Chipmakers Wary of Trump's Proposed Tariffs

　　The semiconductor industry reacted cautiously as the Trump administration unveiled plans to propose tariffs on up to $60 billion in Chinese products as part of a set of actions outlined in response to what it calls China's unfair trade policies.

　　The actions, detailed by Trump Thursday (Mar 22) along with the findings of a seven-month investigation into Chinese technology policies and practices, also include restrictions on China's investment in U.S. technology firms and a challenge to China's technology licensing practices at the World Trade Organization (WTO). China responded almost immediately by proposing tariffs on U.S. products including pork, wine, fruit and steel.

　　While chipmakers have long complained of lax policies and attitudes in China around the protection of intellectual property, many remain wary of the unclear ramifications of an all out trade war between the U.S. and China.

　　The Semiconductor Industry Association (SIA) — a trade group representing U.S. chipmakers — issued a statement Thursday in support of "an outcome that protects U.S. intellectual property in a manner that avoids a costly trade conflict."

　　SIA President and CEO John Neuffer said the SIA is still reviewing the administration's findings and the proposed actions. "The U.S. semiconductor industry shares the Trump Administration’s concerns regarding unfair and discriminatory trade practices that put at risk American intellectual property in China," Neuffer said.

　　The administration will propose within two weeks a list of Chinese products that would be subject to tariffs of 25 percent. The products subject to tariffs will include aerospace, IT, communications equipment and machinery, according to the administration.

　　The tariffs would not take effect, however, until the end of a 30-day public comment period that will begin when the list of targeted products is published by the U.S. Trade Representative. The long waiting time has led to speculation that the tariffs will ultimately be watered down by lobbyists and elected representatives.

　　Trump said that the U.S. is currently engaged in negotiations with China, leading to speculation that the tariffs and other actions outlined Thursday are part of a negotiation strategy.

　　"So we’ve spoken to China and we’re in the midst of a very large negotiation. We’ll see where it takes us," Trump said in remarks at the White House Thursday. He added that the proposed actions would be undertaken "in the meantime."

　　Trump's proposed actions come in response to the findings of an investigation that concluded that China's policies and practices related to technology transfer, intellectual property and innovation are unreasonable or discriminatory. The investigation was initiated last August by U.S. Trade Representative Robert Lighthizer at Trump's direction.

　　Among other findings, the 215-page report by Lighthizer concludes that China's policies regarding joint ventures, foreign investment, administrative review and licensing processes are designed to force or pressure technology transfers from American companies.

　　"We have a tremendous intellectual property theft situation going on, which likewise is [worth] hundreds of billions of dollars.  And that’s on a yearly basis," Trump said.

　　U.S. government officials have grown increasingly weary of attempts to purchase Western companies by Chinese entities with financial ties to China's central government. Both Trump and his predecessor, Barack Obama, have blocked attempted acquisitions of U.S. firms and assets by China-backed firms. Earlier this month, Trump took the unprecedented step of blocking Broadcom's attempt to acquire Qualcomm on the grounds that it would weaken the position of the U.S. in 5G technology.

　　The semiconductor industry has been a particular target of Chinese investment. China's aggressive plans to build up its domestic semiconductor industry with more than $160 billion in state backing over 10 years have been called by some a threat to U.S. leadership in the semiconductor space. In addition to government policies that force or pressure technology transfers, U.S. chip firms have long accused China of loose intellectual property protections and outright theft.

　　Shortly before leaving office in January 2017, Obama made public a strongly worded report on the threat posed to the U.S. semiconductor China’s aggressive maneuvering to become a larger player in the global chip space. That report concluded, among other things, that Chinese policies distort markets in ways that undermine innovation, subtract from U.S. market share and put U.S. national security at risk.

　　In the statement issued by the SIA Thursday, Neuffer said that U.S. chip companies "should be able to compete in foreign markets without putting their critical IP at risk."

　　But Neuffer welcomed China's participation in the global semiconductor industry, "as long as it conforms with its international obligations and is consistent with market-based principles."

　　Neuffer added, "In the end, strong protections for intellectual property serve the long-term interests of both the United States and China."