Meeting of the 43Rd JSTC

Meeting of the 43rd JSTC

Minutes of the Meeting

May 23-25, 2012

Saratoga Springs, New York

May 23

Prior to the JSTC meeting, the Chair of the Semiconductor Industry Association in the U.S., serving as JSTC Chair, hosted a breakfast meeting for the Chairs, association heads and counsel during which they reviewed the agenda and key points for discussion.

The JSTC Chair from the Semiconductor Industry Association in the U.S. opened the 43rd meeting of the JSTC by welcoming all delegations to Saratoga Springs. He expressed his expectations for a productive meeting.

After the delegation members from each semiconductor industry association introduced themselves, the Chair reviewed the JSTC agenda. The counsel for the Semiconductor Industry Association in the U.S.then reviewed the antitrust guidelines, which were circulated to each person attending the meeting electronically.

1. Cooperative Approaches in Protecting the Global Environment

The Semiconductor Industry Association in the U.S., as Chair of the ESH Committee, gave a presentation to the JSTC regarding the work of the ESH Committee since the last JSTC meeting.

PFC Working Group – The Chair noted that in 2011 the WSC announced that all associations met the goal set in 1999 to reduce PFC emissions at least 10% below baseline levels by 2010, with total 2010 WSC emissions about 32% below baseline levels. The WSC also announced at that time a new Post 2010 PFC Voluntary Agreement based on a commitment to implement best practices in all new fabs, which started construction after May 2011, including “Rest of World” fabs. The industry expects that the implementation of best practices will result in a Normalized Emission Rate (NER) in 2020 of 0.22 kgCO2e/cm2, which is equivalent to a 30% NER reduction from 2010 aggregated baseline. The Chair provided the first annual report under the new post-2010 goal. The WSC achieved a 3 percent NER reduction in 2011, along with a one percent reduction in

absolute emissions. In addition, the PFC Working Group will complete its review of the Best Practices document in order to make the document available on the WSC website.

Energy Working Group -- the Chair noted that data collection and review of technical trends to forecast future energy consumption will continue. Historically,

energy consumption normalized to kWh/cm2 decreased 36% below the 2001 level. At this point the Energy WG has not yet achieved a consensus on the appropriate forecasting method that will result in the most accurate basis for development of a Post 2010 WSC energy reduction goal. More Effective Engagement with Suppliers is needed to increase efficiencies in current and future tools (e.g. 450mm tool set) and to mitigate process risk associated with operational improvements. The JSTC expressed its expectation that the Energy Working Group will complete its work on establishing an energy reduction goal before JSTC in September 2012.

New Chemical Working Group – the Chair reported on the ESH Committee’s charter of the new Chemical WG to develop WSC policy positions, and promote policy positions focusing on global harmonization of regulations. The Committee has completed an advocacy paper - “Essential Considerations for the Regulation of Chemicals Used in Semiconductor Manufacturing and Products” and requested JSTC approval of the document. The committee has also developed an action plan and timelines on the U.N. SAICM (Strategic Approach to International Chemical Management)activity, pending California “Green Chemistry” regulations, and a policy paper focusing on nanomaterials.

The JSTC thanked the committee for this effort. Some associations noted that action items from the last meeting were not completed or delayed, specifically mentioning the need to finalize the PFC best practices document and the late submission of the quantitative data.

The JSTC approved the chemical paper and the proposed WSC joint statement language.

ACTIONS:

- The ESH committee will develop a timeline and plan for the submission of quantitative data and report to JSTC in September 2012. The JSTC will monitor adherence to this timeline

-The ESH Committee to finalize the WSCBest Practices Guidance of PFC Emission Reduction document before JSTC in September 2012.

- The ESH Committee to work to achieve a Post 2010 WSC energy reduction goal before JSTC in September 2012

2. Market Report

The Semiconductor Industry Association in the U.S., as Market Task Force Chair, reported on the task force’s activity. The current import/export tables that we have historically used in the spreadsheet only include trade with U.S., Europe, Japan, and Asia Pacific. The tables should be expanded to at least include all of the WSC regions. The associations also had the task force action to consider how to include R&D data using government data or special surveys. All regions agreed that a cumulative annual R&D figure would help differentiate the semiconductor industry from other industries, as a leading innovator – one that contributes significantly to economic growth and societal welfare. Therefore such data would be helpful in positioning our GAMS recommendations. Some associations expressed that it could be difficult to collect the data, but given this factor, they would again revisit this issue to identify possible other means of collecting the data.

The draft presentation to the WSC was presented and the JSTC discussed the presentation and requested that an additional slide be added to encourage CEO discussion of more recent data. Data on location of R&D, in addition to the existing data on R&D by regional industries, was requested.

ACTIONS:

- Associations who have not submitted the R&D data in the current spreadsheet to consider if it is feasible to do so, and all associations to consider collection of data on R&D by country or region. Updated information to be provided to the Market Committee Chair, the Semiconductor Industry Association in the U.S. by July 15

- The Semiconductor Industry Association in the U.S. will expand the regions covered using UN ComTrade and send the data regarding imports/exports on July 15 to the other associations to confirm data

The Semiconductor Industry Association in the U.S. previewed the cloud computing presentation that Nick Santhanam from McKinsey will deliver to the WSC. The presentation included information on cloud model mix, adoption across regions, CIO interviews on cloud adoption, cloud growth phases, profit potential, implications for semiconductor growth.

