China Adds to Semiconductor Import Tax Exemptions
The Ministry of Finance of the People’s Republic of China issued a notice concerning the country’s policies toward Customs and Taxation for the Integrated Circuit and Software Industries. The notice stated that ”Logic circuits and memory manufacturers with integrated circuit line widths less than 65 nanometers (including, the same below), and specialty processes with line widths less than 0.25 microns (ie, analog, digital-analog hybrid, high voltage, radio frequency, power, optoelectronic integration, Image sensor, micro-electromechanical system, silicon-on-insulator technology) integrated circuit manufacturing enterprises, importing domestically produced raw materials and consumables for private use (including R&D, the same below) that cannot be produced or whose performance cannot meet the demand, special construction materials for clean rooms, Supporting system and integrated circuit production equipment (including imported equipment and domestic equipment) spare parts.”
This allows the import tax exemption for any standard IC with a less than 65nm line width that cannot be produced in China, including those that can be produced but do not meet performance metrics (unspecified). The exemption notice also includes a wide variety of materials (photoresist, masks, etc), including 8” and larger wafers, and a host of software used to test various points in the semiconductor production cycle. The notice actually gives a rebate on taxes that would now be un-taxed under the new rules going back to July 27 of last year, and will continue through 2030.
While this might seem to be counterintuitive to China’s desire to rapidly build out its semiconductor infrastructure, it seems to us to be more of a near-term incentive for semiconductor companies outside of China to step up the supply, as they will now see some of the price increases that have been instituted offset by the elimination of the import tax for more items. Whether this really has any effect on supply to China or just gives ammunition to US semiconductor component and equipment suppliers to lobby the federal government for less trade regulation with China remains to be seen, but it does indicate that China remains in the same precarious position as others in relation to near-term semiconductor shortages.
This allows the import tax exemption for any standard IC with a less than 65nm line width that cannot be produced in China, including those that can be produced but do not meet performance metrics (unspecified). The exemption notice also includes a wide variety of materials (photoresist, masks, etc), including 8” and larger wafers, and a host of software used to test various points in the semiconductor production cycle. The notice actually gives a rebate on taxes that would now be un-taxed under the new rules going back to July 27 of last year, and will continue through 2030.
While this might seem to be counterintuitive to China’s desire to rapidly build out its semiconductor infrastructure, it seems to us to be more of a near-term incentive for semiconductor companies outside of China to step up the supply, as they will now see some of the price increases that have been instituted offset by the elimination of the import tax for more items. Whether this really has any effect on supply to China or just gives ammunition to US semiconductor component and equipment suppliers to lobby the federal government for less trade regulation with China remains to be seen, but it does indicate that China remains in the same precarious position as others in relation to near-term semiconductor shortages.
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