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.

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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 it 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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