Chinese Circuit Manufacturers Petition for Tax Exemption
National Business Daily, 9/09/09
According to the Shanghai Integrated Circuit Industry Association, 7 major Chinese semiconductor vendors have submitted a joint letter requesting that the state reinstate tax exemptions that were previously offered per the State Council's Document No. 18. The seven manufacturers, Shanghai Huahong NEC, Semiconductor Manufacturing International Corporation (NYSE: SMI, 0981.HK), Grace Semiconductor, Taiwan Semiconductor Manufacturing Company (China), HeJian Technology (Suzhou), Advanced Semiconductor Manufacturing Corporation (3355.HK), and Shanghai SIM-BCD, addressed the letter to China's National Development and Reform Commission (NDRC), Ministry of Finance, State Administration of Taxation, General Administration of Customs, and Ministry of Industry and Information Technology (MIIT). The petition emphasizes terms related to the waiver of value-added import tax for equipment materials and components, requesting that the state take action as soon as possible to continue developing exemption policies to encourage growth of the integrated circuit industry.
An industry source revealed that the NDRC and MIIT have expressed support of the motion, but that the Ministry of Finance and State Administration of Taxation will be the two key deciding bureaus. A number of government committees are currently in the process of formulating a new policy draft for public review, but it is not yet clear when the new policy will be released.
China's industrial policy makers had previously announced that, starting January 1, 2009, they would reinstate value-added import tax for integrated circuit manufacturers importing equipment and associated technology, components, and spare parts. After further consideration, however, the government postponed implementation of the new policy until July 1, 2009. Prior to July, the State Council's Document No. 18 had waived value-added import tax for integrated circuit manufacturers importing related technology and complete manufacturing equipment, as well as import of specialized devices for use in the manufacture integrated circuits.
Financial performance of many of China's semiconductor manufacturers has been poor so far in 2009. Advanced Semiconductor Manufacturing Corporation Limited (ASMC), for example, reported H1 2009 revenues of RMB 300 mln, down from RMB 518 mln in the same period of 2008, and a net loss of RMB 56 mln, compared to a net loss of RMB 6 mln in H1 2008. Industry bellwether SMIC has also seen performance decline so far in 2009, with a Q2 2009 net loss of USD 98.1 mln, and a Q1 2009 net loss of USD 178 mln.
Keywords: Shanghai Integrated Circuit Industry Association HeJian Technology ASMC SIM-BCD regulation policy hardware import semiconductor tax Ministry of Finance MIIT Grace Semiconductor SMI State Administration of Taxation State Council General Administration of Customs NDRC 0981.HK 3355.HK component TSMC Hua Hong NEC IC
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