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By Noel Randewich SAN FRANCISCO (Reuters) - The landmark expansion of a global tariff-cutting agreement to include some new types of microchips used in products ranging from smartphones to medical equipment will spur innovation, according to the head of U.S. chipmaker Altera (O:ALTR).
The breakthrough in talks with China this week to expand the Information Technology Agreement was hailed as a major step for the chip industry. Altera Chief Executive Officer John Daane says the impact is small right now but will accelerate quickly.
Semiconductors were tariff-free after the ITA went into effect in 1997, but some developed since then are not covered.
Multi-chip packages and similar devices to be included in the ITA are made by squeezing individual semiconductors together into tiny groups in ways that can reduce power consumption and save costs and space.
"Multi-chip packaging, while having been around for a long time, is reaching a point where its benefits are great and costs are coming down," Daane told Reuters in a phone interview late on Wednesday.
The chips to be added to the agreement today account for only 3 percent of global semiconductor trade but they will fuel future improvements in a wide array of consumer products and data services, according to the Semiconductor Industry Association.
Daane in 2010 chaired the SIA, which pushed for the deal along with chipmakers in Japan, Korea and Taiwan. Global semiconductor sales hit a record $306 billion in 2013, according to the association.
Currently, multi-chip components often fall under the category of printed circuit boards, which are subject to tariffs of up to 25 percent, he said.
The kinds of chips added to the expanded ITA account for about 10 percent of Texas Instruments' (O:TXN) product portfolio, a company spokeswoman said on Tuesday.
Altera is developing new multi-chip technology with Intel. It also sells multi-chip devices made with Taiwan's TSMC.
Daane said a separate agreement to manufacture Altera's newest programmable chips on Intel's cutting-edge 14 nanometer factories is on track. But he stopped short of saying Altera would extend its partnership to Intel's future 10 nm technology.
"At the 14 nm node Intel is alone. At the 10 nm we'll see. We're evaluating the technologies," he said.
(Corrects ninth paragraph to refer to Texas Instruments' product portfolio, not its revenue)
(Reporting by Noel Randewich; Editing by Alan Crosby and Dan Grebler)