| The China government has recently introduced a new tax incentive program for sub 0.25-micron process semiconductor production in the territory. Industry players are optimistic about the new policy, saying that the incentives should help encourage local vendors to expand to feed the vast consumer electronics IC market.
Under the new program, any semiconductor company that has invested over eight billion yuan (US$263 million) or has its process node under 0.25-micron process will receive a 15% discount in operating tax. For those companies that have invested in a sub 0.25-micron process for over 15 years will be tax free for five years, and have a 50% reduction in operating tax for the sixth to tenth year after becoming profitable.
While acknowledging that the new policy is favorable to domestic foundries, the industry players commented that it is the huge demand for consumer electronics ICs that motivates the China government to introduce the new policy. Amid the upcoming Beijing 2008 Olympics and other international events, industry players in China are eager to grab the associated business potential, especially for the wide array of consumer electronics that are mainly fabricated on under 0.25-micron processes.
China-based foundries including Hua Hong NEC (HHNEC), Grace Semiconductor Manufacturing Corporation (GSMC) and Semiconductor Manufacturing International Corporation (SMIC), who are aggressively expanding their 8-inch wafer fabrication capacity, are expected to be some of the beneficiaries of the new program.