Flanders Green Group
Legal Department 4 Supervisor/Chinese Practicing Attorney Ding Deyin
I. Development of the Semiconductor Industry in Mainland China
(1) Highly Developed Semiconductor Industry in Mainland China
The demand for the upstream wafer market has increased in mainland China due to the shift of the manufacturing of PCs, cellular phones, and consumer electronic products to the region. Consumer electronics and other machine products, such as the transfer of manufacturing to the Chinese mainland region, driven by the upstream chip market demand, the semiconductor market size for the first time exceeded 200 billion yuan, with total sales of 207.41 billion yuan, a growth rate of up to 41%. Among them, PC became the largest application area of semiconductor market in mainland China for the first time, and the demand for higher-end wafers also increased dramatically.
Since 2001, the global semiconductor industry's average capital expenditures have shrunk by 30 percent annually, while the capital expenditures of mainland China's semiconductor industry have grown at an annual rate of 50 percent. Currently, there are five major foundries in mainland China, namely SMIC, Shanghai Advanced, Hua Hong NEC, and Ship and Macronix, with eight 8-inch fabs alone, and a total monthly production capacity of 155,000 wafers, a sharp increase of 83 percent over the 84,000 wafers in a single month in 2003.
In the next few years, by the mainland China's rapid economic growth, the pull of policy support, the 2008 Beijing Olympic Games and the 2010 Shanghai World Expo and many other factors, the mainland China semiconductor demand will continue to grow at a high rate, it is expected that sales of semiconductors in the mainland China market in 2004 will reach 280 billion yuan, to 2008 the market size will reach RMB More than 600 billion yuan.
(2) constantly catching up with high-end technology
While the semiconductor manufacturing process in mainland China lags behind Taiwan as a whole, due to the rapid development in recent years, Semiconductor Manufacturing International (SMIC), Macronix, Suzhou, and the ship and other wafer foundries have entered the mass production stage of the 0.18mm process, the main foundries in mainland China have plans to lead the way into the 0.13mm process by the end of this year. And, in order to be able to compete with the wafer foundry. Moreover, in order to be able to compete with the foundry industry giants TSMC and UMC, China's mainland foundry offer generally lower than Taiwan, is constantly eating into the market share of Taiwan and the United two.
From 2004, China's top 4 foundries have introduced 0.18mm process, until the mass production of the product, the relevant process technology has reached a mature stage, and China's foundries in the technology is also rapidly catching up with Taiwan's wafer fabs.
For the semiconductor design industry, the machine production of most of the downstream customers are concentrated in mainland China, China's fab has the ability to provide more and more advanced process, part of Taiwan's semiconductor design industry and even plan to transfer the main products to the Chinese mainland foundry.
Therefore, in the rapid expansion of the market scale at the same time, mainland China's semiconductor manufacturing process and the international advanced level will be increasingly narrowed down, 0.13mm wafer manufacturing will be scaled up, 0.09mm process will also be towards the market, the system-on-chip (SoC) will become the main direction of development.
(C) the regional distribution of semiconductor industry in mainland China
From the geographical point of view, the semiconductor industry in mainland China is mainly distributed in the Yangtze River Delta, Beijing, Tianjin, Bohai Bay and the Pearl River Delta region, the three regions accounted for more than 95% of the value of the semiconductor industry in the whole of mainland China.
In the three major economic regions, due to the rapid development of the Yangtze River Delta region in recent years, has become the most important development and production base for semiconductors in mainland China, and occupies an important position in the semiconductor industry in mainland China. In terms of semiconductor design, the sales of the semiconductor design industry in the Yangtze River Delta region accounted for about 45% of the sales in mainland China. Wafer manufacturing accounts for about 70% or so of mainland China, and nearly 80% of packaging and testing enterprises and nearly 65% of packaging and testing volume in 2003 were concentrated in the Yangtze River Delta region. At present, the Yangtze River Delta region has formed a semiconductor design, manufacturing, packaging, testing and equipment, materials and other supporting complete and more complete semiconductor industry chain. In the semiconductor industry chain downstream machine part, the Yangtze River Delta region's notebook computer production accounted for 80% of mainland China, DVD production accounted for more than 50%. At present, the Yangtze River Delta region has many electronic parks such as Shanghai Zhangjiang Development Zone, Suzhou Industrial Park, Wuxi, and three semiconductor design industrialization bases in Shanghai, Hangzhou, and Wuxi, as well as Changzhou Hi-Tech Development Zone and Changzhou New District. Semiconductor Manufacturing International (SMIC), Hongli Semiconductor, Advanced and Hua Hong NEC are all located in Shanghai Zhangjiang Development Zone; TSMC is located in Shanghai Songjiang Development Zone; and Ship is located in Suzhou Industrial Park. These wafer production enterprises led to the cluster effect, the initial formation of the Yangtze River Delta region semiconductor design, wafer manufacturing, packaging and testing, equipment and materials enterprises and downstream production of complete semiconductor industry chain.
