Semiconductor Industry Backs Trump’s China Probe

Article By : Dylan McGrath

Semiconductor Industry Association applauds President's investigation into China's policies and practices around intellectual property.

SAN FRANCISCO — The semiconductor industry's largest trade group reacted quickly to a memorandum by U.S. President Donald Trump authorizing the investigation of China's trade practices, offering support and saying it has long voiced concern over "market-distorting" aspects of China's industrial policy.

"The U.S. semiconductor industry stands ready to work with the Trump Administration to protect American intellectual property and critical technology from theft or forced transfer in foreign markets," said John Neuffer, president of the Semiconductor Industry Association (SIA), in a press statement released Monday.

Neuffer's statement was issued shortly after Trump announced the memorandum in widely televised event at the the White House. The memorandum directs U.S. Trade Representative Robert Lighthizer to investigate China's laws, policies practices and actions that may be unreasonable or discriminatory and that may be harming American intellectual property, innovation and technology.
"This is just the beginning," Trump said of the memo.

China's stance on intellectual property rights has long been criticized by the semiconductor industry and other U.S. high-tech industries. Chip makers have complained about being enticed by the Chinese government to establish joint ventures with local companies as a condition for setting up manufacturing in China, which they say ultimately results in intellectual property theft.

"While China is an important part of the global semiconductor value chain, SIA has long raised concerns about market-distorting aspects of its state-led industrial policy — such as forced technology transfer practices — that disadvantage U.S. companies and imperil their IP," Neuffer said in Monday's statement. "A balanced, fair, objective and thorough investigation aimed at ensuring that China meets its global trading obligations and that market forces determine competitive outcomes will be helpful to address these market-access issues."

A White House statement issued Monday said China has implemented laws and taken actions that encourage the transfer of American technology and intellectual property to Chinese firms. For example, the statement said, "U.S. companies can be required to enter into joint ventures with Chinese companies if they want to do business in China, resulting in Chinese companies forcibly acquiring U.S. intellectual property."

China's increasing presence on the global semiconductor stage and the Chinese central government's plan to invest $161 billion over 10 years to strengthen its domestic semiconductor industry have been an increasing source of tension between the U.S. and China since before Trump ascended to the presidency. The U.S. government has increasingly shown willingness to fight or block acquisition of U.S. chip firms by Chinese entities. Prior to leaving office in January, former president Barack Obama released a strongly worded report on the threat posed to the U.S. semiconductor industry by China's aggressive ambition to become a global player in the chip space.
A report on intellectual property theft originally issued in 2013 by the National Bureau of Asian Research concluded that Chinese government policies lead to the theft of American IP. The latest update to that report estimates that the annual cost to the U.S. economy from IP theft could be as high as $600 billion and that China is responsible for an estimated 50 to 80 percent of all IP theft that causes harm to the U.S. economy.

"Intellectual property is the lifeblood of the semiconductor industry," said Neuffer. "Semiconductors are America’s fourth-largest export and underpin the entire economy. U.S. semiconductor companies invest nearly one-fifth of their revenue in research and development to stay at the forefront of innovation, and they should be able to compete in foreign markets without putting their critical IP at risk."

The White House also issued a separate statement containing praise for the memorandum from 18 representatives of industry, defense and foreign policy, including the current CEOs of defense contractors such as General Dynamics, Lockheed Martin, Raytheon and Northrop Grumman.
"China’s assault on American intellectual property threatens our military edge and economic competitiveness," said J. Randy Forbes, a former U.S. congressman and founder of the Congressional China Caucus. "It is a serious threat to our national security and can only be countered by bold, aggressive action in support of our national interests. I commend President Trump for his leadership on this issue."

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