tariffs

Last week, SEMI joined a coalition of business groups in calling for Ambassador Robert Lighthizer, U.S. Trade Representative, to enact an exclusion process for the most recent tranche of tariffs on $200 billion in goods imported from China. While an exclusion process was provided for in the previous tariff lists, which cover about $50 billion in goods, the administration has said that no similar process will be provided on the most recent tariffs on $200 billion (List 3), which took effect Monday. SEMI members will face millions of dollars in additional duties as a result of these tariffs. This action will also curb growth, stifle innovation, and introduce significant uncertainty in the semiconductor industry. Americans for Free Trade is a diverse coalition, which includes hundreds of companies across the United States, to illustrate the impacts of tariffs on American businesses, consumers and manufacturers. SEMI is a member of this coalition. The full text of the letter can be found here. Any SEMI members with questions should contact Jay Chittooran, Public Policy Manager at SEMI, at [email protected].

Tensions between the U.S. and China have reached fever pitch as the Trump administration imposed higher tariffs on $200 billion of Chinese goods last Monday, adding to the $50 billion in goods hit with higher duties earlier this year. Bloomberg News reported that “the combined $250 billion in products facing levies is almost half the value of imports from China last year.”China countered by meting out stiffer tariffs on $60 billion in U.S. goods, on top of the $50 billion already levied, and canceling planned trade negotiations with the Trump administration.Days before the sharp escalation of the trade conflict, SEMI president and CEO Ajit Manocha joined SEMI China president Lung Chu in hosting a closed-door round table with 16 senior semiconductor industry executives in Shanghai. The goal: An update from the China semiconductor sector on its needs as the chip industry braces to weather the conflict. Manocha and Chu then met with influential China media outlets including Semiconductor Manufacturing, China Integrated Circuit, Silicon Semiconductor and IC Café to reiterate SEMI’s position on trade.“The basic principles of SEMI are free and fair trade, open markets, cooperation for mutual benefit, and protection of intellectual property rights,” Manocha told the reporters. “Tariffs and trade frictions are bound to harm the industry’s development.”Manocha highlighted efforts over the past few months by the SEMI advocacy team to educate U.S. policymakers on the impact of tariffs on the development of the semiconductor industry. Last month, the office of the U.S. Trade Representative (USTR) held a hearing in Washington, D.C. to solicit public comment on then-proposed tariffs on $200 billion of Chinese imports to the U.S. Testifying on behalf of the semiconductor industry, SEMI stressed that tariffs on more than 100 tariff lines covering items critical to semiconductor manufacturing “will harm companies in the semiconductor supply chain by increasing business costs, introducing uncertainty, and stifling innovation.” SEMI had testified twice before this year – the first time in May, opposing levies on $34 billion in Chinese goods, and the second in July to speak out against higher duties on $16 billion worth of Chinese products.SEMI China president Lung Chu made clear the consensus of China’s semiconductor sector: The trade war will profoundly impact the global semiconductor industry. He also stressed that SEMI, as a global industry organization linking the global electronic semiconductor industry chain, will continue to promote win-win cooperation between the U.S. and China.Manocha reaffirmed SEMI’s longstanding commitment to promote cooperation among nations and policies that foster industry growth.“For the growth of the semiconductor industry, SEMI is focused on four important factors, and we call them the 4 T’s, namely Tax, Technology, Talent, Trade,” Manocha told the media. “All are indispensable for the development of the industry.” SEMI president and CEO Ajit Manocha and SEMI China president Lung Chu host press conference in Shanghai.Because the semiconductor industry is international, with key features spread across a number of regions, cross-border cooperation is an eternal theme, Chu told the gathering. To maintain the vitality of China's semiconductor industry, the region must deepen its integration with the international semiconductor ecosphere. He acknowledged that there will be no quick answers to easing trade tensions between the U.S. and China but that SEMI would continue to press ahead in efforts to help improve relations. Despite the conflict, the industry remains optimistic about the growth of China’s semiconductor industry, he said."However, we need to face up to the fact that there is still a certain gap between the domestic semiconductor industry and that of international advanced level,” Lu said. “Therefore, international cooperation is the key to industry growth."Of the four cornerstones of the semiconductor industry – design, manufacturing, testing and equipment materials – China in recent years has narrowed the gap with its international counterparts in testing capabilities, Chu said. For China’s semiconductor industry to flower, the region must build strengths in design, manufacturing and materials too.“The semiconductor industry needs long-term investment, persistence and patience, and also needs win-win cooperation, continuous innovation and product applications across the entire industry,” Chu said. “Money is not the only incentive.”Manocha emphasized the theme of international cooperation, with the global semiconductor industry working in harmony.“The global semiconductor industry chain is inseparable, and each region has its own advantages,” Manocha said. “So, we will continue to work hard to create a win-win, inclusive global industrial atmosphere.”For its part, SEMI China is focused on becoming the best partner for China to realize its semiconductor dream by continuing to provide services that encourage international cooperation. That role will grow in importance with SEMI’s expansion into application areas such as smart manufacturing, smart transportation, smart data and smart automotive – all requiring tighter integration of the electronics industry supply chain.Cherry Sun is a marketing manager at SEMI China.

