In early 2024, the border conflict between India and Pakistan escalated again, with the two sides engaging in intense electronic confrontations and drone attacks and defenses in the Kashmir region. Affected by this, the military industry sector in the global capital market has collectively shown abnormal movements:
In the A-share market, military electronics stocks such as Aerospace Development (000547) and AVIC Optoelectronics (002179) have seen weekly gains of over 20%.
1. Us stocks: The share prices of Raytheon Technologies (RTX) and Lockheed Martin (LMT) have reached record highs.
2. Semiconductor sub-sectors: The order visibility of military-grade IC suppliers such as TI and ADI has extended to Q2 2025.
We can see that the underlying logic is nothing more than that modern warfare forms are shifting from "mechanization" to "informatization", and the reliance of electronic warfare systems, radars, military communication equipment, etc. on high-reliability integrated circuits (ics) is as high as over 60%. Take the India-Pakistan conflict as an example. Both sides extensively used phased array radar jammers (relying on ADI's ADRV9009 RF chip) and FPGA encrypted communication modules (relying on Xilinx's UltraScale+ series), directly boosting the demand for military ics.
However, despite the booming market, the vulnerability of the supply chain for military-grade ics cannot be ignored. The three major "bottleneck" problems in the military-grade IC supply chain still need to be solved in the long term:
1. The delivery date has been abnormally extended
TI's military PMics (such as TPS7A4700) have a lead time of up to 78 weeks, which is 30% longer than that in 2023. ADI's radiation-resistant ADCs (such as AD6649) have been listed by the US Department of Defense as "Critical reserve devices" and are given priority supply to domestic projects.
2. The counterfeit goods industry chain is rampant
The Pakistani military once seized a batch of refurbished Remark chips, which were counterfeit TI's DSP (TMS320C6748), causing the missile seeker to malfunction. The "label washing" methods in the gray market have been upgraded, and some counterfeit goods can now pass the primary appearance inspection.
3. Geopolitics disrupts supply chains
The US Department of Commerce has added six Chinese military industrial entities to the sanctions list, restricting their access to high-end ics. India has launched the "Semiconductor Self-reliance Program", requiring defense projects to give priority to purchasing localized chips (but the process is limited to 65nm).
Facing the imbalance between supply and demand, players in the industrial chain are taking completely different countermeasures:
▶ European and American original manufacturers: Bundling defense orders, intensifying technological blockades
TI/ADI signed an exclusive supply agreement with Lockheed Martin, committing to guaranteeing "America First" production capacity. Xilinx (AMD) enables "Defense Customer Certification" for some FPGA models and requires a declaration of end use.
▶ Chinese manufacturers: Walking on two legs
Alternative solution: Guoke Microelectronics (300672) launched the GK7205 military GPU, competing with NVIDIA Jetson TX2;
Supply chain detour: Circumventing sanctions through third-party packaging factories in Malaysia and Vietnam.
▶ Distributors: Transforming from "Middlemen" to "Supply Chain Commanders"
Authorized agents like Yongzao Hong Kong Technology have broken the deadlock through three major measures: 1. Strategic inventory preparation: For the scarce models of TI/ADI (such as TI's LMK04828 clock chip), they have established over 50 million US dollars of military-specific inventory; 2. Authenticity Verification Laboratory: Equipped with X-ray testing equipment worth millions of yuan, we offer chip cover opening DECAP services to eliminate the risk of counterfeits. 3. Geographical arbitrage procurement: Leveraging the advantages of Hong Kong as a free trade port, we provide "non-US supply chain" solutions for military customers in Southeast Asia (such as ST's military MCUS in Europe).
Given this, we can observe the future trend that military ics will enter an era of dual barriers of "technology + supply chain".
First, there is the technical barrier. The next-generation military ics need to meet new demands such as anti-electromagnetic pulse (EMP) and AI edge computing. TI has already laid out GaN power devices, and ADI is betting on quantum encryption ADCs.
Secondly, there are supply chain barriers. Starting from 2024, NATO countries may require military ics to provide full life-cycle traceability codes, which will force the digitalization of the supply chain. However, we should also remain optimistic and see the opportunities in China. If domestic 28nm process military chips (such as Huawei's Ascend 610) pass reliability verification, it may break the monopoly of Europe and the United States.
Ultimately, Yongzao Hong Kong Technology pointed out that "The competition in military ics has gone beyond mere technical performance; supply chain resilience is the core competitiveness." We suggest that customers: In the short term, it is best to lock in TI/ADI's 2025 production capacity through authorized agents to avoid "having no rice to cook".
In the long term, it is necessary to participate in the early definition of the original factory's chips (such as TI's TPS7B98xx customization project) and take the initiative. Yongzao is willing to work hand in hand with our customers and make joint efforts to contribute to the global semiconductor industry and promote its sustainable and healthy development.