The High Cost of Chip Obsolescence

The U.S. Navy faces a choice between scrapping F/A-18F Super Hornet fighter jets or finding a way to replace unavailable, essential chips. Phoenix Semiconductor is providing that alternative by repackaging off-the-shelf semiconductors into devices that are virtually identical to phased-out components.

The economics of modern defense and aerospace are dictated by the smallest parts. As CEO Ryan Hatcher notes, you do not park a US $100 million aircraft, whether it is a 737 or an F-35, for a $1,000 chip, even if that chip originally cost five bucks. This creates a massive, underserved market for parts that are no longer available but remain critical for maintaining existing hardware.

Phoenix, founded in 2023 and based in Austin, Texas, targets the high-mix, low-volume demand that large chip manufacturers avoid. The company designs an interposer—an electrical bridge—to connect chips into a package with a pin-out similar to the original component. The result is a part that looks identical to the original when dropped into a socket, requiring no board, software, or firmware updates.

This strategy addresses a specific failure in the global semiconductor supply chain. Large chipmakers like Intel or TSMC rely on large production runs to maintain profitability; a single production run in a large fab can last up to three years. Retooling a line for small, specialized orders is not efficient for them. Phoenix, however, thrives in this gap.

The scale of the problem is significant. Jonathan Bronson, a managing partner at J2 Ventures, states there is demand for billions of dollars of legacy chips every year, much of which lacks an existing product. Bronson, who became a board member for Phoenix in June 2025, notes that in many instances, Phoenix is the only option available.

For industries like aerospace, healthcare, and heavy industry, the "long tail" of demand for legacy components is growing. As original parts disappear from the market, the ability to bridge the gap between modern, available silicon and legacy hardware becomes a strategic necessity.

The question for defense and industrial leaders is no longer just about procuring new technology, but about how to sustain the hardware they already own.