Source: The State Council of China (gov.cn), Guo Fa 2020 No. 8, dated July 27, 2020
The State Council issued to all provincial governments and ministries the Several Policies for Promoting High-Quality Development of the Integrated Circuit and Software Industries in the New Period, asking for earnest implementation. The document notes that the IC and software industries are the core of the information industry and the key force leading the new round of technological revolution and industrial change, that they have developed fast since the 2000 and 2011 policy documents and strongly supported national informatisation, and that the new policies aim to optimise the industries’ development environment, deepen international cooperation, and raise innovation ability and development quality. The eight policy areas follow, summarised.
1. Fiscal and tax policies
State-encouraged IC manufacturers or projects with line widths under 28 nanometres and over 15 years of operation are exempt from corporate income tax in years one to ten; lines under 65 nm with 15 years are exempt in years one to five and pay half the 25 percent statutory rate in years six to ten; lines under 130 nm with 10 years are exempt in years one and two and pay half in years three to five, with losses carryable forward up to ten years. Tax holidays run from the first profit-making year for manufacturers, or from the first production revenue year for projects; the encouraged-manufacturer list is set by the NDRC and MIIT with relevant departments. Encouraged IC design, equipment, materials, packaging and testing enterprises and software enterprises are exempt in profit years one and two and pay half the rate in years three to five. Key encouraged IC design and software enterprises are exempt in years one to five and pay a reduced 10 percent rate afterwards. Preferential conditions adjust dynamically with technological progress; before this policy, the 2011 two-year exemption and three-year half-rate rule applies. VAT preferences continue. For a period, producers of logic circuits and memory under 65 nm and special-process producers under 0.25 micrometres, including mask and 8-inch-plus wafer makers, import self-used raw materials, consumables, cleanroom materials and equipment parts duty-free, as do compound IC producers under 0.5 micrometre and advanced packaging and testing firms; the finance ministry and customs set the details. Imported self-used equipment and contracted technology for key design and software firms and the producers above are duty-free outside the non-exempt catalogue; major IC projects may pay import VAT in instalments.
2. Investment and financing policies
Services and guidance for major IC projects are strengthened, with planning, risk warnings and an avoidance of low-level duplication. Resource integration and market-based mergers are encouraged without restrictions beyond law. Existing state and local government investment funds support the industries, and social capital is encouraged to raise funds and set up funds marketably. Local governments are encouraged to build loan risk compensation mechanisms, supporting enterprises in obtaining commercial loans through IP pledges, equity pledges, receivables pledges, supply chain finance and technology and IP insurance, with guarantee institutions serving small and micro firms. Commercial financial institutions improve services, raising medium- and long-term lending and innovating credit products; insurance funds do equity investment; banks’ wealth management arms, insurers and trusts set up dedicated asset-management products. Eligible enterprises are supported in listing at home and abroad, with faster domestic review and capitalisable R&D spending; the STAR Market and ChiNext are open, with smoother exits for original shareholders, and multi-tier capital markets supply equity financing and transfers. Eligible enterprises are encouraged to issue corporate bonds, company bonds, short-term financing bills and medium-term notes.
3. Research and development policies
Focus falls on key core technologies of high-end chips, IC equipment and process technology, key IC materials, IC design tools, and basic, industrial and applied software, exploring a new national system for breakthroughs under the socialist market economy; the science, NDRC and MIIT authorities organise support through national R&D programmes and major projects. Innovation platforms are built in advanced storage, computing, manufacturing, high-end packaging and testing, key equipment and materials, and next-generation semiconductor technology, with priority support for their R&D projects. Software enterprises are encouraged to follow national standards for quality, information security and development management; IC standardisation bodies are strengthened, standards verified, and quality and competitiveness raised.
4. Import and export policies
For a period, key design and software enterprises may temporarily import self-used equipment, software and hardware environments, prototypes and components through temporary-entry customs procedures, with import taxes per current rules. Financial institutions may, on independent review and controlled risk, provide financing and insurance for software export contracts signed with foreign firms of high credit standing. IC, software and IT service exports are promoted, international service outsourcing developed, and overseas marketing networks supported, with the commerce ministry building long-term cooperation mechanisms with key countries and regions.
5. Talent policies
Universities strengthen IC and software disciplines, accelerating the first-level discipline setup for ICs, adjusting courses and teaching to industry needs and cultivating compound, practical, high-level talent, with faculty, laboratories and training bases built up under education ministry guidance. Capable universities cooperate with IC firms on demonstration microelectronics colleges; enterprises in industry-education integration pilots may offset 30 percent of qualifying vocational education investment against education surcharges; industry funds are encouraged to fund special talent resources, and demonstration colleges cooperate with famous foreign universities and multinationals. Localities reward top contributors, engineers and designers, with equity incentives improved, top experts and teams recruited through talent programmes, annual import and training plans set, international training bases built, and urgently needed professionals given medium- and long-term training. Industry self-discipline guides orderly talent flow and avoids vicious competition.
6. Intellectual property policies
Enterprises are encouraged to register IC layout designs and software copyrights and to apply for IP rights lawfully, with support where qualified, and IP services developed. IP protection is strictly enforced and violations punished, protecting layout design rights and software copyrights online and developing genuine-software network copyright technology. A long-term genuine-software mechanism is explored: all computers sold in China must be pre-installed with genuine software, government bodies use genuine software with centralised procurement and asset management, key industries adopt it institutionally, and publicity, training and supervision build a good environment.
7. Market application policies
Policy guides market application as the traction, promoting innovative IC and software products and driving industrial upgrading. Industrial clustering is advanced, supporting IT service and IC clusters and characteristic, high-end software parks. Backbone firms, research institutes and universities build specialised innovation service bodies such as maker spaces, allocating technology, equipment, capital and markets to serve IC and software fields and let large, medium and small firms develop together. IT R&D application outsourcing is guided, with government bodies purchasing services for e-government, data centres and data processing from qualified software and IT service providers under security and confidentiality rules, and large enterprises encouraged to spin off professional software service firms. Consumer privacy and trade secrets online are protected, and secure software products and services are promoted in government bodies. Market order is regulated with anti-monopoly enforcement and fair competition protected; industry associations and standards bodies accelerate IC and software standards, promoting quality evaluation and development cost measurement norms.
8. International cooperation policies
Global cooperation deepens, with a good environment for foreign firms investing in China, domestic universities and institutes cooperating with high-level overseas counterparts, and international firms building R&D centres in China. Domestic associations communicate with international bodies, and enterprises cooperate and join the international division of labour and standards setting. The industries are supported in going global, building joint R&D centres abroad and using international innovation resources, with the NDRC and commerce ministry improving services for investment cooperation.
9. Supplementary provisions
All qualifying IC enterprises, including design, production, packaging, testing, equipment and materials firms, and software enterprises established in China enjoy these policies regardless of ownership. The NDRC interprets the policy with the finance, tax, MIIT, commerce and customs authorities. It takes effect on issuance; the 2000 and 2011 policies continue where consistent, and where inconsistent this policy prevails.
Original link: gov.cn policy content 5532370.
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