Don’t Trust the Chinese to Make Microchips for the Military
The recent disclosure that Moscow co-opted the popular Russian cybersecurity firm Kaspersky Lab to aid its espionage efforts has highlighted the danger of relying on companies from adversary countries for the security of sensitive government systems. While the federal bureaucracy and Congress now are acting decisively to end American dependence on Russian-made software products, America’s national-security infrastructure has an even deeper vulnerability to address.
In 2014 McKinsey & Co. estimated that more than 50% of personal computers and between 30% and 40% of the world’s embedded systems—such as automotive, commercial and medical electronics—contained Chinese-designed components. By pressuring Chinese manufacturers to source components domestically, Beijing stimulated a semiconductor industry that has rapidly developed expertise and expanded its reach. Beijing’s strategy has also attracted U.S. manufacturers in ever-increasing numbers to relocate their development and production facilities. Companies are drawn to China’s low manufacturing costs and its sizable market. But for America’s armed forces, the results could one day be devastating.
“If I look out to 2025, and I look at the demographics and the economic situation, I think China probably poses the greatest threat to our nation,” warned Gen. Joseph Dunford, chairman of the Joint Chiefs of Staff, in September. Central Intelligence Agency Director Mike Pompeo said essentially the same thing in July.
In 2011 microchips headed for U.S. Navy helicopters were found to carry defects that would have prevented them from firing missiles. Given that the chips came from China, there was a strong suspicion that the defect was the result of deliberate tampering. Sabotaging an adversary’s military equipment has a long and colorful history, and it would fit squarely in China’s strategy of asymmetrically undermining America’s conventional military superiority.
After an investigation the Navy concluded the defect was an unintentional flaw. This only raised additional concerns about the quality of critical electronics produced in China. Counterfeit Chinese chips have become a rampant problem affecting America’s military, the intelligence community and the Missile Defense Agency. Long and obscure supply chains make it almost impossible to verify the reliability and source for weapons-grade microchips.
The Defense Department is experimenting with different ways to detect fakes entering the supply chain and has pursued legal action against traffickers. Such efforts, while welcome, are insufficient. Even if the Defense Advanced Research Projects Agency succeeds at reducing counterfeits, the U.S. will still be vulnerable to defects deliberately embedded by legitimate Chinese suppliers. The possibility that China will simply cut off access to the integrated circuits on which the military relies remains a risk as well.
Maintaining a domestic chip-manufacturing industry is critical to American national security. It will also stimulate the economy and bring high-quality tech manufacturing jobs back to the U.S. Market forces alone won’t achieve this. If it is cheaper to acquire parts abroad, that’s what defense firms will do absent other incentives.
Congress should pass legislation requiring defense manufacturers to source all electronic components domestically or from approved allies. Although such legislation would run counter to the principles of free-market capitalism, there is significant precedent for interfering in the market to safeguard vital security interests. The Committee on Foreign Investment in the U.S. reviews foreign acquisitions of American companies for this reason.
Republicans and Democrats alike are starting to acknowledge the critical nature of the semiconductor industry. Presidents Obama and Trump blocked the acquisition of chip manufacturers by Chinese investors. But blocking acquisitions of domestic companies won’t be enough if those same companies continue to depend on China for component parts. It also won’t prevent U.S. manufacturers from actively moving their manufacturing plants to China. In addition to bolstering security, requiring the defense industry to source chips wholly produced by the U.S. and its allies would give manufacturers an incentive to keep their facilities in the U.S. This would not only provide jobs in the short term, it would help ensure a competitive domestic semiconductor design and manufacturing capability in nonmilitary applications as well.
While overhauling the supply chain will be an expensive and gradual process, it is an essential one. With Beijing now pursuing an active role in what had previously been a relatively independent Chinese tech industry, the threat of compromised microchips in America’s military supply chain is only increasing. The opportunity to exploit such vulnerabilities and sabotage the U.S.—during peacetime or war—will be too great to pass up.
Depending on China for critical military components is as reckless as depending on Russia for cybersecurity. The U.S. military would not rely on either country to produce its fighter planes or warships. It should stop depending on them for the components that make those weapons function.