In the Beijing-Tianjin Bohai Sea region, there are Beijing, Tianjin, Shandong, Hebei and Liaoning administrative regions, of which the information industry in Beijing and Tianjin occupies an important position in mainland China. The first 12-inch wafer fab in mainland China, SMIC Fab 4, is located in the Beijing Economic-Technological Development Area (BDA); the former Motorola 8-inch wafer fab, now acquired by SMIC, is located in Tianjin. Wafer manufacturing is a highly water-consuming industry that requires high water and air quality. However, Beijing faces a water-scarce environment and a dusty climate, which undoubtedly increases the cost of wafer production. Nevertheless, Beijing's advantages in terms of development environment, market conditions, technological base and human resources greatly offset the environmental impact.
The Pearl River Delta region is an important manufacturing site for electronic products in mainland China, concentrating a large number of downstream machine manufacturers, and is highly dependent on imported semiconductor products, with consumption accounting for more than 80% of mainland China's total imports.
Two, mainland China's semiconductor preferential support policies
The rapid development of the semiconductor industry in mainland China, despite the strong support of mainland China's central and local governments in the land, the environment, formalities, etc., but also the existence of mainland China's huge demand for the market and the operation of the lower cost of such factors, but it can not be denied is that, at present, the government of mainland China issued by a variety of However, it is undeniable that the various preferential policies promulgated by the Chinese mainland government and the various preferential measures given are also contributory. Among them, the first and foremost is the State Council in 2000 promulgated and implemented "to encourage the development of the flexible industry and the development of integrated circuit industry a number of policies", that is, the industry known as "Document 18". Secondly, the Ministry of Finance, the State Administration of Taxation, the General Administration of Customs and local governments in mainland China were also in their own areas of responsibility for encouraging the semiconductor industry to formulate preferential policies for the implementation of the rules, such as the "encouragement of the development of the flexible industry and the integrated circuit industry, tax policy issues related to the" notice (Cai Shui [2000] No. 25), "the Ministry of Finance, State Administration of Taxation on further encouraging the development of the flexible industry and integrated circuit industry tax policy notice" (Ministry of Finance, State Administration of Taxation). Notice on Further Encouragement of Tax Policies for the Development of the Flexible Industry and the Integrated Circuit Industry" (Cai Shui [2002] No. 70), Shanghai's "Provisions on Certain Policies to Encourage the Development of the Flexible Industry and the Integrated Circuit Industry in the Municipality", "Policies to Encourage the Development of the Flexible Industry and the Integrated Circuit Industry in Jiangsu Province" and so on. The promulgation of these policies has provided incentives for the semiconductor design in the upstream of the semiconductor industry chain, the wafer production in the midstream, and the packaging and testing in the downstream, further promoting the development of the semiconductor industry in mainland China.
(1) Semiconductor design enterprises
The "18th Schedule" treats semiconductor design enterprises as software enterprises and enjoys the same preferential treatment as software enterprises. According to the 18th and other related files, the preferential policies for semiconductor enterprises are as follows:
1. For income tax, they can enjoy the preferential policy of "two exemptions and three halves" since the year of profitability;
2. For value-added tax (VAT), they can enjoy the preferential policy of "17% before 2010" for the sales of self-designed semiconductor products. The VAT is levied at the statutory rate of 17% before 2010, and the actual tax burden exceeding 3% is instantly refundable";
3. For the recognized semiconductor design enterprises to introduce semiconductor technology and complete sets of production equipment, and the semiconductor special equipment and instruments imported individually, except for the "Foreign Investment Projects Not Exempted from Tax" as stipulated by the State Council;
3. Foreign investment projects are not exempted from imported goods catalog" and "domestic investment projects are not exempted from imported goods catalog" of goods, exempted from tariffs and import-related value-added tax;
4, semiconductor design enterprises designed semiconductors, such as in the territory can not really be produced, the chip can be produced in foreign countries, and the processing contract (including specifications, quantity) by the competent authorities of the industry, after the determination of the import, the tariffs levied on the basis of Preferential temporary tax rate levied tariffs;
5. Semiconductor design enterprises wages and training costs can be deducted according to the actual amount incurred in the calculation of taxable income;
6. Enterprises on the purchase of semiconductor products, where the acquisition cost of the standard of a fixed asset or constitutes an intangible asset, can be accounted for in accordance with the fixed asset or intangible asset. Investment in more than 30 million U.S. dollars of foreign-invested enterprises, reported by the General Administration of Taxation for approval; investment in less than 30 million U.S. dollars of foreign-invested enterprises, approved by the competent tax authorities, the depreciation or amortization of its depreciation or amortization period can be appropriately shortened, the minimum can be 2 years.
