The 114th Congress is now underway, and SIA has begun the process of advocating for congressional action on key semiconductor industry priorities, including tax, immigration, research funding, intellectual property protection, and others. President Obama is likely to address several of these issues – including an expected focus on a new tax proposal – during his State of the Union Address tonight. SIA will closely monitor the President’s remarks and the actions of the new Congress and will work to enact policies in 2015 that move our industry forward.
The SIA team would like to extend our thanks to Brian Toohey, who concluded his term as the association’s president and CEO last week. Brian’s leadership over the last four years has been invaluable to SIA and our industry, and we wish him well in his future endeavors. Furthermore, we are excited to welcome incoming president and CEO John Neuffer, who most recently served as senior vice president for global policy at the Information Technology Industry Council (ITI). John’s skills and experience will make him a highly effective leader for the semiconductor industry moving forward.
SIA Submits Comments to OECD on Base Erosion and Profit Sharing (BEPS)
On Friday, Jan. 9, SIA submitted comments to the Organization for Economic Cooperation and Development (OECD) regarding permanent establishment status in the context of its ongoing Base Erosion and Profit Shifting (BEPS) work. SIA joined a multi-association letter developed by the Silicon Valley Tax Directors Group, and including ITI, TechNet and SoFTEC as signatories. The comments raise concerns related to the options presented by an OECD Focus Group tasked with reducing the artificial avoidance of permanent establishment (PE) status in a taxing jurisdiction. PE status constitutes a sufficient nexus to grant jurisdiction to tax corporate entities.
House Approves Measure That Could Facilitate Tax Reform
On Tuesday, Jan. 6, the House of Representatives approved a provision known as “dynamic scoring,” which relates to the method for estimating budget effects of tax code changes. The provision requires the Joint Committee on Taxation (JCT) and the Congressional Budget Office (CBO) to consider the budgetary effects of economic growth, employment, investment income and “other macroeconomic variables” when calculating the official price tag of “major legislation” — defined as any bill expected to cost at least 0.25 percent of the gross domestic product, or about $42 billion using figures from 2013. Most observers view dynamic scoring as facilitating the enactment of tax reform because the economic growth estimated to occur due to reform would increase revenues and thereby offset some of the cost of tax rate reductions. Republicans will soon appoint a new CBO Director, who will implement the rule change and apply it to CBO analyses.
SIA China IC Industry Policy Delegation
On Feb. 9-11, an SIA delegation will meet with Chinese government officials and industry stakeholders in Beijing for exchange and discussion on China’s semiconductor sector development and related policies. The U.S. delegation, led by SIA president & CEO John Neuffer and comprised of SIA staff, SIA company representatives, and the U.S. Information Technology Office in China (USITO), will meet with the Ministry of Industry and Information Technology (MIIT), the National Development and Reform Commission, the China Semiconductor Industry Association, Chinese think tanks and research groups, and other Chinese stakeholders. The purpose of the meetings is to better understand China’s IC sector development, convey key SIA semiconductor industry priorities, and explore opportunities for cooperation and continued industry dialogue on China’s policies and development approach related to the semiconductor sector.
2015 Special 301 Review
The Office of the U.S. Trade Representative (USTR) issued a Federal Register Notice seeking written comments for the 2015 Special 301 Review. As in past years, SIA plans to submit written comments to facilitate our efforts to improve IP protection and identify market access barriers for semiconductor products in China and other regions. SIA has circulated a working draft for comment and feedback by relevant SIA committees. The deadline for submitting comments is Friday, Feb. 6 and the USTR hearing will be held on Tuesday, Feb. 24. USTR will publish its 2014 Special 301 Report on or around April 30. SIA’s submission from 2014 can be found here.
Joint Steering Committee of the World Semiconductor Council (JSTC) Meeting in Seoul, Korea
The Joint Steering Committee (JSTC) of the World Semiconductor Council (WSC), comprised of semiconductor industry experts and senior company executives in China, Chinese Taipei, Europe, Japan, Korea and the U.S., will meet in Seoul, Korea, on Feb. 3-6. The JSTC is a working-level meeting to prepare for the CEO-led WSC meeting in May, which makes a joint set of recommendations on semiconductor issues to the governments and authorities of the six participating regions.
The JSTC features task force and committee meetings on environment, safety and health (ESH), IP, regional support programs, tariff elimination for advanced semiconductors, customs and trade facilitation, encryption, anti-counterfeiting, and semiconductor growth initiatives, among other issues. The meeting will also feature an opportunity for information sharing on government support programs, including China’s IC support policies.
