advancement of new enabling capabilities 
63 

that aid in achieving a reliable microelectronics supply. The authorities support the 

health of the defense industrial base across the entire life cycle of DOD systems and 

consist of support for the development of emerging technologies, maturation of those 

technologies, manufacturing refinement, and effective sustainment: • The Department assesses proposed mergers, acquisitions, and foreign investments involving defense-related companies and acts to mitigate identified 

issues. DOD’s participation in the interagency merger and acquisition review 

processes is a tool that enables the protection of DOD’s interests when required. 

The Department works cooperatively with the Department of Justice and the 

Federal Trade Commission on antitrust reviews of mergers and acquisitions 

(Hart-Scott-Rodino) and serves as a voting member on the Department of Treasury-chaired CFIUS. • The Department is supporting the development of new areas of the industrial 

base and cutting-edge manufacturing technologies through initiatives such as 

the National Network for Manufacturing Innovation. This emerging network of 

manufacturing institutes leverages public-private partnerships to reduce barriers to rapid and efficient development and commercialization of new manufacturing technologies. This innovative approach can enable the DOD Trusted Defense Systems Strategy by supporting flexible hybrid electronics and integrated 

photonics manufacturing institutes, which deliver new manufacturing capabilities in electronics. • MIBP oversees the DOD Manufacturing Technology program which advances 

the development and application of advanced manufacturing technologies and 

processes DOD-wide. MIBP, through its Defense-wide Manufacturing Science 

and Technology program, helps to coordinate the manufacturing technology efforts of the DOD Components, which advances the DOD mission by reducing 

acquisition and support costs as well as manufacturing and repair cycle times 

across the life of DOD systems in a cost-constrained budget environment. • Defense Production Act (DPA) Title III, which Congress reauthorized last year, 

gives MIBP the ability to use special economic incentives to develop, maintain, 

modernize, and expand the productive capacities of domestic sources for critical 

components, technologies, and industrial resources essential for the execution of 

the national security strategy of the U.S. In the field of microelectronics, Congress has provided funds that have allowed the Department to improve industry’s ability to support the DOD’s efforts to preserve and expand supplies of defense critical microelectronics. • The Industrial Base Analysis and Sustainment (IBAS) fund provides the means 

to support critical, unique capabilities of companies in the defense industrial 

base with fragile business cases, preserve critical skills for technological superiority, and maintain reliable sources of strategic materials. In the microelectronics sector, IBAS has provided critical investments in research and development and qualification testing to develop Trusted technologies. These technologies include focal plane arrays to meet advanced imaging requirements for 

the space, ground and aviation sectors, as well as radiation-hardened microelectronics, and a specialized integrated circuit approach to ensure the preservation 

of strategic national security systems, such as the Trident missile in high-threat 

environments. 

Mr. HUNTER. During the course of the hearing before the Subcommittee on Oversight and Investigation, multiple witnesses discussed the relatively recent sale of 

IBM’s micro-electronics business to GlobalFoundries Inc. The owner of GlobalFoundries Inc. is the Mubadala Development Company PJSC, a sovereign wealth 

fund of the Government of Abu Dhabi. 

a. Since this transaction must have undergone a CFIUS review, what national defense risks to the Department of Defense and the Intelligence Community were 

evaluated during this process? 

b. What additional safeguards, if any, has the Department put in place at these 

former IBM facilities to ensure that export-controlled items, or the technology and 

manufacturing techniques that enables their production, are handled in an appropriate and lawful manner? 

Mr. GUDGER. DOD is a member of CFIUS and can present any national security 

concerns it deems important regarding a covered transaction to the Committee. Due 

to the confidentiality requirements of CFIUS, the Department cannot confirm 

whether the IBM sale to GlobalFoundries U.S. 2, LLC (GF2) was a covered transaction by CFIUS. Please contact Treasury as the Chair for CFIUS regarding any 

questions regarding CFIUS’ reviews or decisions. 

All the stringent security measures in place prior to the transaction are still 

largely present, including Global Business Solutions (GBS), a business unit of IBM, 

continuing to provide security oversight. GBS was not part of the IBM sale to GF2 
64 

and remains under the control of IBM. In addition, the facilities under control of 

GF2 currently have an interim facility clearance from the Defense Security Service 

(DSS) and an interim Trusted Supplier accreditation from the Defense Microelectronics Activity (DMEA), and are subject to all associated security requirements. 

Due to the foreign ownership of GlobalFoundries, DSS required additional security 

requirements to address visitation, export controls, collaborative business endeavors, 

etc. where there were any concerns. 

Mr. HUNTER. If I understand the testimony before the subcommittee correctly, one 

compound risks confronting the Department of Defense in the micro-electronics 

space is that (1) micro-electronics are part of thousands of items that the Department of Defense buys, including many commercial items, but (2) the volume of 

micro-electronics that the Department of Defense buys is so small, relative to the 

commercial market, that it has little influence on market dynamics. Said another 

way, the ability of the Department to protect national security equities for microelectronics through normal procurement practices is limited by the Department’s 

market share. 

a. Has your office identified this trend—(1) many important defense uses for a 

particular material or component but (2) small defense demand relative to commercial markets—occurring in other industrial base sectors? 

b. How does your office address this trend differently from those industrial base 

sectors, such as binders and propellants for solid rocket motors, where the Department of Defense is the primary driver of demand and private investment? 

