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IMMEDIATE RELEASE

Release No: 182-98
April 17, 1998

DEPARTMENT OF DEFENSE PROGRAM CONTRIBUTES TO TURNAROUND IN A KEY SEMICONDUCTOR MATERIALS INDUSTRY

Department of Defense and industry representatives today celebrated completion of a four-year project to strengthen the U. S. industrial base for gallium arsenide (GaAs) wafers during a ceremony held at the Pentagon. The host for the celebration, Deputy Undersecretary of Defense for International and Commercial Programs Page Hoeper, called the project "an enormous success."

The semi-insulating GaAs wafer project was initiated under the Defense Production Act, Title III Program (Title III), which promotes creation and strengthening of domestic industrial capabilities to support national security needs. Recent Title III projects have focused on developing efficient, low-cost production capabilities for advanced technologies. The primary goal of such projects is to enable and promote early insertion of new technologies into weapon systems at an affordable cost.

Hoeper said, "Prior to the Title III project, U. S. firms accounted for less than 25 percent of sales worldwide and were discouraged from competing more vigorously by the relatively small market for semi-insulating gallium arsenide wafers, and by the high capital cost to be competitive in this market."

"Now," Hoeper continued, "these companies dominate the U. S. and world markets with nearly 60 percent of the market and world-class product quality. More importantly, DoD is reaping benefits in many different weapons programs. Electronic systems using gallium arsenide technology are cheaper, more reliable, and more advanced, due to improvements made during this Title III project."

The gallium arsenide project was begun in 1994 to develop a competitive domestic capability to produce semi-insulating GaAs wafers. "Prior to the Title III initiative, the competitive position of U. S. producers was weak and at risk of declining even further," said Mike Corridore, chief of the Defense Production Act, Title III, program under Hoeper. "We were facing the prospect of having little or no production capacity in a year or two for this critical electronic material."

Gallium arsenide wafers are a critical material for a variety of advanced electronic applications in radars, smart weapons, electronic warfare, and communications. Integrated circuits based on GaAs substrates enable many of the leading-edge technologies in most major weapon systems. Those circuits also are key components in cellular communications, wireless networks, and GPS receivers.

The three Title III contractors for semi-insulating GaAs wafer project were American Xtal Technology (AXT), Fremont, Calif.; Litton Airtron, Morris Plains, N. J.; and M/A-COM, Lowell, Mass.

Crediting the government program, Theodore Young, senior vice president for marketing at AXT, said, "Title III gave AXT the impetus to improve its quality control, increase its capacity and enhance its technical marketing network." Jack Frost, manager of quality systems at Litton Airtron, added "the program helped us establish a world-class program."

"The GaAs industry has made great progress as a whole and the three Title III substrate suppliers have all been able to keep up with device manufacturers' technical and quantity requirements as a result of the program," said David Miller, vice president and general manager of Litton Airtron.

Bob Ochrym, Litton Airtron's director of sales and marketing, said, "Litton Airtron increased its world market share of the GaAs substrate market from 18 percent to 25 percent, becoming the world's largest during the first year of Title III. The strategic and marketing planning, technical customer support and advertising initiatives supported by Title III enabled us to gain and sustain this market leadership position."

Sales of GaAs wafers by the three Title III contractors are now more than five times the 1994 level. The dollar value of these sales has more than tripled over the life of the Title III project, even though the average wafer price has declined by more than one third. Production capacity of the three domestic producers has increased by more than 300 percent and production yields have more than doubled over this period as well.