The World Semiconductor Council, which represents industry groups from Europe, Japan, Korea, Taiwan and the US, also said it hoped China’s semiconductor industry would join its ranks.

The WSC outlined its recommendations for the global chip industry after its tenth anniversary annual meeting, which this year was held in San Francisco.

In a comprehensive joint statement, the WSC said that while some countries had abolished what the WSC claims are unfair tariffs on some semiconductors, more needed to come on board.

Essentially, the problem is the pace of technology has overtaken that of trade agreements, said Anne Craib, director of international trade and government affairs at the US trade group, Semiconductor Industry Association.

The SIA represents Advanced Micro Devices, IBM, Intel, National Semiconductor and about 85% of the country’s chip industry, which accounts for nearly half of global chip sales.

The offending tariff is levied on multi-chip packages, which are two or more pieces of silicon that are combined into in a single semiconductor.

Such tariffs are the result of an agreement reached in the late 1990s with the World Trade Organization and 63 countries in which duties on all IT products, including chips, were eliminated.

However, the agreement didn’t allow for future IT products, such as multi-chip packages. Anything that didn’t exist when that agreement went into effect is not covered, Craib said.

Back then, engineers hadn’t yet figured out how to put two pieces of silicon inside a package without them interfering with each other. But the march of miniaturization in cells phones, PDAs and other devices was a catalyst for this relatively recent innovation.

But custom officials around the world figured that when there are two integrated circuits in one semiconductor product, that product is no longer monolithic. And the WTO rule is that only monolithic semiconductors are tariff-free.

To us, it’s just a semiconductor, Craib said.

Three years ago, the WSC brokered agreements with European, Korean and US governments to eliminate duties on multi-chip packages. The ruling came into effect on April 1.

And Taiwan and Japan currently do not have the tariffs and have committed to keeping it that way, Craib said.

But other customs officials in other countries are just catching up, she said. They are just grappling with the question of ‘What do we do with these things?’

The rate of duty varies from country to country. Before the WSC deal was inked, the Korean rate was 8%, which is somewhat typical, Craib said.

The cost of such tariffs drives up the price of enterprise and consumer electronic devices, she said. If you look at the semiconductor content of a lot of electronic equipment … the chip content is now up to 40%, Craib said.

The WSC is seeking an international agreement and is currently negotiating a deal as part of a WTO round. But this likely will take years to be resolved, Craib said.

The WSC would like to get the World Trade Organization to give fair treatment to these multi-chip packages, she said.

A notable outcome of the recent WSC meeting was a firm commitment by member countries to seek alternatives to an unregulated chemical used to make semiconductors.

Perfluoroctane sulfonate, or PFOS, is a contaminate that has shown up in the blood of animals and people in numerous countries.

WSC members pledged to eliminate non-critical use of process chemicals containing PFOS by 2007. Non-critical processes are ones that would not shut down a chip-making production line.

It’s a very aggressive deadline, Craib noted.

They also agreed to cooperate in finding acceptable substitute chemicals for critical processes.

What’s more, the WSC reiterated its invitation to the Chinese semiconductor industry to become a WSC member. We’ve been working with them to try to resolve outstanding issues, Craib said.

She declined to describe those issues, but said it would require the cooperation of the government of the People’s Republic of China because the WSC issues its policy recommendations directly to member governments.

So any organization that joins the WSC needs the full support of our governments, she said.

The WSC is currently in negotiations with the Chinese Semiconductor Industry Association to garner that support, she said.