U.S. Government Imposes Tariffs on $200 Billion of Goods and China Retaliates on $60 Billion of GoodsEarlier this week, the U.S. Trade Representative (USTR) released a 10 percent tariff on $200 billion in imports from China, including more than 90 tariff lines central to the semiconductor industry.The 10 percent tariff will take effect on September 24, 2018, and rise to 25 percent on January 1. These tariff lines will cost SEMI’s 400 U.S. members tens of millions of dollars annually in additional duties. However, counting the products included in the previous rounds of tariffs, the total estimated impact exceeds $700 million annually. China has already announced that it will respond with tariffs on $60 billion worth of U.S. goods. In his notice, President Trump said the U.S. will impose tariffs on $267 billion worth of goods if China retaliates. The U.S. government removed 279 total tariff lines, including three lines that impact our industry: silicon carbide, tungsten, and network hubs used in the manufacturing process.As we’ve noted, intellectual property is critical to the semiconductor industry, and SEMI strongly supports efforts to better protect valuable IP. However, we believe that these tariffs will ultimately do nothing to address the concerns with China’s trade practices. This sledgehammer approach will introduce significant uncertainty, impose greater costs, and potentially lead to a trade war. This undue harm will ultimately undercut our companies’ ability to sell overseas, which will only stifle innovation and curb U.S. technological leadership.Product Exclusion Process – List 2USTR formally published the details for the product exclusion process for products subject to the List 2 China 301 tariffs (the $16 billion tariff list). If your company’s products are subject to tariffs, you can request an exclusion.In evaluating product exclusion requests, the USTR will consider whether a product is available from a source outside of China, whether the additional duties would cause severe economic harm to the requestor or other U.S. interests, and whether the product is strategically important or related to Chinese industrial programs (such as “Made in China 2025”).The request period ends on December 18, 2018, and approved exclusions will be effective for one year, applying retroactively to August 23, 2018. Because exclusions will be made on a product basis, a particular exclusion will apply to all imports of the product, regardless of whether the importer filed a request.More information, including the process for submitting the product exclusion request and details what information should be included in your submission can be found here. Please let me know if your company plans on filing an exclusion. SEMI has prepared a document that includes guidelines for your exclusion filing, an explainer on how to submit, and links to official government info. SEMI is glad to assist your companies file exclusion requests for your products. SEMI will continue tracking ongoing trade developments. Any SEMI members with questions should contact Jay Chittooran, Public Policy Manager at SEMI, at [email protected].

