U.S. SRAM suppliers decry tariffs
By Andrew MacLellan
Electronic Buyers' News
(10/23/98, 02:50:39 PM EDT)
Silicon Valley
Railing against what they claim are unfair international trade laws, some domestic SRAM suppliers say government tariffs are threatening their customer relationships and have triggered a costly manufacturing shake-up.
Despite being based in the United States, a half-dozen SRAM vendors were named by the International Trade Commission more than six months ago for violating U.S. anti-dumping regulations. The companies were slapped with duties ranging from about 8% to more than 50% for all discrete SRAMs and SRAM wafers sold in the United States but manufactured by foundry sources in Taiwan.
The penalties also applied to several Taiwan-based SRAM makers, including Taiwan Semiconductor Manufacturing Co. Ltd., United Microelectronics Corp., and Winbond Electronics Corp.
Many of the domestic vendors named in the April ruling have restructured their manufacturing alliances to avoid the duties, moving production out of Taiwan to fabs in Singapore and the United States. The few chips still produced for them in Taiwan are sold into overseas markets.
While the affected companies are coping with the new tax, the notion that U.S.-based fabless suppliers must pay the price for the anti-competitive practices of their foundry partners doesn't sit well with executives.
“These tariffs are so unfair,” said Michael Davis, senior product marketing manager at Alliance Semiconductor Corp., which was hit with duties of 50.58%. “It's just embarrassing to me as an American.”
The small San Jose-based chip designer was forced to issue a bond to cover the duties until it was finally able to shift production last July to Chartered Semiconductor Manufacturing Pte. Ltd. in Singapore and IBM Microelectronics in the United States. While the company's OEM customers in Europe picked up some of the shipments originally destined for the United States, the move was an added expense that came amid a general industry slowdown.
“Being a fabless company, flexibility is one of our strengths, so we've been able to maneuver around [the tariffs],” Davis said. “But we've lost money.”
Integrated Silicon Solution Inc., the largest U.S. company named in the decision, is subject to a smaller, 7.59% duty. It has since moved some production to Chartered and to WaferTech, a joint-venture fab in Camas, Wash.
“We're reducing our reliance on TSMC and UMC, and are running more wafers outside of Taiwan,” said Jimmy Lee, president of ISSI, Santa Clara, Calif. “It's caused a little bit of pain for us.”
Disgruntled SRAM makers don't have far to look to point the finger of blame. Boise, Idaho-based Micron Technology Inc., a marginal player in the SRAM market, filed the original petition in early 1997 calling for ITC sanctions. Micron, which has a long history of playing the legal trump card when it suspects unfair competition, claimed it was fighting to preserve fair trade for itself and two other SRAM vendors with domestic manufacturing plants-Cypress Semiconductor Corp. and Integrated Device Technology Inc.
Fabless U.S. SRAM suppliers say the move was a shot across the bow of a growing foundry industry, whose process technologies and design services are fast outstripping the competitive abilities of many dedicated chip makers.
“Look at a midsize company like an IDT, and then look at what a TSMC, or a Chartered, or an IBM can give us, and you can see what a liability owning a fab can be,” said Alliance's Davis. “There are big risks with undercapacity and lousy profit margins.”
With an appeal of the decision pending, the most frightening prospect for chip vendors is the possibility that the disruption to their manufacturing base has damaged their reputation in the eyes of their OEM customers.
“We worried that [OEMs] might start asking themselves, 'Should we be careful about using their products?' That really hurts,” Davis said. “It creates fear, uncertainty, and doubt, which is what Micron wants.”
Amy Kleiner, government affairs manager for Micron, said the company was simply trying to shield the SRAM market from predatory tactics. “The U.S. law is very clear when it comes to dumping,” Kleiner said. “It's an illegal practice, and we want to make sure it's enforced to ensure a level playing field.”
The ruling, designed to punish SRAM suppliers in Taiwan for selling chips into the United States for less than they cost to produce, has had virtually no effect on manufacturers there. The reason: The decision applies to loose SRAM chips and SRAM wafers, but most of the SRAM made on the island leaves in module form or on motherboards or in finished goods, which are exempt.
“We focus on a foundry business,” said a spokesman for UMC, which the ITC hit with duties of 93.87%. “Almost all of our SRAM was shipped to local board makers, so the penalty duty was not a problem for us.”
The dozen U.S. and Taiwanese companies named in the ITC suit represent a small fraction of the total SRAM market. Manufacturers in Japan and South Korea, which account for at least 75% of the market, were exonerated or were absent from the petition.
The Taiwan Semiconductor Industry Association, with support from some U.S. SRAM vendors, has appealed the decision to the Court of International Trade. A decision is not expected before mid-1999, according the TSIA's attorney, Chris Corr of White & Case in Washington. “Our position is that the order should never have been imposed on U.S. SRAM companies or Taiwanese suppliers, because Taiwan was not hurting the U.S. SRAM industry,” Corr said.
The Fabless Semiconductor Association has tried unsuccessfully to lobby Congress to change the Department of Commerce criteria for determining what constitutes foreign-made goods.
“A Senate Ways and Means committee hearing was supposed to happen before the end of this legislative session,” said FSA executive director Jodi Shelton. “I think, unfortunately, that Monica Lewinsky is overshadowing everything at the moment.”
Moreover, the economic crisis in Asia has sent a wave of cheap imports washing up on U.S. shores, fueling concerns of a widening U.S.-Asia trade deficit. In such a climate, legislators are unlikely to risk constituent backlash by favoring what might be construed as a watering-down of U.S. trade regulations.
“With the Asia crisis, there isn't going to be any sympathy for companies looking to weaken dumping laws,” Shelton said.
ebnews.com |
