Government/Authorities Meeting on Semiconductors

Chairman’s Summary Berlin, Germany, September 27, 2012

1. The Government/Authorities Meeting on Semiconductors (GAMS) took place on September 27th, 2012 in Berlin, Germany, chaired by the European Commission. In attendance were delegations of China, Chinese Taipei, the European Commission, Japan, Korea, and the United States.

2. Based on the report of the World Semiconductor Council (WSC) meeting held in Saratoga Springs, United States, on 24 May 2012 and its recommendations to the GAMS, the GAMS discussed: the definition of multi-component integrated circuits (MCOs); implementation of the MCP agreement; encryption standards and regulation; regional stimulus and bailout measures related to the semiconductor industry; regional counterfeit enforcement efforts; patent quality; Non Practicing Entities (NPEs); environmental safety and health; conflict minerals; export / import regulations; and other issues of interest to the worldwide semiconductor industry.

3. With respect to the MCP Agreement, the GAMS agreed with the WSC recommendation on the importance of work to expand the geographic coverage of the agreement and considers that including zero duties for MCPs in multilateral agreements could be the most practical way to accomplish this. In the meantime, the GAMS took note of the importance attached by the WSC to having all current GAMS members accede to the MCP Agreement, and reiterated its 2010 and 2011 statement recognizing the importance of GAMS members applying zero duties on MCPs.

4. The GAMS reiterated its commitment to trade liberalization for new types of semiconductors, including multi-component ICs (MCOs). The GAMS welcomed the consensual definition proposed by the WSC on 24 May 2012. Following exchanges in advance of the GAMS and a technical meeting with customs experts on the definition of MCOs and in close consultation with industry, progress was made and consensus achieved on several parts of the definition. Five out of six GAMS members, as well as all regional industry associations, agreed on a full MCO definition (this definition is attached in Annex), and the GAMS invites the Member (China) which could not agree to reconsider its position. The GAMS also invites industry at future meetings to provide regular updates on advances in semiconductor technology and to share information on tariffs on such advanced semiconductors for GAMS consideration as to appropriate next steps. 5. In parallel to the continuation of the MCO definition in the GAMS, five out of six GAMS members agreed to submit the definition as attached in Annex as a collective contribution in the context of the currently ongoing review of the Information Technology Agreement (ITA). 6. As regards Intellectual Property Rights (IPR), the GAMS reconfirm its commitment to fighting the phenomenon of semiconductors counterfeiting, a global issue which is increasingly affecting all parts of the world. The GAMS consequently welcomes the fact that all regions have now reported on countermeasures taken to fight the proliferation of counterfeit semiconductors. As part of the agreed regular GAMS reporting process, two members also provided an update of their enforcement activities. The GAMS supports the WSC commitment to intensify Anti-Counterfeiting work activities, with the aim of reducing and eliminating counterfeited semiconductors on the global market. Providing training and sharing relevant intelligence information with enforcement authorities are essential elements to fight this phenomenon. Raising awareness, with concrete examples of risks created to health, public safety and critical infrastructure, with not only enforcement authorities but also within the industry supply chain should be another key element of the Anti-Counterfeiting activities. On this basis, GAMS members agree to work with their customs and law enforcement authorities agencies to intensify the implementation of IPR enforcement measures, including information sharing activities, aimed at combatting the trafficking of counterfeit semiconductors.

7. The GAMS agrees it should encourage all GAMS members and governments in general to observe the Encryption Principles that the WSC has developed since 2009 and to which GAMS members have committed. Those Encryption Principles make it clear that in order to avoid negative impact on the industry's competitiveness, it is important to prevent unnecessary restrictions to trade, and that therefore, commercial products with cryptographic capabilities which are, or will be, widely available and deployed in the respective domestic markets should as a general matter not be regulated. As recommended by the WSC, the GAMS should help ensure open global markets that are free from discrimination by encouraging the adoption of international voluntary standards and norms, including algorithms, as essential to avoid fracturing the global digital infrastructure and creating unnecessary obstacles to trade. In the limited circumstances where regulation may be necessary, the GAMS agrees to advocate for transparency and non-discrimination in any regulatory requirements, either in force or being developed concerning encryption in semiconductors used in domestic commercial markets, including the conformity assessment procedures used to demonstrate compliance with those requirements. The GAMS advocates for periodic mutual updates with WSC on regulatory developments concerning the import, production and use of commercial encryption in domestic markets, and therefore requests WSC to provide periodic information on regulatory updates and trade issues. 8. The GAMS reiterates its support to the continuation and deepening of cooperation between Patent Offices of the GAMS parties, in order to increase patent quality, notably by harmonizing classification and patent examination methods, exchange of information, cooperation in the training of examiners, increase coordination in the processing of patent applications and improving machine-translation systems. The GAMS welcomes and supports the cooperation between WSC and the World International Patent Organization (WIPO) to improve patent quality.

