Congress moves to bring back domestic microelectronics manufacturing

The Defense Department will have to stop using circuit boards, made in China and other potentially adversarial countries in its mission systems starting in 2023, according to a provision in the 2021 defense policy bill.

The 2021 defense policy bill, which Congress passed last week and is awaiting the president's signature, prohibits DOD from buying circuit boards used for mission critical functions that are made in certain countries, including China and Russia starting in 2023 with exceptions for commercial-off-the-shelf products and services. The legislation also names North Korea and Iran as off-limits, but the U.S. already has rules in place banning most trade with either country.

The defense secretary can also make exemptions "after reasonable notice, based on a determination that the designation is required to support national security," according to the bill language.

"The pandemic was a big wake up call," said John Mitchell, the president and CEO of the electronics industry advocacy organization, IPC. "The tariffs that started a couple of years ago got everybody to pay attention...but then the pandemic said, wow, my supply chain just got cut off and I can't buy certain things."

Microelectronics like printed circuit boards are used to help electronics from televisions to supercomputers function, and have increasingly become a part of the defense supply chain security conversation, especially this year as the COVID-19 pandemic made certain items difficult to make and buy.

The Trump administration has focused a lot on China and its national security risks when it comes to microelectronics, such as potentially siphoning sensitive data during the manufacturing process. And with growing competition with China and national security concerns heighted by the pandemic, the Congress and the Defense Department have pushed to tighten its cybersecurity and technical supply chains.

"You can't have a chip without the rest of the stuff to have it talk to it and communicate and be put on," Mitchell said. "The challenge is: everybody's very keen on artificial intelligence, 5G, quantum computing, but they don't understand that there's a whole rainforest around getting just those trees to grow.'

Regulations on printed circuit board manufacturing wouldn't come from the defense secretary wouldn't come out until mid-2022, according to the bill, but changes are expected to take shape in the next year as DOD works with electronics companies, contractors, and suppliers to determine sourcing and capability needs.

In addition to the NDAA's new sourcing requirements, Congress also required DOD to study the effects of expanding the restrictions to commercial printed circuit boards and assemblies.

"You can have a factory on one end of the country that is completely secure, and you can have them transmitting information from another factory that's completely secure, but all the stuff in between -- it's basically traveling over commercial lines," Mitchell said.

The pandemic's constricting effect on supply chains plus this year's NDAA could also lead to a resurgence of U.S. microelectronics production.

"The combination of that with this [NDAA] will help fill in the gaps in the ecosystem and the electronic supply chain in the U.S. And that I think is the primary driver. It'll take some time, but efforts will start, I think, as early as 2021 to try to make sure that we'll be examining what parts of the supply chain don't exist here or where we had those problems," Mitchell said.