Export and/or Import Regulatory Restrictions Report to JSTC (SIA in China Presentation and Proposed Action Plan) Shanghai, February 2011 Semiconductor Industry Association in China

II. Summary and Proposed Summary in the JSTC Meeting Minutes I. Presentation from SIA in China at the working group meeting on Feb. 23, 2011 II. Summary and Proposed Summary in the JSTC Meeting Minutes Semiconductor Industry Association in China 2 2

I. Presentation from SIA in China at the working group meeting on Feb Semiconductor Industry Association in China 3 3

※WSC Statement May 2010 Export and/or Import Regulatory Restrictions   To further "free and open" markets, the WSC has asked its JSTC to examine regulatory restrictions on exports and/or imports and their potential to affect commercial trade in semiconductors and report its findings at the next WSC meeting. Semiconductor Industry Association in China

※Example 1 Company # 1 in Region A tried to purchase and import one semiconductor tool from a manufacturer in Region B, but the import was delayed because of the export license administrative requirements.  This delay and uncertainty associated with when the export license would be approved has caused Company #1 to purchase the equipment from a manufacturer in Region C that did not require an export license. Both Regions B and C are members to the Wassenaar Arrangement, but their control lists are updated at different times causing some items to be controlled in Region B that are not controlled in Region C.  Additionally, even when both Regions have the same control lists, license exceptions and expedited licensing may be available in Region C that are not available in Region B.  This inconsistency caused the manufacturer in Region B to loose sales to its competitor in Region C and Company #1 has lost its bargaining power by not having more suppliers to purchase from. Semiconductor Industry Association in China 5

※Example 2 Company #2 in Region D purchased a specific equipment/tool from a supplier in Region D and no export license was required.  However, the equipment was originally manufactured in Region E and an export license was required for the replacement parts required to service the equipment in Region D.  Eventually Company #2 turned to another supplier in Region F because no export license was required for the parts or servicing.  Company #2 was concerned that the supplier in Region E could be an unreliable supplier (e.g., unable to service or repair the tools in Region D because of export control restrictions and delays associated with Region E's export control policies) and may consider outsourcing from other supplier or move to other regions altogether. Semiconductor Industry Association in China 6

※Example 3 Company #3 in Region F has imported equipment from Region G by having been granted an export license from Region G’s government/authority. However, the export license had conditions that required additional government/authority approval before transfer or re-export. Later Company #3 wanted to move controlled production equipment from its facility (I) to facility (II) to solve a bottleneck at facility (II).  Both facilities were owned by the same parent company but an export license was required for the transaction.  The cost in the delay in allowing the intra-company transfer is estimated to cost $100,000 per day.  Semiconductor Industry Association in China 7

※Example 4 Company #4 in Region H had 50 engineers and over $100 million in capital equipment ready to begin a project.  During the complex transitional stage, it found out that it needed a controlled item valued at less than $50,000 to begin the project.  Its vendor in Region J could not file and obtain the export license in a timely manner and the project came very close to being delayed (4 months after signing the purchase order the vendor had still not received the export license).  Company #4 had to seek a new vendor who was knowledgeable on export law and licensing issues to meet all requirements.  It appeared that the original vendor was not very interested in completing the transaction because the value of the overall sale was very low.  Also, the liability/risk exposure they faced in selling the controlled item to Region H outweighed their potential profit from the transaction. As for Company # 4, it realized that the requirement of obtaining controlled items from many sources can find its entire project delayed over the approval of a single license required for a low value/low cost product.  Semiconductor Industry Association in China 8

※Findings and concerns on affecting commercial trade in semiconductors : Each government/authority regulates export/import matters differently out of its concern on national security on dual use of semiconductor equipment/tool, part, and technology; Some government/authority’s related regulations and control lists have been considered as out-of-dated; Industry shows its concern on over-burdened responsibilities and obligations and complicated policy and procedures for applying export license from some regions; Industry indicates uncertainty of result for semiconductor firms to predict on purchasing semiconductor equipment/tool resulting in delay on cycle of production and sales; (To be continued in the next page) Semiconductor Industry Association in China

Different control lists for different regions even within Wassenaar Arrangement cause confusion for some regions; Export control issues raised similar concerns from various NGOs or trade organizations such as SEMI; and Export control issues have become heated issues among different governments/authorities from various regions. Semiconductor Industry Association in China

※Recommendation to WSC: Scope of concerns: Semiconductor equipment/tool (commercial/civilian use) In order to make WSC effort on resolves its concern on the export/import restriction subject efficiently, it is recommended to narrow down the scope of this subject on semiconductor equipment/tool for commercial/civilian use and deal with its related issues out of the following reasoning: Tangible and convenient to tackle issues; Impact accross countries/regions; and Similar concerns from different NGOs. Semiconductor Industry Association in China

※Proposed Text to be inserted in WSC Joint Statement on Export/Import Restriction While recognizing and respecting export/import control in various regions for various needs, in order to align with the spirit of the free and open market of the WSC, further advancing the fair and healthy growth of semiconductor industry globally, the WSC proposes the following items on liberating export/import control on commercial/civilian IC equipments/tools : To liberate the import/export restriction relating to IC equipments/tools to promote the spirit of the free and open market; To streamline and/or expedite the procedure of issuing export license; To maintain the transparency of the export license control policy; To unify the different policy on export control among all regions; To regularly submit industry proposals for improvements and changes to decontrol IC equipments/tools at each regions; To lobby on each government/authority of each regions to decontrol and liberate export control policy; and To outreach to industry and government/authority to organize events, if needed. Semiconductor Industry Association in China

II. Summary and Proposed Summary in the JSTC Meeting Minutes Semiconductor Industry Association in China 13 13

※Summary and Proposed Summary in the JSTC Meeting Minutes: SIA in China provided a presentation first and then all associations engaged in an extensive discussion on this subject. All associations recognized the importance of looking into specific cases in order to decide whether this subject needs to be done or not. They also requested more time to comment on the proposed scope and approach to this subject. Some association raised concern on whether to form a working group and whether to make recommendation to WSC in May. SIA in China has further provided an updated presentation by adding four examples for each association to consider and each association will give its feedback by _____, if any. SIA in China will consolidate feedback and then provide a presentation for all associations to discuss on this subject and make a report of its findings (or a report of the status of this subject) to WSC in May 2011. Semiconductor Industry Association in China 14