In the 1980s, a computer-chip manufacturer in Bloomington needed a new factory to make products that met the security demands of the federal government and military.

On a ridge just above the Minnesota River, near what is now the Mall of America, it built a plant with copper-lined walls to block electromagnetic radiation and prevent snooping. By the standards of the fast-moving industry, the factory should have outlived its usefulness and closed 10 to 15 years ago.

Instead, the chip factory is thriving as SkyWater Technology Inc., a contract manufacturer. The small, secure plant makes economic sense again after the industry’s fundamentals underwent a change no one saw coming.

“Many of the customers we work with can’t consume enough silicon to justify” being in giant, leading-edge factories, said Tom Sonderman, SkyWater’s chief executive.

For decades, bigger was always better in chipmaking. Size lowered costs in chip factories and their main component, silicon wafers. But as chips are made and used in an increasing number of products — from basketballs to tires — they don’t need to be produced at the million-unit levels that are needed for chips used in smartphones and PCs.

“We’re not forced to think about high-volume manufacturing,” Sonderman said. “In many ways, we’re a natural place for people to innovate and do it in a way where they feel like their intellectual property is protected.”

Factories like SkyWater that were on the cutting edge in the 1980s and 1990s, when the U.S. dominated the semiconductor industry, are running at full capacity again. And the long slide of chipmaking away from the United States to other countries has slowed down markedly.

“Everybody thought they were going to die out,” Dan Hutcheson, chief executive of VLSI Research and a longtime industry observer, said of the old factories. “But there’s a renaissance around them.”

SkyWater is going a step further. It just completed a new laboratory within one of its cleanrooms where it will allow other chip companies and designers to test out ways to build chips that don’t rely on traditional etched silicon. Called the SkyTech Center, the lab’s first piece of equipment is for work with carbon nanotubes, which will build circuits in three dimensions instead of on the 2-D plane of silicon.

The company last year won a contract with DARPA, the military’s research agency, to work with researchers at Massachusetts Institute of Technology on the processes to commercialize 3-D system-on-a-chip designs. Carbon nanotube is the first architecture to be tested. The company built a special air conditioner and airflow system for SkyTech Center.

“There’s certain materials in the carbon nanotube processing that we don’t want to get intermixed with the rest of the fab,” said Sonderman, whose office overlooks the giant ducts that jut out of the ground for the lab.

SkyWater is a relatively new company, formed just two years ago by the Minneapolis investment firm Oxbow Industries LLC. It bought the plant from Cypress Semiconductor, a longtime Silicon Valley giant that just last week was purchased by German chipmaker Infineon Technologies AG for $10 billion.

Roots in Control Data

The plant itself has roots that stretch back to the storied computing firm Control Data Corp., which anchored Minnesota’s high-tech scene for decades and was a leading maker of mainframe computers in the 1960s and 1970s. In 1970, it formed a chipmaking division and built its first factory, which is also still operational as Polar Semiconductor Inc. on E. Old Shakopee Road directly east of the Mall of America.

In 1982, Control Data sold the chip business to private investors who formed VTC Inc. and continued chiefly to supply its former owner. As VTC, the business added the plant that is now SkyWater’s, tucked against a state park at 2401 E. 86th St.

Control Data bought the two factories back from VTC in the late 1980s, then sold them off again in the 1990s. The original plant became Polar Semiconductor, a unit of Japan’s Sanken Electric, while the one on 86th went to Cypress.

The equipment in both Polar and what is now SkyWater has been updated through the years and, under Cypress, the size of the cleanroom at SkyWater’s plant more than doubled. Workers don full bodysuits over their clothes, change shoes for boots and then take an “air shower” before entering cleanrooms where the chip fabrication happens.

As they prepared to lead a recent tour, the company’s quality assurance chief C.J. Bonifas asked production chief Eric Schneider for his record time gowning up. “If something’s wrong, I think I can make it about 30 seconds,” Schneider replied.

Inside the cleanroom, workers move cartons of wafers in and out of machines, about 165 steps or processes over about four weeks to completion. Even though the wafers are never exposed to air, and the air in the cleanroom is constantly moving and filtered, microscopic particles can get onto the surface of a wafer, damage one of the millions of circuits on a chip and make it unusable.

Each of the 200-millimeter, or nearly 8-inch, wafers will have hundreds or thousands of the same chip built on it. And each of those chips must be tested before being sent out of SkyWater to a finishing plant where they will be cut apart and put into ceramic packaging before installation in an end product like a smartphone.

Industry’s evolution

Since chips were invented in 1959, manufacturers made them better and cheaper in two ways. Lines of circuits were etched ever more closely together, making it possible to squeeze more of them into a given space. And chips were made on silicon wafers of growing size, making it possible for more to be made at once.

The squeezing together of circuitry happened so regularly it became known as Moore’s Law after industry pioneer Gordon Moore. But those advances are reaching physical limits: the lines are so small and circuits so dense that the risk exists of atoms leaping from one to another haphazardly.

Meanwhile, the 200-millimeter wafer became the industry’s leading edge in the early 1990s and formed the basis for equipment in the last big wave of new chip factories in the U.S. By the early 2000s, 300-millimeter wafers displaced them and required giant factories costing billions of dollars, with most built in Asia. Executives and analysts believed that, as happened in previous advances, the old 200-millimeter wafer factories would phase out.

But Joanne Itow, managing director at Semico, a chip research firm, said she began noticing a change when the Japanese chipmaker Renesas restored a 200-millimeter wafer factory after a disastrous earthquake and tsunami struck that country in 2011.

“The whole industry banded together,” Itow said. “Other manufacturers were able to step up and get them the type of equipment they needed. Normally, you think 20, 25 years is a pretty good life span for a tool. This equipment is having this whole second life cycle.”

The risk for chipmakers relying on such equipment is that it’s hard to find replacement parts and new versions of the equipment aren’t being made. Suppliers are instead focused on building equipment to make chips on 300-millimeter wafers.

But in one sign of the popularity of the older chipmaking technology, Taiwan Semiconductor Manufacturing Co., the world’s largest contract manufacturer of chips, in late 2018 said it would build onto a fab where it uses 300-millimeter wafers a new cleanroom that it would fill with 200-millimeter process equipment.

“There’s a huge opportunity for a lot of companies in the 200-millimeter space because they don’t have much competition,” Hutcheson said. “If you run it right, it can be very profitable, even more profitable than memory or logic chips, and the risk is relatively low.”

Plant’s new direction

After Cypress sold the Bloomington plant to SkyWater in March 2017, it promised to remain a customer for three years. Since then, Sonderman and his executives have been on the hunt for other customers and lined up a few dozen, ranging from designers of medical sensors that may wind up in pills to firms that specialize in chips for military equipment.

“We allow companies to have the scale they need and we allow them to innovate inside our facility,” Sonderman said.

Today, while the company doesn’t disclose financial figures, Sonderman said just over half of the chip production at SkyWater is for companies other than Cypress. The firm has added about 75 employees in the last two years and now has about 500.