3. MCO Task Force

The Semiconductor Industry Association in Europe presented the draft report to the WSC on MCOs. The Chair reported that GAMS in 2011 reiterated its commitment to the MCO issue, leading to several inter-government and industry technical meetings. This effort has led to a common industry definition of the MCO and a proposal to amend the Harmonized System classification to add MEMS as a subcategory to HS 8541. The final definitions, subsequently approved by the WSC,are attached to these minutes in the annex.

The Chair presented language regarding the means of notifying the WSC on new products for positive consideration to be added to the MCO definition and for additions to be recommended to GAMS as a standing item on the GAMSagenda. The language also calls for GAMS to annually review, in the light of technological developments, experience in applying tariff concessions or changes to the HS nomenclature, whether the coverage should be modified to include additional components or products. The Chair also presented proposed WSC Joint Statement language.

The JSTC amended draft joint statement to add a request that MCO’s be classified with other integrated circuits under 8542.

JSTC Suggested Timeline for MCO Agreement

• By May 30: Semiconductor Industry Association in Europe to provide to JSTC delegations a short background paper based on the WSC slides for use with their communications with GAMS members.

• By June 4: Each WSC member convey to GAMS member (and where applicable include customs authorities)theWSC approved MCO definition proposal, request conclusion of an Agreement at September Berlin GAMS, with effective tariff elimination date of January 1, 2013. Each WSC member to seek concurrence of its government/authority to the above objective and encourage them to pursue GAMS level consultations to foster consensus.

• By June 26: notify all other JSTC members of status of reaching objective, and the Semiconductor Industry Association in Europe to arrange for a JSTC conference call by June 28.

• JSTC to encourage GAMS to pursue a special government/authority technical and or agreement drafting session well in advance of the GAMS meeting to foster consensus. This meeting will likely be held in Europe given that the September GAMS will be held in Europe. JSTC to encourage the GAMS Chair to circulate draft Agreement by July 1 if possible.

• Urge GAMS members to complete domestic procedures as soon as possible.

• By July 13: JSTC call on additional information about the status of GAMS discussion.

• By July 15: Seek GAMS members’ agreement to draft text of Agreement.

• September 27: Signature by all six GAMS members in Berlin.

• Deposit by GAMS Chair of Agreement with WTO as soon as possible.

• January 1, 2013: Effective date of Agreement

4. Encryption

The Semiconductor Industry Association in the U.S. presented on behalf of the Encryption Certification and Licensing Regulations TF. The presenter noted the GAMS Chair’s Summary statement that “GAMS would welcome further WSC inputs on the semiconductor perspective on encryption and on the role of semiconductors in addressing global information technology challenges, and reporting back in 2012.” He also reviewed the Outline Proposal that the Task Force has approved as an answer to GAMS request. Finally, he presented the draft WSC Joint Statement for approval.

JSTC approved the draft statement for submission to the WSC.

The JSTC noted the section in the WSC Joint Statement supporting efforts by various international organizations that are developing innovation policy principles to guide governments on how to help industry generate greater domestic innovation without distorting trade and impeding market access.

ACTIONS:

- The Semiconductor Industry Association in the U.S. to send to all associations the 14 innovation Policy Principles adopted by APEC Leaders in November 2011, and all associations are to review the principles by the next JSTC meeting

- The TF will approve a presentation on encryption to the GAMS in the September meeting and decide further steps

5. Website Task Force

The Semiconductor Industry Association in the U.S., as the Website Task Force Chair, presented the TF report. The new WSC website was launched at and the new logo has been introduced. The Chair also noted that at the February JSTC Meeting in Hsinchu the JSTC agreed to conduct an annual review of each committee and task force to determine whether the committee or task force should continue its activities, and presented the results of the review as follows:

•IP Committee

•ESH Committee

•ESH Energy/QT Working Group

•ESH PFC Working Group

•ESH Chemicals Working Group

•Market Committee

•MCO/MCP TF

•Encryption Certification & Licensing Regulations TF (at least until September)

•WSC 2.0 TF (to meet once a year in September)

•Website TF

•Export and/or Import Regulatory Restrictions TF

•Regional Stimulus TF

ACTION:

-Semiconductor Industry Association in the U.S. to send invoices to share the cost of the website

6. IP Committee Report

The Semiconductor Industry Association in Korea, chair of the IP Committee, reported on the Special IP Committee meeting. At its meeting, the IP Committee agreed on a letter to WIPO covering patent quality issues of: collection of quality “metrics,” enhancement of prior art search quality, and harmonization by conclusion of the Substantive Patent Law Treaty. The committee also discussed improvement of utility model patents, and will make recommendations,if feasible, based on the information collected. The committee also previewed the presentation from Dr. Allison on his study of non-practicing entities.

The Semiconductor Industry Association in Japan noted that it did not have adequate time to approve the WIPO letter because the draft was not available in time, but would seek an approval at its internal IP committee which will be held at the beginning of June.

