Monopolies Slowly Destroying the Pentagon

Monopoly Supplier of Critical Pentagon Semiconductors Shuts Down Its Production.

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Why will the Pentagon have trouble building the weapons it ordered? It turns out that the Defense Department has a semiconductor shortage of its own, but this one isn’t supply chain related. Via Bloomberg.

The Pentagon plans to place as much as $2 billion in rush orders by early March for customized semiconductors used in weapons like the B-2 bomber before the production line for them is shut down.

GlobalFoundries Inc. has sold the factory in Fishkill, New York, that produces the specialized chips used in GPS-dependent systems, and the new owner won’t be making them.

Systems that use the semiconductors include the B-2 stealth bomber, the Army and Marine Corps Joint Tactical Light Vehicle, the Army’s wheeled Stryker vehicle, the Navy’s Arleigh Burke-class destroyer and the Air Force’s new Small Diameter Bomb II, according to the Air Force, which is overseeing the chip purchases.

We used to have lots of semiconductor fabs all over the country that could produce different kinds of chips, but these were gradually sold off or closed. It’s gotten so bad that the Pentagon relied on one production line for key chips, and that production line, owned by Abu Dhabi-controlled Global Foundries, just sold it off to a firm that will shut it down. The Pentagon is stockpiling extra chips, but in a war, these kinds of things get used very quicktly.

Such a potentially crippling shortage isn’t a unique challenge. As Lucas Kunce and I wrote in 2017, our defense base has a serious monopoly problem, both because of consolidation in the defense sector and the broader economy.