The U.S. might blink on Huawei.
Chip export news
The topic of supply chain security got hotter with Wednesday’s presidential executive order that could mean rules banning some companies from the U.S. supply chain, speakers said a U.S. Chamber of Commerce Global Supply Chain Summit Thursday (see 1905150066). China is starting to fire back.
Applied Materials didn’t respond to queries Tuesday seeking comment on a Nikkei report the company ordered staff to suddenly stop doing business with customer Xiamen San'an Optoelectronics Friday, a day after the Chinese LED chipmaker appeared on a U.S. government “unverified list” of foreign entities. Applied supplies semiconductor production equipment and large-area deposition systems for LCD and OLED display manufacturing (see 1902150002). Xiamen San'an describes itself as China’s “largest LED epitaxial wafer and chip manufacturer, endeavoring to become top 1 in the global LED industry.” It was among 50 entities that Commerce’s Bureau of Industry and Security added to the unverified list Thursday after the agency “could not verify their bona fides because an end-use check could not be completed satisfactorily for reasons outside the U.S. Government's control,” said a Federal Register notice. Under Export Administration regulations, “license exceptions” for exports, re-exports and in-country transfers involving a foreign party are “suspended” when that entity appears on the list, said the notice. Exporters doing business with a listed entity also must ask that trading partner for a statement acknowledging the listing before doing further commerce, it said. Efforts to reach Xiamen San'an, whose shares are listed on the Shanghai stock exchange, were unsuccessful Tuesday due to time zone differences.
TVs were the big winner Friday when the Office of the U.S. Trade Representative eliminated them from its final list of Chinese imports earmarked for Trade Act Section 301 tariffs of 25 percent. Other sectors didn’t fare so well, including those that import Chinese printer parts, thermostats and computer equipment used in artificial intelligence and blockchain technology. China vowed to retaliate "immediately."
A second House member from North Carolina went to bat for Cree in the company’s attempt to fend off Trade Act Section 301 tariffs on U.S. imports of LEDs from China. The company produces LED wafers at its plant in Durham, North Carolina, exports them to China for making them into finished packaged chips and re-imports those chips to the U.S., said Rep. David Price, D-N.C., in a June 8 letter to U.S. Trade Representative Robert Lighthizer posted Wednesday in docket USTR-2018-0005. Cree began exporting the wafers 11 years ago to a plant it owns in Huizhou so it could “serve the rapidly growing and large Chinese and Asian markets,” said Price, who said 2,500 Cree employees work in his congressional district in Durham. Unless the USTR’s office removes from the tariffs list LEDs classified under the Harmonized Tariffs Schedule subheading 85414020, Cree would be forced to pay 25 percent higher duties on the devices, “despite the fact that approximately 70 percent of the value of these LED chips and components are based on U.S. intellectual property,” Price said. Including those LEDs on the final tariffs list “erroneously entangles the company into tariff proposals that are unlikely to result in a reduction of unfair IP practices in China,” he said. Rep. George Holding, R-N.C., earlier urged Lighthizer to remove Chinese LED imports from the final tariffs list (see 1806100001). The White House announced May 29 that the USTR’s office will release its final tariffs list by Friday and the tariffs will take effect “shortly thereafter” (see 1805290046).
A Wednesday House Communications Subcommittee hearing on intersecting telecom, national security and competition policy issues could give lawmakers an early opportunity to delve into T-Mobile's proposed merger with Sprint and ramifications of President Donald Trump's push for the Department of Commerce to re-evaluate its seven-year ban on exports to ZTE (see 1805140062), officials and lobbyists told us. A range of other issues could also come up, including the FCC national security NPRM (see 1804170038), U.S. competitiveness in 5G and a revamp of the federal government's process for reviewing foreign takeovers of U.S. communications sector companies, they said. Testimony released in advance of the hearing focuses on concerns about China and the need for further U.S. government work to secure the telecom infrastructure supply chain.
Tech industry reaction was overwhelmingly positive Wednesday to the news that the U.S. and more than 50 of its World Trade Organization partners completed work on a final Information Technology Agreement (ITA) expansion proposal. A statement from the Office of the U.S. Trade Representative (USTR) said the pact means more than $180 billion in yearly U.S. tech exports will no longer face tariffs in key markets around the world. The original ITA was reached in 1996, prompting many to say the new agreement was long overdue.
