Huawei

For the past several months, U.S. Department of Commerce officials have been developing proposals to amend the foreign direct product rule to require a license for the use of U.S.-origin semiconductor manufacturing equipment or technology in producing semiconductor devices for Huawei and its affiliates. Commerce has also advanced proposals to amend the de minimis rule to expand license requirements for shipments to Huawei and its affiliates of semiconductors produced outside the U.S. and incorporating minimal amounts of non-sensitive U.S. content.The expansion of both rules is among the many Huawei-related actions the administration is pursuing that include a government procurement ban, replacing Huawei equipment in rural U.S. networks, and prohibiting imports of technology and services from unspecified foreign adversary nations. The de minimis proposal was under final interagency review, and the direct product rule next in line for further action, when on February 18 President Trump issued a tweet saying that “The United States cannot, will not, become such a difficult place to deal with in terms of foreign countries buying our product, including for the always used National Security excuse, that our companies will be forced to leave in order to remain competitive.”Speaking to reporters later that day, the president, referring to chipmakers and Huawei, said “I think people were getting carried away with it… Things are put on my desk that have nothing to do with national security.”This week, SEMI President and CEO Ajit Manocha sent President Trump a thank-you letter for his comments and warned that the proposals could severely impact the U.S. and global semiconductor and electronics industries, create confusion and uncertainty in manufacturing supply chains, reduce investment in new capacity, and lead to the design-out of U.S. technology and U.S. components. SEMI also stressed that unilateral controls on U.S.-origin semiconductor devices, equipment, materials and technology could significantly and disproportionately harm U.S. companies, serve as a disincentive for further investments and innovation in the U.S., and impact non-U.S. companies as well. SEMI continues to work with policymakers to build awareness of the damaging and far-reaching effects of these proposals. The 2020 sales forecast for the global semiconductor manufacturing equipment market, excluding the U.S. (since the proposals only directly affect non-U.S. fabs), is approximately $53 billion. With U.S. producers accounting for roughly 40 percent market share, over $21 billion in U.S. equipment sales to non-U.S. fabs could be affected. Non-U.S. companies whose equipment incorporates U.S.-origin components and technology could also be impacted, and every fab worldwide using U.S.-origin manufacturing equipment or technology to produce items destined for Huawei would need to stop their use immediately and file for a license and/or remove U.S.-origin equipment and technology from production lines used for Huawei and its affiliates. The president’s remarks, along with the resignation of two key officials supporting the proposals, have created uncertainty around the next steps. SEMI is holding regular conference calls to keep members up to date and developing strong messages for members to use in their communications with government officials. SEMI Advocacy in Washington remains actively engaged with executive and congressional officials to ensure that U.S. export controls are narrowly tailored to specific national security concerns and applied at the multilateral level with major trading partners.Joe Pasetti is Vice President of Global Public Policy and Advocacy at SEMI.

The U.S. on September 1 will levy a 10 percent tariff on $300 billion (List 4) worth of Chinese goods that until now were exempt from duties, President Trump said today. The trade action makes good on the U.S. president’s commitment to impose the new round tariffs in response to China’s failure to deliver on promises to buy more U.S. farm goods and to stop the flow of the painkiller fentanyl into the U.S. The 25 percent tariffs already in effect on $250 billion in goods will remain in place.The new list includes items used in the electronics industry but also encompasses retail products spanning the U.S. economy including clothing, toys and cell phones, exacting a more direct hit to U.S. consumers. A meeting between China and U.S. trade officials in Shanghai this week apparently did little to ease trade tensions. Both sides plan to meet again in September, though expectations for meaningful progress toward resolving their trade differences then are low.The U.S. believes China backtracked from commitments to changing its practices related to forced technology transfer and intellectual property theft. China denies making the pledges and insists on the removal of all tariffs as part of a settlement.The U.S. actions risk backlash from China including non-tariff barriers to trade such as licensing delays, more stringent business-related inspections, and an accelerated rollout of its unreliable entities list, China’s response to the U.S. decision to blacklist telecommunications giant Huawei. The list includes foreign companies, other organizations and individuals that China sees as national security threats or risks to China’s economy.SEMI will continue to urge both nations to reach an agreement consistent with its 10 Principles for the Global Semiconductor Supply Chain in Modern Trade Agreements. The principles encourage free and fair trade, open markets, and respect of IP among all players in the global electronics manufacturing supply chain.SEMI member companies impacted by the new U.S. tariffs or facing any new non-tariff barriers in China should contact Jay Chittooran, public policy manager in SEMI’s Global Advocacy Office, at [email protected] Russo is vice president of Global Industry Advocacy at SEMI.