ACTIONS:

- The Semiconductor Industry Association in Japan will confirm whether it approves the WIPO letter by June 15. Assuming final confirmation from Semiconductor Industry Association in Japan, JSTC will approve any necessary changes, and the Semiconductor Industry Association in the U.S. will arrange for the letter to be signed by the WSC Chair, and send to WIPO by June 30

7. Anticounterfeiting Report

The Semiconductor Industry Association in Europe reported on anticounterfeiting. The presenter reported on impacts and magnitude of counterfeiting, and encouraged companies to develop effective anticounterfeiting programs including awareness, scrap control, and cooperation with law enforcement. He proposed that a JSTC anti-counterfeiting task force be established to share information, locally support task force activities, collaborate with local law enforcement, set up a local program, provide local training, and report annually to the WSC. The pace of activity would be determined by the task force.

JSTC discussed the issue and concluded that a meeting of personnel at the industry level responsible for anticounterfeiting measures will be convened to recommend to the JSTC an upgraded, ongoing effort to combat counterfeiting by proposing a work plan that considers possible projects or tasks.

ACTIONS:

- Associations to identify appropriate personnel by June 25. Per the interest expressed by the WSC, the Semiconductor Industry Association in Europe will organize the anticounterfeiting meeting, likely around the GAMS meeting

8. Special Guest Speaker - NPE

Dr. John Allison of the McCombs School of Business, University of Texas at Austin, an independent third-party consultant retained by the Semiconductor Industry Association in Korea, gave a preview of his WSC presentation regarding his recently released study on "The Effect of NPE Patent Litigation on the Semiconductor Industry.”

The WSC agreed during its meeting that the JSTC meeting would note that the WSC welcomes the contribution of Dr. Allison’s study to the understanding of this important subject and has asked its IP Committee to review this study and the U.S. Government’s official study of NPE litigation, scheduled to be issued in September 2012.

ACTIONS:

- The Semiconductor Industry Association in Korea to send the U.S. Government Accountability Office study to the other associations when it is released

- The IP Committee will review and discuss the study by Dr. Allison and the GAO study at the September, 2012 or February 2013 meeting

9. Export and/or Import Regulatory Restrictions

The Semiconductor Industry Association in China presented on export and/or import regulatory restrictions. After reviewing prior statements on this subject by the WSC and GAMS, the TF chair then suggested draft joint statement language.

The JSTC approved the draft WSC joint statement.

ACTIONS:

-The TF to review the Joint Statement and determine next steps on specific issues and how to approach these issues

-SIA in China, as TF Chair, to provide information as to what relevant industries or organizations are doing on this subject and identify possible areas of mutual interest and distribute to the TF members prior to the next JSTC meeting

-Each association to collect updated information on each region’s related export/import reforms, if any, and send to Semiconductor Industry Association in China by the end of August to consolidate and report to the next JSTC meeting

-Each association to follow up with their GAMS member regarding the WSC request that GAMS members actively communicate with WSC and provide information on each region’s related revisions and reforms of export and import regulations, including the impact of those reforms on the worldwide semiconductor industry and ensure there are opportunities for further dialogue on issues such as administrative licensing requirements and procedures and improving administrative efficiency by the next JSTC meeting

10. Regional Stimulus

The Semiconductor Industry Association in the United States, chair of the regional stimulus task force, presented the task force report. After reviewing past WSC and GAMS and JSTC statements and past actions taken, the JSTC reviewed papers and ideas which had been presented on the topic related to the adequacy of WTO Rules, on the topic of the opportunity for notification and consultations regarding bailouts, and a general statement regarding communication at the GAMS level. The chair reviewed the input received from regions regarding the communication mechanismsproposed by one region, and said that the proposal was amended to take the concerns into account. In particular, the word “voluntary” was added to the prospective notification mechanism, the 60-10 day clause in the notification provision was deleted, and lengthy definitions were removed in favor of a simple description of “bailouts.” He proposed draft WSC joint statement language.

The JSTC discussed the proposal and the WSC presentation. The Semiconductor Industry Association in Japan objected to discussing bailouts, and said that there is no consensus regarding bailouts which should be addressed by GAMS rather than industry. The Semiconductor Industry Association in Korea said that the current WTO already has a consultative mechanism and a new multilateral agreement could lead to disputes over definitions. The Semiconductor Industry Association in the U.S. answered that the notification is voluntary so it is not a multilateral agreement, and that the detailed definitions were deleted to take these concerns into account. Furthermore, the Semiconductor Industry Association in the U.S. noted that the voluntary notification would reduce disputes. The Semiconductor Industry Association in Europe agreed on the concept of a communication mechanism concerning aid measures. Within the European Union, any aid measures are handled transparently and are notified (prior notification if over 10M Euro) to the European Commission to be checked. No consensus was reached on the proposal.

A discussion of key concepts and questions took place, which discussed definitions and descriptions of "appropriate stimulus measures" and "bailouts." Some Regions thought the term "bailout" was problematic and one region suggested the term "aid for failing companies." No consensus was reached on the concepts and definitions.