State Council to use government investment funds to aid growth of IC and software sectors

The State Council has unveiled a package of policies offering tax cuts and incentives for research and development in the country's semiconductor sector.

Experts have welcomed the Cabinet's move, saying it will help more domestic businesses attain breakthroughs in core technologies.

The latest mix of policies to promote the high-quality development of the integrated circuit and software sectors was released on Aug 4 and pledged greater efforts to improve the business environment, facilitate international cooperation and bolster the two sectors' capacity to innovate.

Eligible IC producers that have operated for over 15 years will be exempt from corporate income tax for 10 years if they employ the 28-nanometre process or more advanced nodes. Producers with projects between 65 nm and 28 nm will have their corporate income tax waived for five years and halved for the following five years.

The government will also waive corporate income tax for two years for businesses that design, package and test chips and those that produce related equipment and materials, and then halve it for the subsequent three years.

Financial institutions will also be encouraged to offer more mid-and long-term loans to businesses, and eligible IC and software companies will receive support to list publicly and raise funds at home and abroad.

Yang Jungang, a senior semiconductor sector analyst at research company CCID Consulting, said the latest policies would provide a strong boost because they offered more favorable tax policies and helped businesses expand their funding channels.

"The IC sector is the core part of the information technology industry, and facilitating the development of the sector will offer a strong shield for the growth of related sectors," he said.

Yang said the policies highlighted the need to promote the study of integrated circuits at universities, including steps to establish institutions specializing in microelectronics, which would be a key step toward solving the shortage of talent in the sector.

Another highlight of the new policies, he said, was that they emphasized the protection of intellectual property rights.

"For chip designers, a main part of their work is IC design, and stronger IPR protection will safeguard their legitimate interests and thus benefit the healthy growth of the sector," Yang said.

China remained the world's largest semiconductor market last year, with the country spending about $305.6 billion on chip imports, down 2.1 percent year-on-year.

The latest policies follow incentives rolled out by the State Council in 2000 and 2011.

The Cabinet has also pledged to make full use of government investment funds to aid the growth of the IC and software sectors while at the same time encouraging private capital to set up investment funds.

It said it will further promote global cooperation in the IC sector, take proactive measures to optimize the business environment for foreign businesses and encourage companies from overseas to set up R&D centers in China. Chinese companies will also be encouraged to go global and set up R&D centers in other countries.

The government will step up antitrust law enforcement and target monopolistic behavior to ensure fair competition in the IC and software sectors, the document detailing the new policies said.

Chen Yuenan, an analyst with semiconductor industry website ijiwei, said the latest policies offered unprecedented support for the whole IC industry chain.

The Cabinet had proposed the establishment of a new system mobilizing the resources of the whole nation to support the development of high-end chips, equipment, core materials and technologies in the IC sector, he said.

Chen said the system, which will promote cooperation between public research institutions and private enterprises, will help break the technological monopoly held by Western businesses and enable domestic manufacturers to attain more technological breakthroughs, a prerequisite for dominance in the domestic market.