China cuts tax rates for chipmakers

China announced plans to introduce tax exemptions and reductions for chip producers on March 30.

Businesses established after Jan 1 to manufacture integrated circuits (ICs) with lines thinner than 130 nanometers (nm) will be exempted from the income tax for the first two years, according to a statement from the Ministry of Finance.

The tax rates will be 12.5 percent from the third year, half of the statutory level.

The exemption period will be five years if the IC lines are thinner than 65 nm or the investment totaled more than 15 billion yuan ($2.39 billion).

Businesses established before 2018 producing 0.25 and 0.8-micron chips can also enjoy similar favorable policies after they make profits, according to the statement.

The tax breaks came as the country’s latest effort to stimulate the manufacturing of high-performance ICs, which has been dubbed an emerging sector of strategic importance.

A robust IC sector will facilitate technological and industrial revolutions and help foster new economic growth engines, analysts said. The sector maintained a 20-percent annual growth rate during the past five years.

Miao Wei, minister of Industry and Information Technology, said China will provide more opportunities for foreign companies to invest in IC and other manufacturing sectors.