Northrop sees growing commercial market for microelectronics products

WASHINGTON — Northrop Grumman is bullish on expanding its microelectronics business to commercial customers, with the company undergoing a review of the business that could lead to a future spinoff or Pentagon investment, its chief executive said today.

In the company’s first major public statement since losing the Navy’s F/A-XX sixth-generation fighter competition, Northrop CEO Kathy Warden hinted that major changes to the company’s microelectronics unit are being considered.

“For more than a decade, we’ve leveraged our expertise in cutting-edge semiconductors and our secure US boundaries to pioneer leading quantum computing technologies,” Warden told investors during an earnings call this morning. “Today, we see a significant opportunity to scale this transformative technology for commercial and government customers.

“To fully realize its potential, we are actively evaluating strategic alternatives and believe we are uniquely positioned to lead in this field,” she said, adding that the company intends to share more details “in the coming months.”

Asked by analysts whether those changes included a sell-off or spin-off of the microelectronics business, Warden acknowledged that those two options are among those being considered, but that no final decisions have been made.

“We could continue to solely invest in it ourselves with the support of our current shareholders. We could think about broadening that base of investments, or we could think, as you noted, about separating the business,” Warden said.

“All of those options are on the table, and certainly the degree to which we do that and the timing are all the things that we would be taking under advisement here in the coming months,” she said.

Warden also did not preclude a direct investment from the Pentagon as an option. The department has announced a $1 billion equity stake in L3Harris’s missile solutions spin off, although that split has been postponed until mid-2027.

“We believe there is such a strong commercial application for this that we are not wanting to be overly dependent on any government, particularly the US government in this case. But all options are on the table,” Warden said.

The company’s microelectronics business — known as the Northrop Grumman Microelectronics Center — is made up of three government-accredited production facilities: two semiconductor foundries in California and Maryland and an advanced packaging facility in Florida.

While the majority of the company’s current work on microelectronics is geared toward the US government, Warden said those customers are “very open” to Northrop selling some of those products on the commercial market — which would also allow the company to sell those items to the government as commercial items.

“It’s an opportunity that, as a company, we are going to take advantage of in complete partnership with the government, but do it in a way that also opens up access to commercial markets that before we did not have as strong as an opportunity to pursue because of the restricted nature of the work we were doing,” she said.

One new technology that Warden said could have commercial applications is the Fortitude chip, which Northrop unveiled earlier this month. A gallium nitride chip the size of a grain of rice, Fortitude is designed to deliver three times more power and 20 times better signal quality as current chips, with applications including radar, GPs and future 6G networks, she said.

While most of the company’s current work in the sector centers on government customers, in previous decades, advances in microelectronics technology pioneered by Northrop have been harnessed in commercial technologies. One such example are the microchips used in cell phones during the early 2000s, according to the company.

Last fall, Northrop announced that it was now open to selling dozens of microelectronics components, made in government-certified facilities on US soil, to other aerospace and defense companies as a merchant supplier — a break from its previous position of manufacturing them only for Northrop-made products.