On July 27, the State Council issued the Several Policies for Promoting the High-quality Development of the Integrated Circuit Industry and Software Industry in the New Era (国务院关于印发新时期促进集成电路产业和软件产业高质量发展若干政策的通知). The Several Policies put forward 37 policy measures to promote the development of the integrated circuit industry and software industry, broken down into eight aspects. These policies include: Tax reductions and exemptions, support for investment and financing, policies to promote research and development, financial support for import and exports, talent recruitment, protection of intellectual property rights, market development, and international cooperation. The Several Policies take effect immediately.
Regarding preferential taxes, the Policies clarify that for companies or projects manufacturing integrated circuits with a line width of or less than 28 nanometers and having operated for a period of more than 15 years, the corporate income tax will be exempted for the first ten years. For companies or projects manufacturing integrated circuits with a line width of or less than 65 nanometers and having operated for a period of more than 15 years, the corporate income tax will be exempted for the first five years and halved for the second five years. Companies manufacturing integrated circuit with large width will also receive different levels of fiscal preference. In addition, companies or projects focusing on integrated circuit designing, material supplies, software design, and testing will receive other tax exemptions and cuts.
With regard to trade, imports of certain integrated circuits, raw materials and equipment parts for certain integrated circuits will be exempted from any tariffs. The list of companies and imported goods, as well as implementing measures for tariff exemptions, will be published later. For certain exports related to integrated circuits, financial institutions will provide financial and insurance support, based on the principles of independent loan review and risk control. In order to promote exports of integrated circuits, and to help software and information technology service and support companies to establish overseas marketing network, MOFCOM will also work with local agencies to adopt “comprehensive measures.” The document does not specific what the “comprehensive measures” would be.
With regard to intellectual property (IP) protection, the Several Policies encourage companies to register IP rights, as well as strictly implement IP protection for integrated circuits and software and strengthen punishment for IP infringement. It also states that all computers (including mainframes, servers, microcomputers and laptops) sold in China must have legal software pre-installed and government agencies must use legitimate software.
These new regulations appear to be another effort by the Chinese government to promote its integrated circuit sector, as the United States is tightening exports of integrated circuit hardware and software to China through its export control regimes.