However, it is important to note that in order to enjoy such preferential conditions, semiconductor design enterprises should obtain the recognition of the Ministry of Information Industry and the State Administration of Taxation in accordance with the provisions of the "Measures for the Administration of the Recognition of Integrated Circuit Design Enterprises and Products" and obtain the "Certificate of Recognition of Integrated Circuit Design Enterprises" and the "Certificate of Recognition of Integrated Circuit Products".
(ii) Semiconductor Manufacturing Enterprises
According to the current classification of semiconductor enterprises, in addition to semiconductor design enterprises, other manufacturing, packaging and testing enterprises are semiconductor manufacturing enterprises. Semiconductor production enterprises are mainly preferential policies:
1, income tax: as a productive enterprise, in accordance with the "Foreign Invested Enterprises and Foreign Enterprises Income Tax Law" and other provisions, to enjoy the "two exemptions and three halves" of the tax benefits.
2. Value-added tax (VAT):
Semiconductor manufacturers selling their own semiconductor products (including monocrystalline silicon wafers) will be subject to VAT at the statutory rate of 17% until 2010, and the actual tax burden will be refunded if it exceeds 3%; if the investment exceeds RMB 8 billion or the semiconductor line width is less than 0.25 microns, the enterprise income tax will be "five exemptions and five reductions". "five exemptions and five halves".
3, the introduction of semiconductor technology and complete sets of production equipment for recognized semiconductor production enterprises, a single import of semiconductor equipment and instruments, in addition to the State Council's provisions of the "foreign investment projects are not exempted from imported goods catalog" and "domestic investment projects are not exempted from imported goods catalog" of the commodities, exempted from tariffs and import-related value-added tax.
4. Semiconductor manufacturing enterprises with an investment of more than RMB 8 billion or a semiconductor line width of less than 0.25 micrometers are exempted from tariffs and import VAT on imported raw materials and consumables for their own use, in addition to enjoying the "five exemptions and five halves" of the income tax.
5, for semiconductor production equipment, investment in more than 30 million U.S. dollars of foreign-invested enterprises, reported to the State Administration of Taxation for approval; investment in less than 30 million U.S. dollars of foreign-invested enterprises, approved by the competent tax authorities, the depreciation of its depreciation can be appropriately shortened to a minimum of three years.
In addition, the semiconductor industry is relatively concentrated in the local government has also formulated supporting preferential policies, such as the Shanghai Municipality promulgated the "Shanghai Municipality to encourage the development of the flexible industry and the integrated circuit industry, a number of policies", which: (1) for the new semiconductor manufacturing and related projects, by the relevant scientific and technological and tax departments that belong to the technologically advanced, the market outlook is good, you can enjoy the encouragement of foreign investment in energy, Transportation investment tax incentives, i.e., "five exemptions and five halves"; (2) the new semiconductor wafer production line project is listed as a major project of the municipal government, and a loan subsidy of 1 percentage point will be provided for the RMB portion of the loan for fixed asset investment during the construction period; (3) the new semiconductor wafer production project will be exempt from tax for three years from the date of identification. Within three years from the date of recognition, exemption from the purchase of production and operation of the transaction fees and property rights registration fees; exemption from the project's water capacity increase, gas capacity increase and power supply and distribution subsidies; (4) overseas enterprises to the Chinese mainland enterprises to transfer semiconductor design technology, such as the right to use or ownership of the technologically advanced, approved by the same level of the finance and taxation departments, exemption from withholding income tax.