Last week, more than a dozen senior semiconductor executives traveled to Washington, DC for the first-ever Fall Washington Forum. The SEMI Washington Forum, a venue for SEMI members to educate lawmakers about the industry, focused on action against China, both in the form of tariffs and export controls.Our industry is global, and companies rely heavily on trade. In 2017, more than 90 percent of equipment made in the United States was exported. Because of this dynamic, the United States holds a nearly $9 billion trade surplus in this industry. SEMI supports trade policies that open foreign markets. In the meetings, the executives expressed deep concern that the tariffs would inflict deep damage to the U.S. economy, including to SEMI members. Estimates suggest that the Sec. 301 tariffs (and the Chinese retaliatory tariffs) will cost semiconductor companies more than $700 million annually, dramatically increasing the cost of doing business. These tariffs also threaten U.S. technological leadership. The United States has led innovation for decades. However, by pursuing policies that limit market access opportunities, company-led R D and innovation will slow, which, in turn, will curb further export potential. SEMI companies also stressed that because of the blunt application of these tariffs, this action will actually hurt U.S. companies as much as it hurts their Chinese competitors. Indeed, about 40 percent of imports in our sector from China are from U.S. or other non-Chinese companies. Further, the semiconductor industry relies on a vast network of supply chains, which have been built and qualified over the course of years. A fundamental revamp of supply chains is simply not feasible. This would be expensive, time-consuming, and resource-intensive. With a growing number of policy issues that are central to and could have significant impact for semiconductor companies, SEMI hosted its first ever Fall Washington Forum for members of its North American Advisory Board (NAAB). SEMI also invited several other industry executives. In total, 14 senior industry executives, including representatives from equipment manufacturers, component suppliers, and materials providers, attended the Fall ForumDuring the two days of meetings, SEMI met with several senior Administration officials to better the policies being enacted and considered as well as encourage all parties to not impose barriers to commerce, which would severely impact the semiconductor industry. SEMI also met with Members of Congress and their staffs on this issue. All told, attendees at the Fall Forum had more than 15 meetings with policymakers, reflecting the great impact of public policy on SEMI members companies. At a time when the stakes for the industry could not be higher, direct engagement with lawmakers is critical. The Washington Forum offers an incredible opportunity for members to better understand the impact of key public policy issues and gain firsthand experience in influencing policy and helping lawmakers better understand the industry.If you are interested in learning more about the SEMI Washington Forum or SEMI’s public policy program, please contact Jay Chittooran by email at [email protected].

In testimony today before a U.S. government interagency panel considering tariffs on $200 billion worth of Chinese goods, SEMI called for the removal of nearly 100 tariff lines, all of which cover items critical to the semiconductor manufacturing process, including materials and machines.Jonathan Davis, global vice president of advocacy at SEMI, explained in his testimony that while SEMI strongly supports efforts to better protect valuable intellectual property (IP), tariffs will not help address Chinese trade practices, and will ultimately have significant and unintended consequences. SEMI asserts that these tariffs will harm companies in the semiconductor supply chain by increasing business costs, introducing uncertainty, and stifling innovation. Collectively, SEMI estimates that this round of tariffs will cost its 400 U.S. members more than tens of millions annually in additional duties. All told, SEMI estimates that all U.S. and Chinese retaliatory tariffs will cost members nearly $700 million in annual duties. SEMI’s full written comments note that these tariffs, on top of those already in force and the retaliatory tariffs, will hamstring the industry. The tariffs seem to target U.S. firms for simply operating in China. Given that tools and materials are extremely complex, precise, and difficult to manufacture, it is unreasonable to believe that a constituent component can simply be replaced with a part from another source. Further, this U.S. government approach does not take into account that many items subject to these tariffs are not available, at sufficient quality and cost, from domestic sources, or even non-Chinese sources. We stand steadfast in our belief that this trade action will raise prices, put thousands of high-paying and high skill jobs at risk, and curb growth.Over the past four months, SEMI submitted written comments and offered testimony on the two previous rounds of tariffs, citing the damaging impact tariffs would have on the U.S. semiconductor industry. The first round of tariffs – on $34 billion worth of Chinese goods – took effect July 6, and the second round – targeting $16 billion in Chinese imports – will be imposed on August 23. The tariffs hit machines and tools central to the semiconductor industry, including equipment used to manufacture wafers, boules, and chips as well as test, inspection and sensing equipment. We urge SEMI members to review the $200 billion U.S. tariff list to determine the level, if any, of impact. We also strongly encourage members to review Chinese retaliatory lists as well. Any SEMI members with questions should contact Jay Chittooran, Public Policy Manager at SEMI, at [email protected].

