Qualcomm Incorporated (NASDAQ:QCOM)
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1 Month : From May 2019 to Jun 2019
By Asa Fitch
The U.S. has sharply slowed approvals for the nation's semiconductor companies to hire Chinese nationals for advanced engineering jobs, according to industry insiders, who say the delays are limiting access to vital talent.
The disruption, which started last year, has affected hundreds of jobs across the industry at companies including Intel Corp., Qualcomm Inc. and Globalfoundries Inc., impeding their ability to hire Chinese employees or move existing employees to key projects in the U.S., these people said.
It is significant in part because Chinese nationals account for a large share of non-U.S. citizens hired for such technical roles, where the talent supply domestically is often scarce. The slowdown in approvals also shows the conundrum U.S. companies face in navigating the U.S. stance toward China on technology: Decisions aimed at protecting U.S. competitiveness in one way could hamper it in another.
Under rules in place for decades, companies must get licenses before assigning workers with foreign nationalities -- Chinese, Iranian, Russian among others -- to work on a list of sensitive technologies. Because companies are giving foreigners knowledge about technology they could eventually take home, the Commerce Department considers such assignments the equivalent of an export.
Approvals for so-called deemed-export licenses once took a matter of weeks, whereas a wait of six to eight months isn't unusual today, a person familiar with the process said.
The slowdown is happening as the White House engages in efforts to protect American know-how against a concerted effort by China to build up its own technological capabilities.
The Trump administration has used months of often heated trade talks with China to push back on forced technology transfers, and U.S. authorities have blocked tech-company acquisitions, including Broadcom Inc.'s hostile bid for Qualcomm, citing concerns about the potential impact to the country's ability to compete with China.
Talks toward a trade deal have stalled. The Trump administration last week imposed higher tariffs on $200 billion of Chinese goods and added Huawei Technologies Co. to a trade blacklist, making it harder for U.S. companies to deal with the Chinese telecom giant. On Monday, U.S. officials said they would grant a handful of temporary exceptions to the export blacklist, giving suppliers and customers of China's telecom giant a 90-day reprieve from tough trade penalties.
The licenses add another wrinkle. Companies need them for existing and prospective foreign-citizen employees working on advanced semiconductors, telecommunication systems, encryption and other technologies. The level of scrutiny varies depending on the technology and the perceived risk that it could fall into the hands of U.S. adversaries. The licenses are separate from work visas that employers also need to hire foreigners who aren't permanent U.S. residents.
The slowdown cuts across industries but is especially troublesome for chip makers, as the pool of people capable of doing highly technical engineering work is shallow, industry insiders say. Chip companies already have had to cope with higher tariffs on imports and a White House push for more sales to China, which they say would only further intertwine the global supply chain with the country.
While there hasn't been a complete halt to the hiring of Chinese nationals, the slowdown in license approvals has affected who could be hired and who could be assigned to important engineering projects, an industry insider said. "There have been longer delays that have led us to lose candidates we thought were critical," the person said.
From 2013 through 2017, Chinese nationals accounted for more than 60% of approved licenses, according to the Commerce Department. The Nos. 1 and 3 most commonly requested categories for deemed exports in 2017 related to chips. The second-most-common category covered telecommunications technology. The department hasn't released 2018 statistics.
The Commerce Department reviews deemed-export applications carefully in cooperation with other government agencies, such as the state, defense and energy departments, a spokesman said. "This review often includes requesting additional information from the companies seeking to release controlled technology to foreign nationals in the U.S.," he said.
Kevin Wolf, a lawyer at Akin Gump in Washington who was the assistant secretary of the Commerce Department's export body during the Obama administration, said the differences in the pace of deemed-export approvals could reflect changed political circumstances, though changing technology could also be playing a role. If more applications involve especially sensitive technologies, the time it takes to process them could be longer.
Foreign-born engineers have been important to chip-company staffing over the years, said Linley Gwennap, president of the Linley Group, a Silicon Valley semiconductor research outfit. "The people from these countries have gone on to start companies in the U.S.," he said. For example, Charles Liang, the chief executive Super Micro Computer Inc., of San Jose, Calif., co-founded the company after emigrating from Taiwan in the early 1990s and studying in the U.S.
In addition to semiconductors, the restrictions cover certain telecom-equipment, nuclear and military technologies.
Further restrictions on deemed exports to China could be on the way next year, when the Commerce Department is to decide on definitions of new technologies subject to export controls. Those definitions could hit areas such as artificial intelligence, a huge focus for chip makers and tech companies but also a major area of U.S.-China technological competition.
Statutes suggest the definitions should avoid stifling innovation and focus on technologies that could endanger national security if they fell into the wrong hands.
Chip makers worry that the definitions will be too broad. The Semiconductor Industry Association in January sent a letter asking the Commerce Department to fully consider the economic impact of the definitions and limit them to technologies with national-security concerns, not trade-policy concerns.
Write to Asa Fitch at email@example.com
(END) Dow Jones Newswires
May 21, 2019 10:46 ET (14:46 GMT)
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