Trump administration

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.

SEMI, with 660 other companies and associations, urged the Trump Administration in a letter today not to escalate its trade dispute with China by imposing new tariffs and to negotiate a resolution. The letter comes as the Office of the United States Trade Representative prepares for hearings next week in considering 25 percent tariffs on $300 billion worth of Chinese goods, including a number of products used in semiconductor manufacturing.With intellectual property (IP) the crown jewel of the semiconductor industry, SEMI vigorously supports the stronger IP protections direly needed in international trade. However, we worry that the proposed and recently implemented tariffs will hurt companies in the semiconductor supply chain by introducing significant uncertainty, increasing costs and subjecting companies to retaliatory tariffs while ultimately doing nothing to address our concerns regarding China’s trade practices. We strongly encourage the administration to return to the negotiating table while working with our allies to develop global, enforceable trade solutions. There are no winners in a trade war. Senior industry executives and SEMI staff raised this and other issues with policymakers last month as part of SEMI’s Spring Washington Forum. SEMI will continue to engage the Trump Administration as trade tensions continue.Jay Chittooran is public policy manager at SEMI. He can by reached at [email protected].

With (most of) the election results in from the U.S. midterms, the expected Democratic takeover of the House and the Republican’s maintaining control of the Senate is now a reality. The day of the election, DC insiders expected that the House would go to the Democrats by a margin of +/- 20, with the Republicans gaining 2-3 seats in the Senate. Not a bad prediction, which is a far cry from what the same insiders called in advance of the 2016 Presidential election.What does that mean for our members and the tech sector in general? Will there be an ease of trade tensions or less of a chance of tighter export controls? Some believe that with the midterm elections over, President Trump will have some room to take a less aggressive stance against China, setting up a “win” that he can carry into 2020. With the recent more aggressive stance by North Korea against the U.S. regarding its nuclear program, China may well have some leverage at the trade table … and the U.S. may want to make a deal that provides a path for a “win” on both fronts. Indeed, there are the makings of a potential win-win leading into the G20 meeting in Argentina when President Xi Jinping and President Trump are scheduled to meet on Dec. 1.One can see a scenario where there is a meeting of the minds and some degree of lessening tariffs; that does not mean that the effort to enhance export controls will go away. The need for tighter restrictions on export controls is driven to a great degree by the U.S. Department of Defense (DoD) and is a follow on from the previous FIRRMA legislation and attempts to curb the loss of U.S. technology critical to global competitiveness and national security. This issue will not go away anytime soon, and cases like the recent one involving Jinhua only add fuel to the fire. In addition, given how these cases can be leveraged at the negotiating table, they will continue to surface.SEMI’s approach has been to educate governments, lawmakers and administration officials on the strategic importance of the globally connected and highly complex semiconductor supply chain, and how some of the approaches will not achieve the attended goals. This approach helps to ensure that when and if it comes time to make decisions based on merit, the principals are informed. It also helps SEMI and its members develop and maintain important relationships and positions SEMI as an industry leader and spokesperson, making it a more effective advocate. As an example, on Nov 8th SEMI released its Global Trade Principles with the intention of providing a framework to all governments to guide various trade talks. It also helps to inform member companies and others from the broader tech sector of our industry position(s) so we are able to speak with one voice. These principles are aligned with our fundamental advocacy pillars of promoting free trade and market access, respect for IP, cybersecurity and national security.Will the fact that power is now split between the two chambers of Congress help or hurt? Will the House focus on investigations limit the ability to move productive legislation? Besides taking time, it may well put them at increasingly worse odds with the Senate and the President (if that is possible), creating deadlock. Some argue that if nothing moves, no harm can be done. Some also say that it may drive the President to take independent and more aggressive actions in order to demonstrate (his) effectiveness to his base. There is another view: that with the Democrats, the President may be able to lead in the advancement of legislation that will show he can get things done when others couldn’t in areas that benefit the greater good…some of which may impact our industry…such as investments in education and infrastructure development. This would be a way that he could pull in some of the votes from the middle that he has lost in his first two years in office. They say “politics makes for strange bedfellows”; one never knows what might happen in this case.Regardless of what happens, some things will not change: the global nature of our business and the needs of our members to have access to markets…and to be able to safely and efficiently leverage their technologies in the way they see fit in order to grow their business. SEMI will continue to advance the interests in what is an extremely challenging and dynamic global policy environment today. As ruling parties and representatives change around the globe, we will continue to build new relationships and educate lawmakers so they are able to make informed decisions that benefit our members. Mike Russo is VP of Public Policy and Talent Advocacy at SEMI.

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].

SEMI and 106 other associations today joined forces to express deep concern to congressional leaders about the Trump Administration’s decision to use tariffs to address China’s unfair trade practices. In a letter from the collective to House Ways and Means Committee Chairman Kevin Brady and Ranking Member Richard Neal ahead of today’s hearing on "Effects of Tariff Increases on the U.S. Economy and Jobs," we expressed our strong support to better protect valuable intellectual property, the crown jewel of our industry.However, we worry that these tariffs will hurt companies in the semiconductor supply chain, introduce significant uncertainty, impose greater costs, open companies to retaliatory tariffs, and ultimately do nothing to address our concerns regarding China’s trade practices. We strongly encourage Congress to work together and with the Trump administration to jointly develop and execute a plan that will address the longstanding problems with China. As part of the SEMI Washington Forum (April 17-18), SEMI staff and senior executives from across the industry will raise this and other issues with policymakers in Washington, DC. SEMI will continue to engage as trade tensions continue.