U.S.-China Trade War Heats UpThe U.S. Trade Representative (USTR) yesterday released a 25 percent tariff on $16 billion in imports from China, including 29 tariff lines that represent the heart of the semiconductor industry. These tariff lines include semiconductor products such as machines and spare parts used to make, wafers, flat panel displays, masks and chips, and will cost SEMI’s 400 U.S. members an estimated more than $500 million annually in additional duties.SEMI, along with hundreds of companies, including Lam Research and KLA-Tencor, submitted written comments, requesting the removal of tariff lines from the proposed list. SEMI also testified on behalf of the semiconductor industry, joining more than 80 other companies, including Applied Materials, in opposing the duties before an U.S. government interagency panel in late July.This trade action is on top of the already imposed $34 billion U.S. tariff list, which will cost SEMI’s U.S. members tens of millions of dollars annually. In the coming days, USTR will publish details on how U.S. companies can request the exclusion of products from the $16 billion tariff list, much as it did for the first round of $34 billion.In a swift retaliation, China announced a 25 percent tariff on $16 billion in U.S. exports, including products vital to semiconductor manufacturing such as chemicals, test equipment and other parts. Both U.S. and China tariffs will take effect on August 23.The new tariffs come as China considers tariffs on $60 billion of U.S. imports, and the U.S. weighs additional duties on $200 billion of Chinese imports – a wave that would inflict even deeper damage on the U.S. semiconductor industry. This latest round of U.S. tariffs would cover goods used in microelectronics manufacturing, including chemicals, glass products and spare parts. SEMI will testify against the $200 billion tariff list later this month. If your company expects to be impacted by the proposed tariffs on $200 billion worth of goods, please contact SEMI staff.SEMI stands firm in its belief that none of the tariffs address U.S. concerns over China’s trade practices. Instead, they harm companies in the semiconductor supply chain by increasing business costs, introducing uncertainty and stifling innovation. SEMI will continue to engage with policymakers as both the U.S. and China $16 billion tariff lists are implemented. We will also be evaluating the products covered by the $200 billion U.S. list and the $60 billion Chinese list as both are further considered. We encourage members to review these lists to determine impact on their companies. For more information, please contact Jay Chittooran, Public Policy Manager at SEMI, at [email protected].

Two months after opposing $34 billion in U.S. trade tariffs on behalf of the U.S. semiconductor manufacturing industry, Jonathan Davis, global vice president of industry advocacy at SEMI, this week spoke out against an additional $16 billion in duties on Chinese goods. Testifying before the same U.S. interagency panel mulling the tariffs, Davis called for the removal of 29 tariff lines covering items critical to semiconductor manufacturing including machines and spare parts used to make, wafers, flat panel displays and masks.In his testimony to the panel, Davis stressed that while SEMI supports stronger protections against the theft of valuable intellectual property (IP), tariffs do little to address U.S. concerns over IP loss. Over the past month, SEMI has also submitted written comments and opposed the tariffs in public testimony. The panel includes representatives from the U.S. Trade Representative (USTR), Departments of Treasury, Commerce, State and Defense, and the Council of Economic Advisers.Also testifying, Joe Pon, corporate vice president at Applied Materials, explained that the proposed tariffs will harm small and midsized companies and other U.S. business interests. Describing the tariffs as a tax on exports of high-value U.S. goods, Pon said the duties give non-U.S. firms an unfair competitive advantage.In a parallel push to Davis’s testimony, SEMI, with more than 10 representatives from six member companies, met with 16 congressional offices this week to underscore the damage the tariffs would wreak on the U.S. semiconductor industry. The fallout would include higher operating costs, fewer exports and slower innovation. The tariffs would also curb industry growth and put thousands of high-paying, high-skill jobs at risk. SEMI pressed congressional leaders to reject the tariffs and support a push for congress to re-assert itself on trade policy.Tariffs to Cost U.S. SEMI Members More than $500 MillionSEMI estimates that the second list of proposed tariffs, covering about $16 billion in Chinese goods, will cost its 400 U.S. members more than $500 million annually in additional duties.The tariffs on $34 billion in Chinese goods, which took effect July 6, impact products such as test and inspection equipment as well as spare parts that enter the U.S. from China. That round of tariffs will cost SEMI member companies and estimated tens of millions of dollars annually. SEMI Public Policy Team Asks Members to Review Tariff ListLooking ahead, SEMI encourages members to review the newly released $200 billion tariff list, determine any impact to their businesses and share their findings with SEMI’s public policy team.The U.S. Trade Representative (USTR) has published the exclusion process for products subject to the China 301 tariffs. If your company’s products are subject to tariffs, you can request an exclusion.In evaluating product exclusion requests, the USTR will consider whether a product is available from a source outside of China, whether the additional duties would cause severe economic harm to the requestor or other U.S. interests, and whether the product is strategically important or related to Chinese industrial programs (such as “Made in China 2025”).The deadline for submitting product exclusion requests to USTR is October 9, 2018. Approved exclusions will be effective for one year upon approval and retroactive to July 6, 2018.More information including the process for submitting the product exclusion request can be found here.Any SEMI members with questions should contact Jay Chittooran, Public Policy Manager at SEMI, at [email protected].

