Spotlight: SkyWater aims to boost, secure semiconductor production

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SkyWater Technology’s new 60,000-square-foot expansion — which will produce specialty microelectronics for customers ranging from medical device makers to the U.S. Space Force — embodies the push to boost domestic semiconductor production and the public-private partnerships company leaders and government officials say are critical to the effort.

The Department of Defense is spending $170 million over several phases to build the expansion, which includes 12,000 square feet of additional clean room space for SkyWater, the only U.S.-owned and operated pure-play foundry or semiconductor fabrication facility. The investment comes under DoD’s Trusted and Assured Microelectronics program, which works with industry and laboratories to produce technology solutions for national security and defense.

Construction on the addition at SkyWater’s headquarters in Bloomington began in October 2019 and continued during the pandemic. The company marked its completion last month with a commissioning event that featured DoD, Department of Commerce, state and local officials as well as U.S. Rep. Dean Phillips.

Production in the new space will begin in the fourth quarter of 2021, SkyWater President and Chief Executive Officer Thomas Sonderman said in an interview. Equipment is getting installed and is undergoing testing in the meantime.

Falling U.S. chip making capacity

The United States this year accounts for only 12% of worldwide semiconductor production, down from 37% in 1990, according to the U.S. Semiconductor Industry Association. With Asia dominating production, a bill pending in Congress calls for billions of dollars in incentives to “re-shore” semiconductor manufacturing.

“It’s definitely unusual to be expanding a semiconductor facility in the U.S.,” Sonderman said. “It’s a sign that instinctively it all was in flight before some of this awareness around U.S.-based manufacturing became apparent. But now it’s certainly putting us in a very nice position as we begin to repatriate the way semiconductor manufacturing is done.”

SkyWater’s new clean room will specialize in part in making radiation-hardened or “rad-hard” semiconductors, Sonderman said. These chips, he said, work in “harsh environments, places where detonations can occur, places where you have a need for sensitivity to high degrees of radiation.” Applications include certain Space Force communications needs, superconducting technologies used for quantum computing, in which Sonderman said SkyWater is a leader, and medical devices.

“Us being in the center of the medical device arena here in Minnesota leads to some interesting applications there,” Sonderman said. “It’s a capability that not only is unique but also well-timed because there is a lot of effort to commercialize space.”

Jeb Nadaner, DoD deputy assistant secretary for industrial policy, told listeners at SkyWater’s event that the tech sector’s reliance on foreign chip suppliers and customers that have close ties to China creates new security challenges for the United States. Public-private partnerships are part of defense department strategy to counter that threat.

“We as Americans must be assured that the chips our weapons and our equipment used by American troops and in our infrastructure for all our citizens operate as intended when they are needed most and that they’re not ‘exfiltrating’ the sensitive and personal and private data to people that do not wish us well,” Nadaner said.

Advance manufacturing potential

The new fabrication facility “is proof that large-scale and advanced manufacturing continues to be possible in the United States of America,” Ian Steff, Department of Commerce assistant secretary for global markets, said at the commissioning event. “Our domestic capabilities up and down the supply chain must increase … and will increase. This continues to be enabled by industry-driven approaches with government partnership to improve the investment climate as demonstrated here today.”

SkyWater, which has 500 employees, expects to add 50 by the time the new clean room is fully operating, Sonderman said. About 20% are engineers and about 20% of them have doctorate degrees. Another 20% of the workforce is former military “because what we do requires high degrees of precision and attention to detail” in working on pieces of equipment that can cost $1 million and up.

SkyWater doesn’t make its own products but offers services for companies that do, said Sonderman.

“Part of the way we run our facility is just not manufacturing a product for a customer on a given basis but also working with that customer to innovate and co-create next-generation technologies that will go into the products of the future,” Sonderman said. “That’s essentially what we’re doing with the U.S. government as it relates to the rad-hard technology. We’re creating an environment where we won’t only manufacture the product but we’ll also be involved with helping to create the process design capabilities that will lead to those products. And we get paid for both. We like to think of it as offering technology or innovation as a service.”

2017 spinoff continued operation

SkyWater’s original fabrication facility was launched by Control Data Corp. in the 1980s and acquired and expanded after Cypress Semiconductors acquisition in 1991. SkyWater spun off in March 2017 when Oxbow Industries, a Minneapolis-based private equity firm, acquired the facility.

The progress SkyWater has made in the past 3½ years will accelerate with the expansion, Steve Manko, the company’s chief financial officer, said in an interview.

“We’re going to see even more as a lot of the services we’ve been providing in development of this new technology will start going into production in 2021 and beyond,” Manko said. “That will excite customers and allow us to continue further deepening our relationships with our customers and make not only our customers sticky but also our employees sticky, as they are really seeing us change the world through this technology that they’ve been working on for a number of years coming to reality.”

SkyWater Technology

Business: The only U.S.-owned and operated pure-play semiconductor foundry offers customer technology development services and volume manufacturing of integrated circuits and micro-devices.

Headquarters: Bloomington

CEO: Thomas Sonderman

Employees: 500

Founded: 2017 (spinoff from Cypress Semiconductor)

Website: www.skywatertechnology.com