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. 'Right now there's a lot of talk about change, but we have not seen any significant change,' Ms Hadfield said. Chinese chipmakers are deploying increasingly advanced technology to service a mainland semiconductor market forecast to reach US$61.9 billion by 2008, compared with $19.2 billion last year. Shanghai-based Semiconductor Manufacturing International Corp (SMIC), for example, has begun building the mainland's first 12-inch wafer facility in Beijing. Ms Hadfield noted US firms must wait up to five months before export licences are approved and risk losing sales to Japan and Europe, which take a looser interpretation of the Wassenaar Arrangement and are quicker to approve licences. According to Ms Hadfield, Semi had suggested that US officials draw up a list of 'pre-screened' mainland chipmakers that could buy equipment without having to go through the licensing process. She also said there was a proposal to amend the Wassenaar Arrangement, which would remove automatic testing equipment used in back-end processes from the list. If approved, makers of testing equipment could freely export to China within a year. But no similar progress for front-end equipment was on the horizon. 'There is no proposal going to Wassenaar for changes to that area,' Ms Hadfield said. Mr Meyers described Semi's growth expectations for the mainland chip-equipment market as conservative. SMIC has said it will spend US$3.32 billion on capacity expansion over the next two years. The mainland is expected to account for 24 per cent of global chip demand by 2008, but only 5 to 6 per cent of production. This looming gulf has created an opportunity for SMIC, Grace Semiconductor and others to fill the demand.