SEMI Policy Report (China) – March 9, 2023

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CHINA

Shanghai Issued Regulations for Recognizing and Rewarding Innovative Enterprise Headquarters On February 22, 2023, Shanghai Development and Reform Commission and other local authorities jointly issued Administrative Measures for Recognizing and Rewarding Innovative Enterprise
Headquarters, stipulating several measures to be taken to identify, reward and support headquarters (HQs) of innovative enterprises.
# ^. i7 I, \1 m0 r$ N( ]/ EThe regulations took effect on March 1, 2023, running to February 29,2028.
* l4 W0 L+ i( q# ?+ JIntegrated circuit (IC) design and manufacturing enterprises (subject to the conditions as listed below) are eligible to apply for recognition as innovative enterprise HQs.
• Application Requirements: To officially be recognized as innovative enterprise HQs, generally, an applicant company must meet the following standards:
1 V' K0 O1 v, Z7 m0 S6 ro The applicant should be a Shanghai-registered company in the industrial sector or the services sector (as discussed IC design and manufacturing fall into such scope), with total assets reaching RMB 200 million (approx. USD 29 million) or a market value of no less than RMB 2 billion (approx. USD 290 million).
o The applicant’s annual sales revenue should be more than RMB 100 million (approx. USD 14.5 million) or its average compound growth rate of sales revenue in the last three years should exceed 20%.
$ K' _  @1 N9 T0 @o The applicant must have comprehensive headquarter functions in Shanghai, including R&D, sales, and settlement, and have two or more branches in areas outside Shanghai.
o The annual R&D expenses of an industrial enterprise should account for more than 5 percent of its sales revenue, while for companies in the services sector (such as IC design), the figure needs to be over 10%. Alternatively, total annual R&D expenses of more than RMB 50 million (approx. USD 7.3 million) can also meet the requirements for R&D outlay.
o The applicant should have R&D personnel at a ratio over 10% for industrial companies and 20% for services companies (such as IC design companies) or have more than 100 R&D employees.
o The applicant should have core intellectual property rights of major products or services in Shanghai, including more than 15 invention patents, exclusive rights of IC layout design and software copyrights.

8 A1 S; Y5 e: ~" T2 V• Rewards and Support for Recognized Innovative Enterprise HQs: For qualified innovative enterprise HQs:
, b- I, ^4 k; V" @7 D" bo They will be offered up to RMB 5 million (approx. USD 0.73 million) as start-up funds if they are registered in Shanghai or have moved registration to Shanghai since January 1, 2022, and have paid-in registered capital of over RMB 100 million (approx. USD 14.5 million).
3 E# E. s: M  a+ x) [! t! W7 Uo They will be rewarded for good performance: Innovative HQs whose annual revenue has reached RMB 500 million (approx. USD 73 million), RMB 1 billion (approx. USD 145.6 million) and RMB 1.5 billion (approx. USD 218.4 million), respectively, for the first time since Jan 1, 2022 – of which the local contributions newly brought in by such HQs are not less than RMB 10 million (approx. USD 1.5 million) – will be given RMB 5 million (approx. USD 0.73 million), RMB 3 million (approx. USD 0.44 million), and RMB 2 million (approx. USD 0.29 million) as performance rewards.
" f8 W4 v- X$ H4 ?, po Supports will be offered to innovative Enterprise HQs in relation to the industrialization of major projects, cultivation of high-value patents, recruitment drives, imports of research and development materials, innovative product procurements, commercialization of achievements, registration and other aspects.
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# m# ?9 l# r5 f$ h) w9 S% yBeijing Released a Development Fund Implementation Guideline for High-grade, Precision and Advanced Industry
On February 24, 2023, Beijing Municipal Bureau of Economy and Information Technology and Beijing Municipal Finance Bureau jointly released the High-grade, Precision and Advanced Industry Development Fund Implementation Guideline of 2023 (First Batch).2 The parts applicable to IC sectors are as follows:
• Beijing will support IC design enterprises to launch first-round tape-out of multi project wafer (MPW) and engineering products (full mask) and reward qualified enterprises based on tape-out costs, with a maximum amount for a single enterprise of RMB 30 million (approx. USD 4.4 million).
# x4 c1 b( h) o• Beijing will support innovative IC enterprises that carry out R&D in Zhongguancun (a major technology hub in Beijing) to purchase qualified EDA design software (including software upgrade expenses) and offer rewards based on actual procurement expenses, with a maximum amount for a single enterprise of RMB 5 million (approx. USD 0.73 million).
2 {# W% U: J: k& E3 X• Beijing will provide insured companies in the field of automotive chip with subsidies of no more than 50% of the relevant insurance premiums, while the amount of subsidy for a single automotive chip insurance policy shall not exceed RMB 5 million (approx. USD 0.73 million), with a maximum annual amount of RMB 10 million (approx. USD 1.5 million) for a single enterprise.

