SALE OF SEMI-GAS SYSTEMS, INC., TO THE JAPANESE (House of Representatives - July 30, 1990)

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The SPEAKER pro tempore. Under a previous order of the House, the gentlewoman from Maryland [Mrs. Bentley] is recognized for 60 minutes.

Mrs. BENTLEY. Mr. Speaker, what a shock to read an article this weekend that President Bush has approved the sale of Semi-Gas Systems, Inc., to the Japanese. It is not too late to stop the sale, and tonight I am requesting President Bush to reconsider his decision.

I think this action could have grave consequences for the semiconductor industry, and it does affect our national security.

Semi-Gas is vital to Sematech, which was established several years ago to help the U.S. semiconductor industry compete in the world market. If Semi-Gas is sold to the Japanese firm, Nippon Sanso, it will force a shutdown of the Sematech research laboratory for 6 months and be a setback to Sematech.

The article, entitled `Bush To Let Japanese Buy Concern Vital to Chip Race,' stated that, `President Bush said today that he would not block the sale of Semi-Gas Systems, a major supplier of gas distribution and control systems to American chipmakers, to a Japanese bidder even though the California company has a central role in the semiconductor industry's effort to overtake its Japanese rivals.'

It also stated that Nippon Sanso of Japan intends to acquire Semi-Gas Systems for $23 million from Hercules, Inc., a large chemical producer based in Wilmington, DE.

Hercules acquired Semi-Gas 3 years ago for an investment of about $5 million.

I must add that the employees of Hercules have endeavored to buy the company for $18 million to keep it in the United States. But the Government apparently has only a bottom-line mentality and, instead, signed off on the sale.

I might add, Mr. Speaker, that Sematech has received a subsidy of $100 million each year because its production has been considered vital to our national security.

Semi-Gas is one of those vital components of Sematech, as has already been pointed out. Again I want to point out and emphasize that selling it to a foreign firm means Sematech will have to shut down its research laboratory for at least 6 months while trying to find a replacement.

The other aspect of this approval to sell Semi-Gas to a Japanese firm that causes me to ask questions is a result of the fact that only 3 or 4 weeks ago Chairman J.J. Pickle brought out in his Committee on Ways and Means subcommittee that foreign firms, particularly the Japanese, owe some $50 billion in taxes to the United States Treasury, taxes that they have been dodging since 1983. Now we are turning over another American-owned firm, one essential to our national security, to foreigners who play games with our tax system as well as take our technology away.

Yes, Mr. Speaker, I want to repeat, the sale is a threat to Sematech's security and that means to this country's security.

Mr. Mills, senior vice president of Sematech, stated that, `Semi-Gas has been an intimate partner to Sematech almost since we began 2 years ago. They have an intimate knowledge of our fabrication facility. You couldn't choose a better way to do industrial espionage.' That is what he said.

What amazes me, Mr. Speaker, is that the Committee on Foreign Investment in the United States, headed by Treasury Secretary Nicholas Brady, recommended approval of Nippon Gas' bid. I wonder why. Is it because we need to

sell T-bills at this time?

According to the New York Times article, Mr. Noyce, Sematech's president and chief executive, stated before his death last month that, `The alliance was on course to reclaim the lead from their Japanese rivals by the mid-1990's, and with this sale Sematech will have a tough time to ever reclaim the lead.' How can this happen?

In a story last November, the Journal of Commerce reported that Congress was being warned that the United States' semiconductor industry `is falling prey to foreign competitors determined to gain a chokehold on the materials and equipment needed to make computer chips.'

In that article, Robert Noyce was quoted that, `Foreign competitors are determined to control the supply lines, the manufacturing and the end products.' Mr. Noyce testified at a joint hearing of two House science subcommittees that, `While the United States has a 40-percent share of the worldwide semiconductor market, its hold on the markets for critical equipment and material is below that.'

Does not Semi-Gas Systems qualify under one of those conditions? It certainly does under national security. The American people have placed their money in Sematech along with 14 American companies. They deserve a chance to succeed. In effect, we might say this is knocking the wind out of the semiconductor industry by allowing the sale of Semi-Gas Systems to Nippon Sanso.

I say to President Bush for economic and national security, Mr. President, please do not sell this company to the Japanese. Please reconsider your decision.

Mr. Speaker, I yield to the gentleman from California [Mr. Hunter], who has been outstanding in all of our efforts to block technology transfer.

Mr. HUNTER. I thank the gentlewoman for yielding.

Mr. Speaker, I want to thank her for her vigilant efforts to retain American technology and to prevent a transfer that might accrue to the detriment of either the national security or the American economic base.

The one thing that I think should concern Members of Congress is this: We have spent a lot of money and undertaken a great deal of effort to make Sematech work and to succeed in the goals that we have set out for this consortium. The problem is that no one in Congress and no one in Sematech and no one, I think, in the administration presumed that some of the participants in Sematech would be purchased by the trading competitors against whose domination of the market the consortium is working.

If you look at it from a strategic aspect on the part of our competitors, I have to agree with Peter Mills, who says, `You couldn't choose a better way to do industrial espionage.'

If one of these companies had undertaken to acquaint our trading competitors with intimate knowledge of the consortium's activity at Sematech, they would be subject to civil and possibly criminal charges. But by purchasing one of the players, one of the participants, our trading competitors are putting themselves in an especially advantageous position.

And the tragic part of this is that this transfer and this activity that has led to a reversal in a very important area has received the imprimatur of approval from our administration, from the Bush administration.

Mr. Speaker, I think it is appropriate for Congress to take action to protect this very vital investment that we have made. We made it with the taxpayer dollars from the American people because we had a very, very vital strategic and economic interest; in fact, a vital defense interest as well as an economic interest in the success of Sematech.

I cannot understand what rationale would lead the administration to not prevent this particular sale. Maybe the gentlewoman has some answers there.

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Mrs. BENTLEY. I do not have the answers, but I can make some guesswork.

For example, I mentioned there are some purchases on some vital bills in August, and I know we need the money to keep going on operating in the red because we are destroying ourselves economically. We have guessed in the past that at each crucial sale the Japanese have come in and said, `Hey, if you want us to buy, you've got to give us this.' The FSX was one example of that. I am wondering if this comes back to that same category.

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Going back to April, I did at that time protest one. I first heard that this was pending, and I protested to Brent Scowcroft, the National Security Adviser, about it. The sale has moved on. I think we need to try some emergency legislation tomorrow to see if we can stop this. I think this is really too crucial, and again, the taxpayers' money. Are we wasting it? Are we turning eveything over to the foreigners?

Mr. HUNTER. If the gentlewoman will continue to yield, I think this does not make good business sense to expend as many taxpayer dollars as we have to to make sure this consortium works, and then to allow one of the partners in the consortium to sell out to a trading competitor against whose advantage the consortium was formed. It makes no business sense, and it really is not dealing in good faith with the American taxpayers who are shelling out the dollars to make Sematech work. If the gentlewoman will draft up legislation, I am prepared to support it.

I want to commend also my colleague, the gentleman from California [Mr. Levine], who also has registered some disapproval with this particular sale.

Mrs. BENTLEY. We will move quickly on that, and I thank the gentleman from California [Mr. Hunter] for these remarks.