(Yicai Global) Aug. 5 -- China has crafted a new set of policies to develop the country’s integrated circuit and software sectors.

The beneficiaries of these measures for tax relief, beefed-up intellectual property protection and incentives for international cooperation are integrated circuit production, design, equipment, testing and software companies, according to the policy document China’s cabinet the State Council issued yesterday. Corporate income tax, value-added tax, import value-added tax and Customs duties will be reduced or waived for such firms.

China will exempt integrated circuit manufacturers or projects with a 28-nanometer process and an operating period of more than 15 years from corporate income tax altogether for 10 years.

"Previous fiscal and tax incentives focused more on integrated circuit and software developers, but because industrial development requires the coordinated development of upstream and downstream companies, the coverage of tax incentives has been expanding in recent years to encompass integrated circuit design, equipment, materials, packaging, testing and other companies,” Shi Zhengwen, a professor at China University of Political Science and Law, told Yicai Global.

“Import tariffs are waived for relevant companies on self-use production raw materials, consumables, special building materials for sterile rooms, supporting systems and integrated circuit production equipment parts,” Shi added.

The scope of tax cuts has been expanded and they have been increased to reduce the burden on companies, vitalize and encourage them to raise investment in innovation, he noted.

Foreign Aid

In contrast to corresponding policies the State Council issued in 2000 and 2011, this notice for the first time provides support for international cooperation, including fostering greater global collaboration in the IC and software industries, and creates a good environment for international companies to invest and grow in China.

The country produced more than 100 billion microprocessors in the first half in a 16.4 percent annual rise, data from the Ministry of Industry and Information Technology show.

Several chip makers’ shares rode the updrafts of the new pronouncement today. Semiconductor Manufacturing International Corp. [SHA:688981] traded 2.37 percent up at CNY83 (USD11.90) in mid-afternoon, while Datang Telecom Technology’s stock [SHA:600198] had risen 2.06 percent to CNY13.90 after both fell off from morning highs.

Editor: Ben Armour