The U.S. Trade Representative (USTR), based on findings from its Section 301 investigation into China's trade practices, today announced a 25 percent tariff on $34 billion in Chinese goods including many products in the semiconductor supply chain.Products such as test and inspection equipment and spare parts that enter the U.S. from China will be subject to this tariff, which enters into force on July 6, 2018. About 80 percent of the semiconductor products originally proposed remain on the final list of tariffs.USTR also has proposed tariffs on more than $16 billion worth of goods including chemicals as well as machines and spare parts that are used to manufacture semiconductor devices, wafers, flat panel displays, and masks, all of which would squarely strike the semiconductor industry. This new proposed list includes products identified by the U.S. government that have particularly benefited from Chinese industrial policies such as “Made in China 2025.” SEMI is set to voice its opposition to these tariffs with written comments and at an upcoming public hearing.Over the past month, SEMI has submitted written comments and offered testimony on the damaging impact that tariffs would have on the U.S. semiconductor industry. While SEMI strongly supports efforts to better protect valuable intellectual property, we believe that these tariffs will do nothing to address U.S. concerns over China’s trade practices. Instead, the tariffs will harm companies in the semiconductor supply chain by increasing business costs, introducing uncertainty and stifling innovation.SEMI will continue to engage with lawmakers as the $34 billion in tariffs take effect and the proposed $16 billion in duties remain under consideration. We encourage members to review this list and determine the level, if any, of impact. If you have questions or concerns, please reach out to Jay Chittooran, Public Policy Manager at SEMI, at [email protected].

Hope springs eternal. And it was with collective open arms that many U.S. businesses welcomed the recent talks between U.S. and Chinese officials to resolve their trade differences and downplay the specter of a full-blown trade war. Treasury Secretary Steven Mnuchin went so far to say that trade war with China was “on hold.”Hope and optimism soon fizzled. On May 29th, the White House released a statement contradicting Sec. Mnuchin, announcing that the Trump Administration would indeed move forward with a 25 percent tariff on $50 billion worth of goods imported from China. Besides focusing on goods that the U.S. has deemed are tied to “Made in China 2025” – the Chinese initiative to produce more advanced manufacturing goods domestically – the Administration also announced stiffer investment restrictions and enhanced export controls related to the acquisition of industrially significant technology. The final tariff list will be published by June 15th, and the proposed list of investment restrictions and export controls will be announced by June 30th.Tariffs and New Focus on Export ControlsAll of this comes as the White House and Capitol Hill have heated up their activity in recent months to curb commerce with China through tariffs and investment restrictions.The Section 301 investigation, a key component of this push, has zeroed in on China’s trade practices related to intellectual property violations. Following a months-long inquiry, the Office of the U.S. Trade Representative (USTR) determined in March 2018 that China’s forced transfer of technology and intellectual property has discriminated against U.S. firms. The finding prompted President Trump to respond with a number of remedial actions including a proposed 25 percent tariff on $50 billion worth of U.S. imports from China.More than 100 lines of the proposed tariff list directly impact the semiconductor supply chain, hitting fundamental components of the semiconductor manufacturing process. SEMI has fought back, strongly urging the removal of these tariff lines from the proposed tariff list. At a bare minimum, the tariffs against China will cost the U.S. tens of millions annually in additional taxes, create lost revenue as a result of reduced exports, threaten thousands of high-paying U.S. jobs, stifle innovation and curb U.S. technological leadership – all while not directly addressing U.S. concerns with China.These tariffs, plus the new focus on export controls, is particularly troubling for the semiconductor supply chain. The recent move comes on the heels of other trade actions, including tariffs on steel, aluminum, and solar cells that will not only limit trade and opportunities for U.S. economic growth, but also will introduce significant uncertainty for U.S. businesses. CFIUS Reform Moves Ahead, But Concerns RemainAt the same time, other government efforts that could encumber investment continue. Both the Senate Banking and House Financial Services Committees unanimously passed the Foreign Investment Risk Review Modernization Act (FIRRMA). The legislation aims to upgrade the Committee on Foreign Investment in the United States (CFIUS) – the interagency body that reviews inbound foreign investment for national security concerns. With such rare bipartisan agreement on a major bill, it is expected to be passed by both chambers and signed into law later this year.The current version of the bill is certainly an improvement on earlier drafts. The legislation no longer contains problematic language that would have given CFIUS the authority to review joint ventures between U.S. and foreign companies. The language would have, for the first time ever, expanded CFIUS’s jurisdiction to include outbound foreign investment. Given the semiconductor industry’s deep reliance on expansive global supply chains, this language was particularly concerning to our industry.However, broad concerns remain about how CFIUS functions. In recent months, CFIUS has been used seemingly to evaluate transactions based on economic security, rather than the Congressional intent of national security. Should this trend continued, we worry that this could curb otherwise acceptable investments, stifling innovation and limiting growth, especially in the semiconductor industry.SEMI Educates Lawmakers on Industry ImpactsWith tensions likely continue to rise and efforts to wall off commerce with China ongoing, SEMI is engaging with policymakers to educate them on how these restrictions will potentially undermine the long-term health of the semiconductor industry. SEMI will continue to meet with policymakers about the critical importance of trade and investment to the continued success of the semiconductor industry. If you are interested in more information on trade, or how to be involved in SEMI’s public policy program, please contact Jay Chittooran, Public Policy Manager, at [email protected].

Testifying before a U.S. interagency panel weighing trade tariffs against China, Jonathan Davis, global vice president of industry advocacy at SEMI, yesterday called for the removal of more than 100 products from the list of tariffs proposed by the Trump administration, stressing that an escalation of the U.S.-Sino dispute could trigger a full-blown trade war and hasten deep, unintended damage including higher consumer prices, an expanded U.S. trade deficit, and a slowdown in U.S. economic growth.Representing the electronics manufacturing supply chain, Davis threw the industry’s weight behind protections for valuable intellectual property but argued that “if implemented as proposed, these tariffs will potentially cost tens of millions annually in additional taxes and lost revenue owing to reduced exports, threaten thousands of high-paying U.S. jobs, and not solve U.S. concerns with China.” Davis said the undue harm will ultimately undercut the ability of U.S. chipmakers to sell overseas, stifling innovation and curbing U.S. technological leadership.In testimony at the hearing before the government panel that included representatives from the U.S. Trade Representative (USTR), Departments of Treasury, Commerce, State and Defense, and the Council of Economic Advisers, Davis explained that more than 100 lines – products defined for the purpose of setting import duties – of the proposed tariffs would hamstring the semiconductor supply chain. The tariff lines include fundamental components of the semiconductor manufacturing process that are oxygen for the chip industry. As part of his testimony, Davis also submitted comments on the impact of the tariffs.Charles Gray, general counsel at Teradyne, who also testified at the hearing, said the tariffs will threaten growth while penalizing U.S. companies with supply chains that touch China. Gray and Davis were among more than 100 industry leaders who provided more than 3,000 comments in the May 15-17 hearing to evaluate the impact and efficacy of the proposed tariffs.The hearing followed the Trump administration’s heated, longstanding criticism of China for what it considers unfair trade practices, focusing specifically on intellectual property violations. In recent months, the administration has begun implementing trade actions against China that will increase tariffs, restrict cross-border investment, and introduce significant uncertainty for U.S. businesses.The Section 301 investigation that determined China’s forced transfer of technology and intellectual property discriminated against U.S. firms prompted a proposed 25 percent tariff on $50 billion in U.S. imports from China – a punitive measure that would squarely hit the semiconductor manufacturing industry.SEMI continues to educate policymakers on the deep damage tariffs would exact on the long-term health of the semiconductor industry and the critical importance of balanced trade to the future of the semiconductor industry.For more information on trade or how to participate in SEMI’s public policy program, please contact Jay Chittooran, SEMI public policy manager, at [email protected].