Follow Up on the Conclusions of the GAMS Regarding Regional Stimulus Measures Background and Agenda

Background The guiding tenet of the WSC is that the competitiveness of companies and their products should be the principal determinant of industrial success and international trade. To that end, in May of last year the WSC adopted recommendations regarding Regional Stimulus: While the WSC supports stimulus measures by the respective governments and authorities, it strongly urges governments and authorities to pursue actions that are guided by market principles and avoid adoption of protectionist or discriminatory purchasing or preferences as part of such efforts, and advocate transparency. Discriminatory policies will impair economic growth and recovery.

Background in September, the GAMS provided the following additional guidance: GAMS took note of its Joint Statement, which stresses that the competitiveness of companies and their products, not the intervention of governments and authorities, should be the principle determinant of industrial success and international trade. While GAMS notes that the adoption and implementation of stimulus measures due to the current economic recession may be considered necessary by governments and authorities, GAMS agreed that such assistance should be provided in a market-oriented fashion to ensure the long-term commercial viability of assisted companies and also agreed to avoid adoption of protectionist measures. GAMS advocates transparency among governments and authorities and suggests the WSC to collect further information on this topic and report it to next years GAMS meeting in order to promote a favorable environment for the international semiconductor market.

Background What might be done to avoid non-market or protectionist actions by governments in the memory sector

Background While memory semiconductor companies are accustomed to supply and demand fluctuations resulting from the semiconductor business cycle, significant oversupply is inevitable when governments rescue uneconomic capacity that should otherwise be shut down.

Hypothetical Bailout Scenarios Background Hypothetical Bailout Scenarios

Regional Stimulus Agenda Confirm working group members: China – No response Chinese Taipei – No response 3. Europe: Alfred Hoffmann; Vice President, Public Affairs, Infineon Technologies 4.. Japan: Toyooki Mitsui, Chief Specialist for Government & Public Relations Division for Toshiba Corporation - Semiconductor Company 5. Korea : Steve Hong, General Manager of KSIA 6. US: Gilbert Kaplan, King and Spalding LLP representing Micron Technology.

Regional Stimulus Agenda--Outline of Tasks List government assistance that should be clearly allowed. General governmental assistance to revive the economy, such as fiscal stimulus tax cuts, lowered long term interest rates at a nation-wide level, home buyer tax credits, renewable energy grants, education grants, and cuts in payroll taxes. Locational subsidies provided by governments to encourage the establishment, upgrade, or expansion of production facilities in a particular location. These could take the form of tax abatements, grants for roads or other infrastructure construction, employee training grants, or other forms of assistance. Cross-border investments, such as sovereign wealth fund investments, to encourage the establishment of production facilities in a particular location. Tax breaks, grants or other assistance to purchase or upgrade environmental or energy-efficiency equipment. Government procurement programs undertaken in the normal course. Other?

Regional Stimulus Agenda--Outline of Tasks Determine the “bailout measures” that should be prohibited. The Agreement on Subsidies and Countervailing Measures (SCM) can provide a starting point. Debt-to-equity swaps where the original debt is owed by the troubled company to a government or to a government-controlled entity, on terms that are inconsistent with normal commercial practice. Equity investments into a troubled company by a government or a government-controlled entity, on terms that are inconsistent with normal investment practice. Purchases on non-commercial terms by a government, or by a government-controlled entity, of a troubled company’s commercial paper, bonds, or other forms of debt. Non-commercial loans provided to a troubled company from a government or a government-controlled entity, to cover operating losses or the repayment of debt. Grants provided to a troubled company by a government or a government-controlled entity, to cover operating losses or the repayment of debt. Tax breaks provided to a troubled company by a government or a government-controlled entity, to cover operating losses or the repayment of debt; Debt forgiveness by a government or a government-controlled entity. Other?

Regional Stimulus Agenda--Outline of Tasks List the products of concern. The starting point is commodity memory (ROM, DRAM, SRAM, MRAM, Flash, EPROM) . Are there semiconductor commodities that WSC members believe have similar problems to the memory sector?

Regional Stimulus Agenda--Outline of Tasks Consider how to handle Bail-Out Assistance Given to Companies that Make Memory and Non-Memory Products. The bailout assistance should not inure to the benefit of or be intended to assist memory production or memory facilities. If the lines of business are so enmeshed as to make this goal difficult or impossible to achieve, safeguards should be put in place.

Regional Stimulus Agenda--Outline of Tasks Draft introductory language for the report to WSC.

Regional Stimulus Agenda--Outline of Tasks Determine timing of completion of above tasks.