Tariffs on Multi-Chip Packages Lifted

by Anton Shilov
11/03/2005 | 09:03 PM

Leading makers of the so-called multi-chip packages (MCPs), devices that include more than one piece of silicon on a single piece of substrate, applauded Thursday a decision by several governments to lift additional taxes applied to MCPs. The decision will boost competitive advantage of such chipmakers as AMD, Intel and Texas Intruments.

The draft agreement was finalized by representatives of the governments and authorities from the United States, Korea, Japan, Chinese Taipei and the European Commission, who will now return home to complete their respective approval processes. It is foreseen that the Governments/Authorities Meeting on Semiconductors (GAMS) members will eliminate duties on multi-chip package integrated circuits beginning on January 1, 2006.

Semiconductors are covered by the Information Technology Agreement (ITA) and thus are duty-free in much of the world. However, an evolution in the packaging of certain semiconductor devices allowed for the inclusion of more than one silicon chip inside each package.

This technological advance resulted in a classification of MCPs by customs authorities into a category that was no longer duty-free. As a result of the reclassification, the U.S., Korea, and European Union imposed duties on these semiconductor products. The U.S. has not imposed duties on any semiconductor devices since the mid-1980s. The U.S. and Korean duty on MCPs is 2.6%, and the EU duty ranges up to almost 4%. MCPs are found in a variety of products including cell phones and personal digital assistants.

The worldwide market for MCPs grew from zero five years ago to $4.2 billion in 2004. The market is expected to nearly double to $7.92 billion by 2008, with a compounded annual growth rate of 25%, which significantly outpaces the growth rate in the rest of the industry.

MCPs are used in a wide variety of devices, including mobile phones, computers and consumer electronics.