The American Semiconductor Industry Association (SIA) submitted comments to the Office of the United States Trade Representative (USTR) on December 1, urging the removal of harmful semiconductor tariffs that are exacerbating continued chip shortages and slowing the U.S. economy. As explained in the SIA’s submission, the 301 tariffs imposed on semiconductors and related products are causing the current global chip shortage, causing price increases, and exacerbating the purchase and manufacturing of automobiles, electrical appliances, medical equipment, and other U.S. industrial and Harm to American consumers and manufacturers of technology products.

SIA firmly believes that the tariffs imposed on semiconductors and related products are actually a destructive tax on American chip manufacturers and consumers, and have brought unnecessary burdens to the American economy. In addition, tariffs have weakened the semiconductor industry’s efforts to continue to increase production capacity to meet the soaring semiconductor demand. SIA believes that the government can eliminate tariffs on semiconductors and related products through surgical precision.

Semiconductors are the cornerstone of the modern economy, powering all digital products, from smartphones and cars to supercomputers and medical equipment. American chip companies account for nearly half of the global market share. In 2020, US semiconductor exports exceeded US$49 billion, placing the chip industry in the top five of all US export industries. The US semiconductor industry also maintains a continuous trade surplus with China. Nearly half of the manufacturing operations of American semiconductor manufacturers are located in 18 states in the United States. The US semiconductor industry employs 277,000 American workers in high-paying jobs and supports an additional 1.6 million jobs in the entire US economy.

The general shortage of semiconductors at the end of 2020 due to the COVID-19 pandemic continues to pose major challenges to the semiconductor industry and strain the resilience of the global semiconductor ecosystem. Section 301 tariffs exacerbated supply chain disruptions. The most direct impact is that the additional tariffs imposed by the United States have increased the cost of covered semiconductors by 25%, which has subsequently exacerbated the inflationary price increases already caused by global shortages and rising demand. This has exacerbated the current global shortage, further disrupted the supply chain of US semiconductor customers, and exacerbated the damaging effects of the shortage in the United States. These shortages have also caused factory shutdowns and affected salaries in the form of reduced wages and working hours. Although the removal of the 301 tariff will be a gradual step, in the current global shortage, even gradual steps to increase US supply capacity will have a huge impact.

In addition, semiconductors have a fundamental role in many medical devices (such as ventilators), and these devices are used to combat the ongoing COVID-19 pandemic. In this time of resource constraints, the removal of Section 301 tariffs on semiconductors and related products will help promote the availability and affordability of medical products and services.

Finally, SIA believes that the current tariffs imposed on semiconductors and their supply chains are disproportionately harming the US semiconductor industry and broader US interests, but they have little impact on China. In fact, most of the chips imported from China are processed in assembly, testing, and packaging factories owned and operated by American semiconductor companies. Assembly, testing, and packaging are the lowest value-added stages in chip production, and most of these semiconductors are mature and more basic technologies, but they are still widely used in certain industrial application scenarios, such as automobiles. Therefore, imposing a 25% tariff on US semiconductors and related products imported from China is causing economic damage to US manufacturers and innovators, and it is difficult to cause too much impact on China.

SIA looks forward to working with the government to expand tariff exclusion procedures and remove tariffs on semiconductors and related products from USTR’s Section 301 tariffs to help alleviate existing semiconductor shortages, fight the ongoing COVID-19 pandemic, and keep the United States in Competitiveness in the global semiconductor market.