Not Cheap Moving Semiconductor Packaging Plants Out of China, Intel Tells USTR

It's not easy or cheap to relocate semiconductor packaging plants from China to other countries of origin to avoid tariffs, said Intel in comments posted Wednesday in docket USTR-2018-0018 opposing the proposed 25 percent Trade Act Section 301 duties on Chinese semiconductor imports. Many tech interests argued this week for removing Chinese semiconductor imports from the tariffs list because most semiconductors the U.S. imports are made in the U.S., shipped to China for final, low-end assembly, testing and packaging (ATP), and then shipped back to the U.S. (see 1807240005). Imposing those duties would require U.S. semiconductor manufacturers to pay tariffs on their own products, they said. Though U.S. firms can limit or avoid their exposure to Chinese tariffs by moving their ATP plants elsewhere, "no rational U.S. semiconductor company is going to incur the very high costs and other risks raised by relocating an ATP facility in China with an already established ecosystem to a green field site in another country,” said Intel. It estimates it would cost $650 million to $875 million to move an ATP plant out of China, “depending on its size and where it would be relocated.” That includes the costs of constructing a new building and buying or leasing new land to build it on, hauling at least 80 percent of the equipment from the existing facility to the new one and buying new, “duplicative” equipment to “ensure continuous operation at the existing site while the new site is being built out,” said Intel. Other costs include paying for the labor “overlap” of two to three years “while the new site ramps up and the existing one winds down,” and the “incremental product freight incurred by relocating the plant,” it said. “China is our industry's biggest market and has some of our biggest customers,” it said. “These significant costs assume very limited disruption in servicing customers.”