9. The GAMS takes note that the issue of NPEs has been addressed at the WSC through the presentation of a study entitled 'The Effect of NPE Patent Litigation on the Semiconductor Industry', and acknowledges that this is an issue of concern for many semiconductor companies and remains open to hearing the conclusions to any further WSC discussions at the GAMS. It specifically asked WSC to provide the presentation on the study to the GAMS.

10. On regional stimulus, the GAMS reiterates its belief that government action should be guided by market-based principles and that competitiveness of companies and their products and not the interventions of government and authorities should be the principal driver of industrial success and international trade. The GAMS advocates transparency among governments and authorities. In this context, the GAMS notes the continuation of discussions within the WSC on regional stimulus issues, which also addressed the creation of a prior notification mechanism of aid to failing companies. The GAMS reiterates its request that the WSC endeavor to achieve a better understanding of key concepts and questions in this area, in particular on notification and consultation procedures, and on the means to exchange appropriate information on relevant government support programs in the semiconductor sector, especially with reference to the relevant provisions of the WTO Agreement on Subsidies and Countervailing Measures.

11. With respect to environment, safety and health issues, the GAMS welcomes the substantive work achieved so far by the industry to improve energy efficiency and to reduce emissions of greenhouses gases and in particular the new agreement on Perfluorinated compounds (PFCs) at global level looking towards 2020 that now also includes all GAMS members. The GAMS stresses the importance of adequate monitoring and reporting, in particular independent verification of data, in order to improve the credibility of the PFC voluntary approach. The GAMS also pointed out that yearly reporting on quantities used would add to the transparency of the voluntary agreement. It furthermore acknowledges the recommendation and practices in the industry regarding chemical management. 12. The GAMS notes the WSC recommendation on conflict minerals that governments and authorities should take into account industry-led initiatives to encourage conflict-free trade. The GAMS also notes that a number of initiatives and/or potential regulations have been taken or are being considered among its members. The WSC recommendation will be relayed to the appropriate officials involved in these issues for each GAMS region. 13. The GAMS supports the WSC's call for creating a favorable environment for high-tech civilian trade and expresses readiness to engage with industry and exchange information on relevant regulatory developments and dialogue on specific export / import related issues. Annex:

MCO definition Multi-component integrated circuits (MCOs) are a combination of one or more monolithic, hybrid, and/or multi-chip integrated circuits with either silicon based sensors, actuators, oscillators, resonators and combinations thereof, and/or one or more components performing the functions of articles classifiable under heading 8532, 8533, 8541 or inductors classifiable under heading 8504, formed to all intents and purposes indivisibly into a single body like an integrated circuit, as a component of a kind used for assembly onto a printed circuit board (PCB) or other carrier, through the connecting of pins, leads, balls, lands, bumps, or pads. For the purpose of this definition the following expressions mean: 1. " Components" may be discrete, manufactured independently then assembled onto the rest of the MCO, or integrated into other components. 2. "Silicon based" means built on a silicon substrate, or made of silicon materials, or manufactured onto integrated circuit die. 3(a). "Silicon based sensors" consist of microelectronic and/or mechanical structures that are created in the mass or on the surface of a semiconductor and that have the function of detecting physical or chemical quantities and transducing these into electric signals, caused by resulting variations in electric properties or displacement of a mechanical structure. "Physical or chemical quantities" relates to real world phenomena, such as pressure, acoustic waves, acceleration, vibration, movement, orientation, strain, magnetic field strength, electric field strength, light, radioactivity, humidity, flow, chemicals concentration, etc. 3(b). "Silicon based actuators" consist of microelectronic and mechanical structures that are created in the mass or on the surface of a semiconductor and that have the function of converting electrical signals into physical movement. 3(c). "Silicon based resonators" are components that consist of microelectronic and/or mechanical structures that are created in the mass or on the surface of a semiconductor and have the function of generating a mechanical or electrical oscillation of a predefined frequency that depends on the physical geometry of these structures in response to an external input. 3(d). "Silicon based oscillators" are active components that consist of microelectronic and/or mechanical structures that are created in the mass or on the surface of a semiconductor and that have the function of generating a mechanical or electrical oscillation of a predefined frequency that depends on the physical geometry of these structures.