Mr. GUDGER. Yes. The Department identified several sectors where defense-related demand is small compared to commercial demand, such as ground supply and 

transportation subsystems (transmissions, diesel engines, brakes, etc.); service sectors, such as medical, transportation, and construction; and solid rocket motor propellant components. However, the Department’s purchase of these items does not 

approach the scale that we see with microelectronics since microelectronics are prevalent in almost all of the systems we buy. Unlike the examples cited above, the 

microelectronics industry is continuously evolving its technology, roughly every two 

years, thus requiring billion dollar investments in research and development and in 

new production facilities every couple of years. The rate of commercial technology 

advancement and the significant investment necessary to establish microelectronic 

production facilities creates barriers for new firms to enter the market. Accordingly, 

it is the combination of the Department’s small market share, the rate of technology 

advancement, and the significant investment necessary to establish microelectronics 

production facilities that limit the Department’s ability to impact market dynamics 

for microelectronics. 

There is no one right answer for addressing low market share trends or DOD 

dominant market share trends. We address industrial base issues associated with 

each industrial sector on a case-by-case basis depending on many variables, to include market share, competitive forces (numbers of domestic sources or foreign suppliers), mature or emerging technology, and barriers to entering the market. The 

Department has several options available for mitigating supply base risks, including 

propellants or propellant ingredients, such as using a reliable foreign source, establishing a domestic source, or investing in research and development to develop a second source. The Department used IBAS funding to help establish a domestic source 

for this material. A current high-priority item for a low DOD market share issue 

is hydroxyl-terminated polybutadiene (HTPB), where variability in the product from 

the sole-source domestic supplier has caused issues for many DOD missile systems. 

Various mitigation activities, including research and development funding from the 

Defense Logistics Agency and IBAS are helping to characterize the material more 

thoroughly, and also to establish a reliable second source. An example of a material 

that scores very high in terms of risk, but has been determined that no action is 

required at this time is nitrocellulose (NC)—a material that is in all DOD ammunition systems and for which there is a sole domestic source. However, that source 

is a Government-Owned, Contractor-Operated (GOCO) facility, and is therefore stable; no mitigation is necessary at this time. A final example of a dominant DOD 

demand issue was the solid rocket motor for the Advanced Medium Range Air-toAir Missile where the program office used a foreign source to mitigate the supply 

issue. 

Mr. HUNTER. During her opening statement, Ms. Marie Mak (Director, Acquisition 

& Sourcing Management Team, U.S. Government Accountability Office) made the 

following remarks with respect to micro-electronics and industrial base policy more 

broadly: 

‘‘But the bottom line is that, not only is the U.S. reliant on a single provider, it 

now faces the unknown risk of relying on one that is foreign-owned. DOD is in a 
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position where it faces some very difficult and complex decisions with potentially 

significant costs and national security implications. 

‘‘Microelectronics is just the latest of several defense industrial base issues. Other 

examples include rare earth materials, specialty metals, and counterfeit parts. We 

need an industrial base strategy that is much more proactive and less reactive.’’ 

a. Since the duties of the DASD-Manufacturing and Industrial Base Policy include 

being the principal advisor to Under Secretary Kendall on ensuring a reliable supply of critical materials like rare earths and specialty metals (10 U.S.C. 139c(b)(16)), 

would you characterize the national security drivers associated with rare earths as 

similar to that of micro-electronics (small defense demand, minimal Department of 

Defense market influence, outsized presence of foreign and Chinese manufacturers, 

etc.)? If not, why not? 

b. What steps is the Department of Defense taking to promote domestic and/or 

allied nation production—not low technology readiness level research projects and 

surveys—of rare earth materials to meet defense requirements? 

Mr. GUDGER. There are similarities between microelectronics and rare earth supply chains (small defense demand, minimal DOD market influence, outsized presence of foreign and Chinese manufacturers, etc.). There are also key differences. 

Microelectronics are manufactured components which can be sabotaged or counterfeited resulting in significant national security risks. Rare earths are raw, semi-finished, or alloy products which go into manufactured items, which substantially limits the ability to tamper or sabotage the materials. DOD is reliant on thousands of 

different microelectronic components, while rare earths consist of just 17 elements. 

DOD can stockpile a handful of different forms of these rare earth elements to mitigate the majority of its risk. Therefore, DOD’s primary risk mitigation for rare 

earths is stockpiling. Stockpiling is generally ineffective for addressing microelectronic components because the technology advances so rapidly, and stockpiled components become obsolete before being used. Additionally, the cost of the multitude 

of components required to be stockpiled would be too high. Consequently, stockpiling 

of select critical microelectronics is considered by DOD acquisition programs on a 

case-by-case basis, when necessary, carefully considering its cost/benefit. 

There is not a sustainable business case for developing rare earth mining and production capabilities in the United States at this time due to the current overcapacity 

in the market. Compared to domestic commercial demand for rare earth materials, 

the Department’s industrial base requirements are very small. Accordingly, the current risk mitigation effort being pursued by the Department is stockpiling. The ongoing establishment of rare earth inventories will mitigate much of the Department’s risk for a relatively small investment. 

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