Huawei Temporary General Licenses Offering US Semiconductor Industry 'Almost No Relief,' CEO Says

The temporary general license issued by the U.S. after it added Huawei Technologies to its Entity List has offered “almost no relief” for the U.S. semiconductor industry, which has been hurt severely by the move, said John Neuffer, president and CEO of the Semiconductor Industry Association. Speaking on U.S.-China trade issues at a Washington International Trade Association discussion on May 29, Neuffer underscored the importance of the Chinese market to U.S. semiconductor exporters and called on the Trump administration to more tactfully negotiate with China. “We would like the U.S. government to better balance its national security concerns with its economic security concerns,” Neuffer said.

Neuffer said there has been an inaccurate perception that the semiconductor industry was aided after the Commerce Department’s Bureau of Industry and Security released general licenses related to its blocking of Huawei (see 1905210013). “I’ll just say it leaves a major hole for us,” Neuffer said, adding that Huawei is one of the “world’s biggest” telecommunications equipment and cellphone providers. “There’s basically no reprieve.”

Neuffer called the semiconductor industry “a little bit misunderstood,” stressing that it is the U.S.’s fourth-largest export and that China composes about 35 percent of its sales. About half of the semiconductor industry’s manufacturing is in the U.S., Neuffer said, which poses different challenges than other U.S. industries with deep supply chains in China. Specifically, Neuffer said, the export industry has been less impacted by retaliatory tariffs and more affected by China’s intellectual property thefts and forced technology transfers. “We’re not as deeply ingrained in the Chinese economy as many other electronics industries are,” Neuffer said. “So our big problems are not so much the market access. Our big problems are what the [Section] 301 [tariff regime] is trying to go after.”

But if China’s expected June 1 tariff increase impacts U.S. “consumer goods” -- including computers and cellphones, which had previously been kept off the tariff lists -- Neuffer said the U.S. semiconductor industry will suffer significant losses, partly because China comprises a large portion of their export market. “Because they are our customers,” Neuffer said, “we will get hit and so will the American consumer.”

Neuffer also said the idea of a potential U.S.-China decoupling is a “folly,” saying the Trump administration’s desire to bring all U.S. supply chains back to the U.S. is “not realistic.” The U.S. has too many other unresolved economic issues to contend with, Neuffer said, such as education and immigration policy. “We don't have an economy where all those supply chains are just naturally going to come back here,” he said. “We all know for economic reasons it’s folly. We all know for broader geostrategic reasons it’s risky.”

But Neuffer did say some administration officials want to simply diversify U.S. supply chains, moving them out of China and into countries such as Vietnam or Mexico. That process has been happening “for years,” said Steve Lamar, executive vice president of the American Apparel and Footwear Association, but has been accelerating recently, including by many of his association’s members. Lamar said his members feel that the administration is sending “instructions … to move your supply chains” out of China. “That seems to be a pretty clear message,” Lamar said.