SIA Urges Congressional Leaders to Approve Trade Promotion Authority
On Jan. 14, SIA and other members of the Trade Benefits America Coalition sent a letter to congressional leaders urging the passage of bipartisan Trade Promotion Authority (TPA) legislation this year. TPA is expected to be an early legislative priority for the White House and congressional Republicans, with the introduction of new legislation in coming weeks and potential committee consideration by March. SIA will continue to engage with the coalition and educate Members of Congress on the importance of trade to the semiconductor industry, the potential benefits of pending free trade deals with Europe and the Pacific nations, and the critical need for TPA to ensure those deals can be ratified in Congress.
Environment, Health & Safety
EPA Proposes to Restrict Chemicals Potentially Used in Semiconductor Industry
On Jan. 15, the Environmental Protection Agency (EPA) posted a proposal to regulate a chemical that may be used in certain semiconductor manufacturing operations. Under the proposal, known as a Significant New Use Rule (SNUR), EPA identifies uses of a substance that are banned, unless EPA reviews and approves the use on a case by case basis. EPA proposes to ban for all uses a large category of perfluorinated chemicals, including Long-Chain Perfluoroalkyl Carboxylate (PFOA), categorized as "long-chain" substances (i.e., a chemicals with a carbon chain of 8 carbons or greater, but less than 21 carbons). In addition, EPA proposes to ban imported “articles” (i.e., items with a specific form related to its use, such as a semiconductor, a fab tool, or a vehicle) if the article contains PFOA or one of 20 specific perfluorinated substances that EPA identifies by CAS number in the proposed rule.
In the past, EPA and the global community have taken action on other perfluorinated chemicals used in the semiconductor industry, including perfluorooctane sulfonate (PFOS), which led to a multi-year, global effort to phase-out the use of this chemical. SIA and member companies are in the process of reviewing the proposal to assess the impact of this proposal on our industry, but some operations may use PFOA and some manufacturing tools may also use the substance. Comments will be due within 60 days after the proposal is published in the Federal Register.
Sen. Hatch Introduces High-Skilled Immigration Bill
On Jan. 13, Sen. Orrin Hatch (R-Utah), along with original co-sponsors Sens. Klobuchar (D-Minn.), Rubio (R-Fla.), Coons (D-Del.), Flake (R-Ariz.), and Blumenthal (D-Conn.) introduced the Immigration Innovation (I-Squared) Act of 2015. Among other things, the bill would raise the yearly cap on H-1B visas from 65,000 to up to 195,000, remove limits on the number of high-skilled visas for employees with advanced degrees, enable visa holders' spouses to work, increase visa holders' ability to move between jobs, recapture unused green cards from previous years, and eliminate yearly per-country caps for employment-based visa petitioners. SIA and our coalition partners in Compete America have long advocated for these changes. At the request of the Senators, SIA issued a letter in support of the bill.
Nonetheless, prospects for immigration reform remain uncertain. In one development, Sen. Sessions (R-AL) has assumed the role of Chair of the Immigration Subcommittee on the Senate Judiciary Committee. Sen. Sessions is a vocal opponent of comprehensive reform efforts, and it remains unclear whether he will support the I-Squared bill.
DLA Announces Favorable Policy on DNA Marking
The Defense Logistics Agency (DLA) announced a new policy on DNA marking that is consistent with SIA’s past recommendations on this issue. In the announcement, DLA states that it will apply the DNA marking within DLA for covered products, rather than requiring the component supplier to apply the marking before shipment to DLA. As a result, SIA companies will not be responsible for applying the DNA mark.
PricewaterhouseCoopers Releases Third Part of its Annual China Semiconductor Report
PricewaterhouseCoopers (PwC) recently released the third and final part of its annual report on China's semiconductor industry. The report, entitled China’s Impact on the Semiconductor Industry 2014, provides a detailed and comprehensive picture of both China’s semiconductor market and industry. Part 3 of the report focuses on manufacturing, Greater China, growth scenarios, as well as the government of China’s recently announced policy efforts to support its industry. Part 1 highlighted China’s market and industry overview, and part 2 spotlighted China’s IC design and manufacturing.
Devi Keller Promoted to Director, Global Policy
SIA is pleased to announce the promotion of Devi Keller, from Deputy Director to Director, Global Policy. Over the past year Devi has done an outstanding job in leading SIA’s efforts on a range of international priorities, including our China strategy, the expansion of the Information Technology Agreement (ITA), the World Semiconductor Council (WSC), and other trade and global policy matters. Devi has demonstrated great skill and professionalism on all of these issues, and her promotion is a well-deserved recognition of her expanded role and the contribution she has been making to SIA’s success. Please join us in congratulating Devi on this well-deserved promotion.