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Rules hamper chip-machine makers

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US suppliers hit wall as they seek access to the rapidly growing mainland market

Stringent export controls on chip-making equipment are hindering the ability of United States suppliers to tap the rapidly growing mainland market, even as political pressure to reduce the trade deficit with China increases in this presidential election year.

'We have a long way to go. Export permits take too long [to process in the US],' said Stanley Meyers, president and chief executive of Semiconductor Equipment and Materials International (Semi), which represents chip-equipment makers.

Semi estimates that the mainland bought chip-making tools worth US$1.16 billion last year, of which 30 to 50 per cent was second-hand equipment. More than 80 per cent, or $953 million, was spent on front-end tools used to make semiconductors, and $203 million for back-end testing and packaging equipment.

The mainland chip-equipment market is expected to grow 27 per cent this year, 26 per cent next and 15 per cent in 2006.

Under the Wassenaar Arrangement, signed by 33 founding countries in 1996, companies wanting to ship sensitive technologies to communist countries and other selected states must apply to their home governments for approvals. This is to ensure that chip-making technology for mobile phones, DVD players or other consumer goods is not diverted to other areas, such as missile guidance systems.

Semi North America president Victoria Hadfield said the group had been lobbying US officials for a relaxation of export controls, but with little success despite concerns about the US's ballooning trade deficit with China.

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