Jiangsu Released Plans for Promoting the Development of New Industries of Strategic Importance
: W% W% Y+ S* \On February 16, 2023, Jiangsu government issued Implementing Plans for Promoting the Development of Cluster of Emerging Industries of Strategic Importance . According to the plans, Jiangsu aims to build and foster one integrated circuit (IC) industry cluster and one third-generation semiconductor industry cluster, with the goals to bring in large-scale production lines, improve supply of IC design tools, build a national third-generation semiconductor technology innovation center and a lead third-generation semiconductor industry base, produce single crystal substrates and epitaxial materials based on silicon carbide (SiC), gallium nitride (GaN), etc., and promote research and industrialization of key components such as wide bandgap semiconductor electronic devices, radio frequency devices, and high-power semiconductor lasers.

: G# y( L7 S2 {' g% pHangzhou Released Policies for Stimulatiing its High-quality Economic DevelopmentOn February 14, 2023, the government of Hangzhou, the capital of East China's Zhejiang province, rolled out Several Policies for Promoting its High-quality Economic Development4 , which contains 64 specific measures.
1 v) ?' }+ ~$ U4 o, G6 X7 [4 GAccording to the policies, Hangzhou will provide a development fund of RMB 380 million (approx.USD 55 million) in total for the intelligent IOT(Internet of Things) industry (including IC sectors). In addition, Hangzhou will actively implement national tax policies for the IC sectors and streamline tax filling procedures and will encourage and support IC enterprises to undertake national and provincial technological rsearch projects.
" V' I9 z8 s. J% ^8 VChengdu High-Tech Zone Released Two Policy Drafts to Support Development of the Power Semiconductor Industry

) G- f7 S& u; B& BOn February 9, 2023, Chengdu High-Tech Industrial Development Zone (the “Chengdu High-tech Zone”) held a press conference with respect to the power semiconductor industry in Chengdu High-tech Zone.
Chengdu a major city in southwest China, and Chengdu High-tech Zone is a national-level high-tech zone. In the meeting, Chengdu High-tech Zone released two policy drafts open for comment: the ThreeYear Action Plan of the Chengdu High-tech Zone for Power Semiconductor Industry (2023-2025) and the Several Policies of the Chengdu High-Tech Zone to Promote Development of Power Semiconductor Industry5.
Although the full texts of these drafts are not available online, official news sources reveal that the two policy drafts focus on the following:
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⚫ The Chengdu High-tech Zone’s goal is to build a cluster of the power semiconductor industry with a strong innovation capacity and a complete industrial chain and to expand the industrial scale by 2024 and achieve comprehensive breakthroughs by 2025.
+ {4 s& B, V+ t1 O⚫ 11 specific policies are expected to be introduced, including but not limited to:
o Provide support up to RMB 500 million (approx. USD 73 million) for enterprises engaging in major manufacturing projects (such as power semiconductor manufacturing, packaging and testing, raw materials, parts, components and equipment).
o Encourage enterprises to participate in investment funds for power semiconductor production lines and hire global talent.
5 f( y9 R; u. Ao Encourage colleges to provide open access to equipment and instrument resources, etc.