In fact, it is under the support of these preferential policies, mainland China's semiconductor from 2000 began to surge forward, forming the current layout of the semiconductor industry chain in mainland China.
Three, mainland China's semiconductor industry policy embarrassment
In the government's mainland China to support and a variety of preferential policies, foreign funds have invested in mainland China's semiconductor industry, but later found that the actual is not imagined so particularly good, the main reason in the "18th gear" and mainland China Export-oriented tax policy, strict foreign exchange management system, there is a certain gap between this policy shortcomings, has made the semiconductor industry chain feel embarrassed.
(A) VAT refund policy is difficult to enjoy
In the VAT refund, the relevant documents provide for the actual tax burden of more than 3% of the part of the tax rebate, but for the semiconductor industry chain in the key packaging and testing enterprises do not enjoy what preferential treatment, because packaging and testing enterprises to accept commissioned semiconductor products can not be regarded as the sale of self-produced products, so although the actual tax burden of more than 3%, but can not enjoy the VAT refund, because the packaging and testing enterprises to accept commissioned semiconductor products can not be regarded as the sale of self-produced products. Therefore, although their actual tax burden is higher than 3%, they cannot enjoy the VAT refund. In addition, because in the case of export of finished products, imported raw materials or original devices imported by way of import processing and processing assembly are not subject to import VAT, and VAT refund is allowed for exported finished products. Under such conditions, the sealing and testing enterprises will export the products before they can enjoy the VAT refund, and then the downstream machine production enterprises also use the same way to import and re-export.
The same is true for wafer manufacturers, production-oriented enterprises exports can be refunded 17% of the VAT (reduced to 13% in early 2004), while domestic sales are only refunded more than the actual tax burden of 3% of the portion of the enterprise as far as possible will be exported to the outside of the product in order to obtain tax rebates, and then imported by the downstream sealing and testing companies as raw materials. Thus, even if a wall between the fab and the sealing and testing enterprises, the product flow in the industrial chain have to be exported and then imported, undoubtedly increasing the cost of enterprises.
In addition, because the enterprise's actual tax burden to exceed 3% of the part of the levy can be refunded, so, from the fiscal point of view, if the enterprise wants to enjoy the actual tax burden of more than 3% to enjoy the benefits of VAT refunds, at least 70-80% of the products for domestic sales, and the gross profit margin to be more than 30%, and from the current situation, taking into account the export tax rebate Preferences, gross profit margin, foreign customers and foreign exchange and other reasons, very few companies can achieve such a high proportion of domestic sales and gross profit margin.
(2) "different tariffs on raw materials and finished products" policy affects the international competitiveness of China's semiconductor enterprises. The current semiconductor preferential policies, although the semiconductor technology and complete sets of production equipment, a single import of semiconductor equipment and instruments exempt from tariffs and value-added tax, but for certain materials and equipment that must be imported, such as for the manufacture of semiconductors in the import of special materials (plastics, conductive rubber, etc.) to levy an average tariff of nearly 10%, which in fact, greatly increase the production cost of the semiconductor industry, and at the same time, the Chinese mainland government on the import of semiconductor products, and the cost of production. At the same time, the Chinese mainland government on imported semiconductor products import tariff rate is zero, which makes a lot of companies from the cost point of view, prefer to import products directly from abroad, but also from the Chinese mainland semiconductor processing plant to buy products, and semiconductor design companies commissioned by the Chinese mainland packaging and testing plant to process the product, due to some manufacturers in mainland China are subject to the "raw materials and Finished product tariffs are different" policy, but also reluctant to buy the appropriate technology and equipment for processing, which in fact objectively weakened the competitiveness of mainland China's semiconductor enterprises in the international arena, and is not conducive to foreign enterprises to invest in mainland China.
(3) foreign exchange balance policy also leads to many enterprises can not domestic sales. Packaging companies, for example, because the Chinese mainland for semiconductor companies do not have a special foreign exchange policy, which makes the enterprise if the semiconductor products sold directly to the local machine manufacturers, can only be settled in RMB, and packaging companies use most of the raw materials need to be imported, which requires a large amount of foreign exchange. At the same time, the semiconductor as an international industry, packaging companies generally by the order of foreign semiconductor design companies to pay processing fees, rather than machine manufacturers, but mainland China to implement the "who exported who collects foreign exchange" foreign exchange management system, the products sold to the local enterprises are regarded as domestic sales, packaging companies can not collect foreign exchange.
