The Semiconductor Industry Association has called on Beijing to scrap a VAT rebate system it claims favors Chinese chip makers.
The SIA, in annual comments for the 2003 National Trade Estimate Report on Foreign Trade Barriers, said that Beijing applied a 17% value added tax on sales of imported and domestically produce semiconductors, but gave a 14% rebate on chips built in China. This mean domestic produced product enjoyed a major pricing advantage over imported chips.
The SIA said the continuation of the rebate scheme meant that China was not adhering to the rules of its membership of the World Trade Organization. It called on China to scarp VAT on semiconductors completely, claiming this would foster the development of the semiconductor and electronic industries in the country and make products more accessible to Chinese consumers.
At the same time, the SIA called on China to insure full protection for intellectual property. It said that Chinese officials had indicated their commitment to enforcing intellectual property, and that enforcing these commitments would be essential to the development of a strong Chinese chip industry.