Newly introduced Trade Promotion Authority (TPA) legislation is aimed at improving U.S. digital trade provisions and leading the way for trade pacts with countries in Asia and Europe, industry groups said. Introduced Thursday, the Bipartisan Congressional Trade Priorities and Accountability Act of 2015 would also strengthen Congress' ability to slow trade agreement implementation bills, lawmakers said. Aside from procedural and transparency modifications, the bill largely mirrors the TPA legislation introduced in the last Congress.
Samsung filed a complaint Nov. 21 asking the International Trade Commission to ban imports of graphics processing chips from Nvidia and several other companies that allegedly infringe its patents. Nvidia’s Quadro, NVS, Tesla, GRID and GeForce line of graphics cards for computers, as well as several systems on a chip for tablets, copy its patented designs, Samsung said in the complaint. It's requesting a limited exclusion order and cease and desist order against Nvidia, plus several other companies that manufacture and export graphics cards and SoCs under contract with Nvidia, including Biostar, Elitegroup, EVGA, Fuhu, Jaton, Mad Catz, OUYA, Sparkle Computer, Toradex, Wikipad and ZOTAC. The ITC is asking for comments by Dec. 9 on public interest factors raised by Samsung’s complaint. Nvidia filed a similar complaint against Samsung in September (see 1410090095). Samsung retaliated, first with a patent infringement complaint against Nvidia filed Nov. 4 in U.S. District Court in Alexandria, Virginia, and later with the Nov. 21 ITC complaint. The Nov. 4 complaint named Velocity Micro, which sources chips from Nvidia, as a co-defendant. Velocity, based in Richmond, Virginia, bills itself as an "independent American boutique builder of higher caliber computer systems," its CEO Randy Copeland said in a blog post in which he blasted the Samsung litigation in blunt terms. Samsung is "all too willing to throw a private company under the proverbial bus for their own strategic reasons," he said. "It’s simply wrong, and a shining example of what’s broken in big corporate America." Velocity is "a small private business" and has "absolutely nothing to do with the disputes between these business giants," Copeland said of Nvidia and Samsung. "This is not our fight, and it’s unconscionable that Samsung is willing to completely disregard the effects and financial fallout this legal tactic will have on the undeserving employees of Velocity Micro and our local community. ... If this is how Samsung operates, we want no part of it, and we hope others agree and consider this during this upcoming holiday shopping season." Samsung didn’t comment.
Broadcom expects to accrue the first revenue in early 2014 from its $164 million buy of Renesas Electronics’ LTE chip business, Broadcom CEO Scott McGregor said on an earnings call. Broadcom, which closed on the Renesas LTE acquisition earlier this month, will initially field a dual-core 4G processor, which will be followed by a quad-core version later in 2014, McGregor said. Renesas, which announced plans to stop 4G wireless development in June, had a customer list that included AT&T, Vodaphone, Orange and NTT DoCoMo in Japan, industry analysts have said. Broadcom inherited about 1,200 Renesas employees along with the 4G assets, including several ex-Nokia chip designers who did some of the early work on 4G standards. The acquisition will enable Broadcom to strengthen a product line that already includes baseband processors, Bluetooth and Wi-Fi and NFC chips. The Renesas buy also will help Broadcom as it seeks to expand business for high-end LTE smartphones in China, company officials said. Much of Broadcom’s focus in China will be on smartphone suppliers like ZTE, which export products to the U.S. and other markets, McGregor said. As part of the Renesas purchase, Broadcom is taking a $20 million charge against Q4 earnings as it cuts 1,150 jobs, including 750 from its own ranks, McGregor said. The Renesas business is expected to add $65 million to Broadcom’s Q4 expenses, an amount that will decline to $45 million by late 2014, he said. Broadcom’s Q3 net income grew to $316 million from $220 million a year earlier as revenue rose to $2.14 billion from $2.04 billion. It incurred $12 million in restructuring costs in Q3.