(4) "Document 18" provides that investment of more than 8 billion yuan or semiconductor line width of less than 0.25 micron semiconductor production enterprises to import their own production of raw materials, consumables, exempt from tariffs and import VAT, while mainland China's local enterprises to purchase local materials and equipment to pay 17% VAT. VAT, which prompted many enterprises are reluctant to buy materials and equipment from local enterprises in mainland China, thus making materials and equipment subject to the foreign market, and materials and equipment if all rely on imports, in fact, also makes foreign investors can not buy local relatively inexpensive materials, resulting in an increase in the cost of the impact of the interest in investing in the development of semiconductors in mainland China, but also limit the development of local semiconductor materials enterprises to support the development of semiconductors in mainland China. The development of the local semiconductor materials companies to support the development of semiconductors in mainland China.
(5) From January 1, 2004, including semiconductor products, a variety of products, including the proportion of export tax rebate from 17% to 13%, which undoubtedly added to the semiconductor enterprise tax burden.
In addition, the current dispute between the United States and China on the semiconductor value-added tax rebate, that is, the United States that the Chinese mainland on imports of semiconductor products to levy a 17% value-added tax, but for local enterprises to sell semiconductor products can enjoy the actual tax burden of more than 3% of the part of the tax rebate, which is a discriminatory tax policy, and the accession of mainland China to the World Trade Organization when made by the This is a discriminatory tax policy, which is inconsistent with the commitment of "national treatment" made by mainland China upon its accession to the World Trade Organization (WTO). Although there is no final conclusion, but it is undeniable that this also indirectly affects the stability of the current preferential policies of China's semiconductor companies.
Semiconductor market development prospects in Asia to promote steady growth
The analysts and industry representatives who participated in the Semicon Singapore 2006 seminar believe that the global semiconductor industry is expected to look forward to a period of
stable growth, a large part of which is driven by the emerging economies of Asia.
Semiconductor Equipment & Materials International (SEMI) expects the market overall to rise
10 percent this year, driven by growing demand for consumer products such as cell phones and digital audio players, said Stanley Myers, president and CEO of SEMI. The global IC device market will
grow by about $3.12 billion this year to $36.12 billion. The market for chip materials is expected to grow from $31.38 billion to $34.51 billion. Of
this, Asia will be the leader, with growth exceeding the global average. And China's semiconductor materials and equipment market is expected to grow at a rate of more
than 20 percent.
Philip Koh, vice president of semiconductor research at Gartner, said the company expects the semiconductor industry to grow at a compound annual growth rate of
7.9 percent over the next five years, with surging demand for 3G cell phones and storage devices making up for the loss of "saturation" in the PC market. China, the world's leading chip market, will continue to grow, with a market share of nearly 60 percent by 2010. More developed markets such as Taiwan and Singapore
will remain relatively "flat". In addition to shifting manufacturing to China, a growing number of major Taiwanese companies are also shifting their research and development activities to the mainland.
While "China's IC and system design industry remains problematic," Gartner expects Chinese electronics manufacturers to continue to aggressively
invest in the country, while also increasing their efforts to develop their own standards and technologies.
Scott Jewler, chief strategy officer of STATS ChipPAC, noted that the global semiconductor industry, which is in its fifth consecutive year of growth, appears to have emerged
from the boom-bust cycle of the past. Fewer companies can technically and financially afford to invest in 300mm fabs or leading-edge packaging solutions,
which will result in less "double-booking" of capacity and "less irrational capital investment. But
Jewler also said the integration of more advanced consumer devices and technologies will also pose challenges.
"Companies have very few options but to partner with each other because very few companies have the intellectual property needed to make devices such as cell phones. In addition
to this, integrated design manufacturing (IDM) processes are becoming increasingly complex." He said. The viability of smaller, niche-focused companies in capital-intensive markets
has also been questioned, while historically they have been a source of innovation in many industries.
IP copyright protection and industry standards will become "more prominent issues over the next three to five years," especially as manufacturing shifts to regions like China
. By 2015, nanotechnology will dominate the semiconductor
market with the emergence of ICs smaller than 45nm and the adoption of materials such as nanowires and carbon nanotubes. He also predicted the emergence of 450mm fabs, although such plants can cost up to $10 billion. At the same time, he suggested keeping an eye out for IDMs with Chinese
backgrounds, some of which are already "competing at the cutting edge," and China is trying to replace imported cores with "homegrown designs."
Wheels."