ADI Analog Devices Inc

Global semiconductor companies agreed to request tariff bans on chips that pack many capabilities into one small package, something that would help them better compete in the global marketplace.

Semiconductor chief executives and other representatives met in upstate New York this week for their annual World Semiconductor Council meeting. The group included representatives from various U.S. companies such as Micron Technology Inc. (MU) and Analog Devices Inc. (ADI), as well as companies from Europe, China, Taiwan, Korea and Japan.

The organization gathers high-level executives once a year to discuss trade policy, intellectual-property law and other regulations that affect the industry. The companies seek to reach agreements as a group that they then recommend to their respective governments.

The biggest issue that the companies agreed on was seeking a ban on import taxes for what the group dubbed "multicomponent chips." As semiconductor technology becomes more advanced, chip designers seek to include more functionality in one complete package, such as processing, memory and sensing capabilities. That reduces cost and typically makes it easier for customers to create their products. Such chips are common in smartphones, tablets, PCs and other consumer devices.

The topic was discussed at a roundtable late Thursday hosted by the chief executives of Micron, Freescale Semiconductor Holdings I Ltd. (FSL) and contract chip manufacturer Globalfoundries, along with the chairman of Analog Devices and the president of the Semiconductor Industry Association.

Freescale Chief Executive Rich Beyer said campaigns by the WSC have helped eliminate most global tariffs on semiconductors, but some nations impose steep taxes on the chips that combine many functionalities in one package.

"Some of these tariffs are as much as 10%, which could eliminate the ability of companies outside of those nations to successfully compete," Beyer said.

While U.S. companies have pushed for the tariff removal for years, the multicomponent chips have been viewed by some nations as a threat, Beyer said. For example, some Chinese companies have traditionally added value to the supply chain by integrating all the separate chips together on a circuit board. Such actions aren't always needed with the new chips. But the six regions were finally able to agree the tariffs hurt companies more than they help, executives said.

The companies also discussed encryption, seeking to ensure specific nations don't force the industry to reveal what steps are taken by customers to encrypt data.

"Our customers will develop encryption that will sometimes be put into the chips," Beyer said. "Some nations around the world would like insights into that."

Other issues discussed include regional stimulus and bailout provisions, anticounterfeiting efforts, and greenhouse gas emissions and chemicals management.

Micron Chief Executive Mark Durcan said some incentives to buoy companies can be positive, but government action at the point of company failure can "create significant disruptions and damage to the industry as a whole."

"There's not a lot of consensus on how that should be addressed," he said. Durcan said the group will discuss the topic in future sessions, noting it took about seven years to reach agreement about tariffs for chips that include many capabilities in one package.

The WSC hosted the meeting near the site for a recently constructed Globalfoundries chip factory in Malta, N.Y. The factory, along with university efforts in semiconductor research, has earned the region the moniker of "Tech Valley."

-By Shara Tibken, Dow Jones Newswires, 212-416-2189, shara.tibken@dowjones.com

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