Wednesday 08 December 2021, 2:00 p.m.
through Jennifer meng, Global Policy Officer
through Jimmy goodrich, Vice-President, Global Policy
SIA on December 1 comments submitted to the Office of the United States Trade Representative (USTR) urging the elimination of harmful tariffs on semiconductors that are exacerbating the current chip shortage and slowing our economy. As the SIA explained in the submission, the Section 301 tariffs on semiconductors and related products are contributing to the current global chip shortage, resulting in higher prices and exacerbating the damage to U.S. consumers and manufacturers of automobiles, household appliances, medical equipment and other industries and technological products.
As our country faces real and significant challenges posed by China’s unfair trade practices, the SIA continues to firmly believe that tariffs on semiconductors and related products are, in fact, a tax damaging to companies. chipmakers and American consumers, creating unnecessary burdens on our economy. In addition, the tariffs undermine the semiconductor industry’s efforts to continue expanding production capacity to meet growing demand for semiconductors. We believe that the administration can eliminate tariffs on semiconductors and surgically related products without limiting its influence to continue to negotiate more favorable trade and economic terms with China.
Semiconductors are the foundation of the modern economy, powering everything digital from smartphones and cars to supercomputers and medical equipment. US microchip companies dominate the world with almost half of the global market share. Semiconductor exports eclipsed $ 49 billion in 2020, making chips one of the top five U.S. exports. The semiconductor industry also maintains a constant trade surplus with China. Almost half of the manufacturing activities of US semiconductor producers are nationally located in 18 states. The semiconductor industry employs 277,000 US workers in high-paying jobs and supports 1.6 million more jobs across the US economy.
The widespread semiconductor shortage that resulted from the pandemic in late 2020 continues to create significant challenges for our industry and has strained the resilience of the global semiconductor ecosystem. Section 301 tariffs add to supply chain disruptions. In their most direct effect, the additional US tariffs add 25% to the cost of covered semiconductors, and subsequently contribute to inflationary price increases driven by global shortages and growing demand. This exacerbates current global shortages, further disrupts our customers’ supply chains, and exacerbates the damaging effects of shortages in the United States. While removing Section 301 tariffs would be a further step, in the current global shortage, even additional measures to boost U.S. supply would make a difference.
Additionally, semiconductors are the basis of many medical devices, such as ventilators, used to fight the ongoing COVID-19 pandemic. Lifting Section 301 tariffs on semiconductors and related products would help promote access and affordability of health products and services during this time of limited resources.
Finally, the current tariffs on semiconductors and its supply chain disproportionately harm the U.S. semiconductor industry and U.S. interests at large, while not putting pressure on the Chinese government to quash the US semiconductor industry. ‘it changes its unfair trading practices. The US semiconductor industry maintains a constant trade surplus with China. In fact, most of the chips imported from China have been processed in assembly, testing and packaging factories owned and operated by US semiconductor companies. Assembly, testing, and packaging are the lowest-value-added stage of chip production, and most of these semiconductors are older, more basic, low-end, and lower-value technologies, but are still widely used in certain industrial applications, such as automobiles. Therefore, the 25% tariff on imports of US semiconductors and related products from China causes economic hardship to US manufacturers and innovators, while not providing much, if any, incentive to urge China to respond to US concerns about forced technology transfer and other unfair Chinese practices identified in the Section 301 report.
The SIA looks forward to working with the administration to expand the tariff exclusion process and remove tariffs on semiconductors and related products from the USTR Section 301 tariffs to help alleviate existing semiconductor shortages. -conductors, combat the ongoing COVID-19 pandemic, and maintain the competitiveness and leadership of the United States. in the global semiconductor market.