Why the Pentagon Dreads the “Sale” of IBM’s Chip Business

By Mark B., A WOLF STREET exclusive:

I started my engineering career with IBM in the Hudson Valley. I went on to work in the semiconductor industry for many years, eventually ending up in the software business, supplying design tools to the industry.

So, I was meeting up with a friend in the business who just got back from a visit to IBM’s Burlington, VT, facility. And he had a couple of interesting observations.

First, IBM’s chip business is one of the only suppliers to the defense industry that is US owned. There are a few smaller players like Honeywell, but they can’t do the advanced fab processes you need to do processors, memory, etc. Intel doesn’t have some of the RF (radio frequency) processes that the military needs, so they’re not a complete substitution.

Second, The Department of Defense is very worried about sending critical chip designs outside the US; they’re worried that they could be back-engineered or even altered prior to fabrication.

Even though only the physical design layout is sent to the fab, it’s still just digital files (think a circuit board with all of the copper traces connecting components, but at a much smaller scale). Inserting a few thousand additional logic gates into a design with hundreds of millions of gates is not particularly difficult. This means a foreign power could, theoretically, insert a hardware backdoor into the chip that would be almost impossible to detect.

This isn’t science fiction. The DOD has been worried about this for years. You can’t look at the chip under a microscope and count gates, etc. to see if you’ve been hacked. The article, The Hunt for the Kill Switch already spelled this out in 2008 when it described how “supposedly state-of-the-art” Syrian radar mysteriously failed to detect Israeli planes when they bombed Syrian nuclear facilities. This sort of “kill switch” could be built into any semiconductor without customers knowing about it.

By now, as the EE Times explains, researcher discovered various methods by which Trojans can be inserted into a chip-design project, “all the way from the system level down to physical layout.” The challenge for the DOD is to protect against these threats.

The Pentagon is making its biggest effort yet to find out if chip makers are building electronic trapdoors in key military hardware. And it’s relying on US manufactured chips; total US control over the process would presumably give it some extra protection.

Here’s the catch: IBM is selling its semiconductor operations to Globalfoundries. Actually, IBM is paying Globalfoundries $1.5 billion to take this monkey off its back – that’s how great the chip business has become for IBM.

It’s sad to see this happen to IBM. They used to be the leading edge of semiconductor technology, ahead of Intel, TSMC, etc. Pride and arrogance were their downfall years ago.

So now, with this deal, IBM is trying to get out of the semiconductor business. The problem, for the Pentagon, is that Globalfoundries is owned by entities affiliated with the government of Abu Dhabi. The fear is that the US government might lose control over the process, and that a practically undetectable Trojan might finds its way into its hardware….

The sale would have to be approved by various agencies. And the DOD will likely have an opinion. But the alternative is shutting down the facilities completely, which means DOD also loses.

Interesting wrinkle in all the problems revenue-challenged IBM already has. By Mark B. A WOLF STREET exclusive.

And IBM’s problems are not unique among America’s big old tech companies, where job cut announcements have doubled from a year ago to reach the worst level since crisis-year 2009. Read… Layoffs Explode In America’s Big Old Tech Companies.

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  5 comments for “Why the Pentagon Dreads the “Sale” of IBM’s Chip Business

  1. Petunia says:

    I think that IBM is doing this on purpose. Outsourcing the chip business out of the jurisdiction of the DOD. Somewhere where the DOD can’t force them to put in back doors for them. The overseas buyers already think the back doors for the DOD are there and are not buying the chips. The only way for IBM to save the overseas market for their computers is to outsource all the manufacturing away from the US. For the customer it is a now a question of who you want spying on you, the US, or some other govt.

    • Mark B says:

      No, it’s purely economic. IBM has been losing money trying to build their own chips for their own servers, which have been steadily losing market share. I was technical support for the software used to design chips and I saw from the inside as IBM steadily lost ground. The only people using IBM servers was IBM, maybe a few marginal players, but almost all IBM. They wanted DOD business as it was one of the few customers they had. And DOD paid a premium for the chips, no surprise.

  2. Vespa P200E says:

    Chinese may be already doing some spying and perhaps far fetched but be able to disable the military hardwares via some of the programmable chips used by the US armed forces. Chinese have huge enterprise recycling the PCBAs (electronic board stuffed with chips, resistors, etc.). It’s dirty and dangerous job pulling out chips soldered with lead solders over coal stoves but many of the chips removed from old PCBAs US armed forces throw away may find its way as spares.

    What is worse is that some Chinese recyclers alter the pad printed company name and part number on the chips and resell via underground chip business. Unsuspecting purchasing person in US buy bargain counterfeit or mislabeled chips which goes onto US armed forces as spares.

    And of course we have Obola chewing gums in Beijing, take his limo instead of Chinese provided limos like other leaders and tout BS deal with China about carbon reduction by cramming down liberal agenda to US with Chinese merely say they will reduce their emissions – yeah right. At least he didn’t bow down to his socialist boss Hu like he did to Japanese emperor and Saudi king.

  3. The establishment is worried about outsiders spying on them? How precious.

  4. Julian the Apostate says:

    LOL It’s like that bumper sticker: “don’t steal. the government hates competition

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