Tensions between the United States and China have reached fever pitch. Ongoing trade negotiations between the U.S. and China broke down earlier this month over reported backpedaling by China on key concessions in a proposed Trump administration deal. Over the past year, the U.S. has raised tariffs on more than $250 billion worth of Chinese goods to 25 percent, and last week the administration proposed tariff hikes on an additional $300 billion in imports – moves that have drawn retaliatory tariffs from China, many squarely hitting the semiconductor industry. Based on SEMI member feedback, the tariff increases will cost the semiconductor industry more than $750 million annually.At the same time, the Trump Administration is taking other steps to ratchet up pressure on China. Last week, seven months after placing Fujian Jinhua on the Entity List, which effectively blocks the sale of and export of goods to China, the U.S. Department of Commerce added Huawei (and nearly 70 affiliates) to the list. While the U.S. is taking this action for security reasons, it is also seen as a move to create leverage at the trade table. The U.S. is also intensifying efforts to reform the export control regime, focusing first on enhancing controls on emerging technologies and then on foundational technologies. The rising pressure has prompted China to contemplate and launch a counteroffensive that goes well beyond tariffs and export controls. The reprisals include China’s promotion of heightened Chinese nationalism by domestic consumers, a tactical slowdown of administrative processes required to conduct business in China, and the imposition of direct or indirect limits to market access. China is also using U.S. actions to justify larger state investments in its domestic industry and is ramping up efforts to give other regions greater access to its markets as it works to strengthen those relations ahead of next month’s G-20 summit in Osaka, Japan. The U.S. is also maneuvering to bolster its negotiating hand through its own agreements with Japan and the European Union.Unintended consequences of Trump administration actionsThe Trump administration’s moves to rectify the trade imbalance with China are also well-intentioned in seeking to protect the IP of U.S. technology companies and ensure continued U.S. leadership in technology development and innovation. However, its tactics can encourage long-term, perverse shifts in the globally integrated electronics manufacturing supply chain that risk upending market-driven investments in the semiconductor industry and weakening natural market forces that nourish competition among companies based on service, quality and product offerings.It is critical for SEMI, in working with government officials, to shed light on the potentially deep, unintended damage its trade actions can wreak on global supply chains and markets. We will continue to promote global standards governing trade, IP and market access through our Global Trade Principles and focus on sustaining a global order that assures the electronics manufacturing supply chain remains cohesive and vibrant.SEMI continues efforts to influence trade policyWe continue to meet with government policymakers around the world to educate them on near- and long-term impacts and risks of their evolving trade practices, conducting approximately 220 meetings with government officials globally in the past year. We also facilitate individual and group member meetings to give SEMI members direct contact to key government decision-makers. For example, on May 22nd during the SEMI Spring Washington Forum, or “fly-in,” more than 30 semiconductor industry executives from across the supply chain met with administration officials and Congressional offices to discuss issues including trade, export controls and immigration reform and impacts on their businesses. The executives represented a cross-section of small, medium, large and global companies based in the U.S. or providing support for U.S. organizations. Their aim: influence policy development. SEMI is in a unique position as a representative of the end-to-end, global electronics manufacturing supply chain and is a valuable “one-stop-shop” that represents members on policy while providing opportunities to collaborate in one of our Technology Communities. SEMI members can also leverage our strategic partnerships, our market research or leadership in industry standards. With this breadth and depth of member engagement and industry expertise, SEMI leads in providing industry insights to governments at this critical time. There is no doubt that the current situation is complicated and it is impossible to predict when or how the trade issues will be settled. As the U.S. and China work to settle the trade dispute, SEMI will continue to lead efforts to ensure that the voices of SEMI members and the electronics industry supply chain are heard.Mike Russo is vice president of Global Industry Advocacy at SEMI.

SEMI, the association representing the end-to-end global electronics industry supply chain, today provided the following statement from Mike Russo, VP of Global Industry Advocacy, regarding the escalation in tensions between the U.S. and China regarding trade:“We continue to monitor what appears to be a deteriorating situation between the U.S. and China related to their ongoing trade negotiations. The escalation in tariffs as well as the recent supply chain executive order and Department of Commerce action against Huawei are cause for increasing concern as those actions disrupt the supply chain and run counter to all-important market access.” “The globally integrated, complex supply chain that underpins our industry requires the world’s largest economies to lead the way by establishing rules that ensure access to markets and protect IP. Reaching an agreement that is aligned with SEMI’s global trade principles would be mutually beneficial to the two nations as well as our global industry, and we are hopeful that such an agreement can still be reached.”