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Historic Opportunities for Zhuhai/Macau Chip Industry

On September 5, the “Overall Plan for the Construction of the Hengqin Guangdong-Macao Deep Cooperation Zone” issued by the Central Committee of the Communist Party of China and the State Council was officially released. This policy is great news for Macau, Zhuhai and other regions. The plan mentioned that it will vigorously develop integrated circuits, electronic components, new materials, new energy, big data, artificial intelligence, Internet of Things, and biomedicine industries.

Accelerate the construction of a microelectronics industry chain for characteristic chip design, testing and inspection,Build an artificial intelligence collaborative innovation ecosystem.create Internet Protocol Version 6 (IPv6) application demonstration projects, fifth-generation mobile communications (5G) application demonstration projects, and next-generation Internet industry clusters.

First of all, where is Hengqin, Guangdong and Macao? Roughly in the west of Macau and the southern part of Zhuhai, this area is separated from Macau by one water and one bridge, and naturally has the basis for Guangdong-Macao cooperation. Since 2009, the state has begun to focus on development in the Hengqin area.

It is worth noting that the “Overall Plan for the Construction of the Hengqin Guangdong-Macao Intensive Cooperation Zone” (hereinafter referred to as the “Plan”) proposed four major development directions, namely the development of scientific and technological research and development and high-end manufacturing industries, and the development of Chinese medicine and other Macau brands. Industry, the development of cultural, tourism, exhibition and trade industries, and the development of modern financial industries, among which technology research and development and high-end manufacturing industries have been placed in the most prominent position.

6th in the world and 8th in China, the historical opportunities of Macau and Zhuhai

As a special administrative region, Macau is mainly known for its gaming industry in people’s impressions. The fact is indeed the case. Macau is limited by geography and population, and its industrial development is relatively single. According to Wang Fuqiang, director of the Industrial Planning Department of the China International Economic Exchange Center, the gaming industry currently contributes 60% of Macau’s annual tax revenue and 70% of its GDP.

However, this single development model structure is very fragile and vulnerable to external shocks. According to statistics, in 2020, affected by the epidemic, Macau’s GDP has dropped by 56.23% year-on-year. At the same time, the single industrial structure greatly reduces the employment opportunities in Macau. The transformation from single to diversified has always been the focus of Macau’s development in recent years.

As early as 2010, Macao took integrated circuit and space research as its key scientific research direction. Among them, the State Key Laboratory of Analog and Mixed-Signal Very Large Scale Integrated Circuits at the University of Macau has become one of the top research institutions in Asia.

In 2019, the Institute of Integrated Circuit Innovation (Macao) of the Chinese Academy of Sciences was officially launched, and Douqi International Investment Group (Macau) Holdings Co., Ltd. and Hexin Technology Co., Ltd. jointly established Macau Douqi Integrated Circuit Manufacturing Co., Ltd., with a total investment plan within 3 years. 20 billion yuan, to promote the national integrated circuit technology innovation and systematic intellectual property distribution.

But Macau has one of the biggest problems, that is, the population is too small, which makes it difficult for the integrated circuit industry to develop. This is why in the industry, the University of Macau has rich academic resources for integrated circuits. Among them, the chip research results ranked sixth in the world in 2018, but the University of Australia’s integrated circuits are not recognized in the industry. The latest data show that the population of Macau in 2021 will be 676,100.

Moreover, it is difficult for University of Macau’s integrated circuit graduates to stay locally. Most of them go to the United States or Singapore. Especially among world-renowned semiconductor companies such as Broadcom and Qualcomm, outstanding graduates of the University of Macau are often found. Without the physical industry, it is difficult to retain these talents locally.

The construction of the Guangdong-Macao Cooperation Zone can solve this problem for Macau. The Hengqin Guangdong-Macao Intensive Cooperation Zone can recruit talents from all over the country, and Zhuhai will have a permanent population of 2.44 million in 2020. At the same time, it is also investing heavily in the integrated circuit industry. From January to June this year, the industrial scale of integrated circuit enterprises above designated size in Zhuhai High-tech Zone increased by 69.3% year-on-year.

Allwinner Technology, Actions Technology, Boya Technology, Actions, Jianrong, Jerry, Apex Microelectronics, Yizhi Electronics, Innosecco, Jihai, Ninestar and other well-known semiconductor companies have established roots in Zhuhai. In 2020, the output value of Zhuhai’s integrated circuit design industry ranked second in the Pearl River Delta, and the nation’s cities ranked eighth.

Taking Zhuhai High-tech Zone as an example, there are now more than 90 integrated circuit companies, of which 68 are IC design companies. In the past three years, the average annual growth rate of the integrated circuit industry in Zhuhai High-tech Zone exceeded 15%. The economic scale from January to June reached 6.387 billion yuan, a year-on-year increase of 24.3%.

According to public information, Zhuhai High-tech Zone has 37 high-tech enterprises in the integrated circuit industry, 1 national-level enterprise technology center, 6 provincial-level enterprise technology centers, 5 municipal-level enterprise technology centers, and 10 provincial-level engineering technology centers. And 2 municipal engineering technology centers. After the construction of the Hengqin Guangdong-Macao Intensive Cooperation Zone, these supporting facilities will provide stronger support to the region.

Tax exemption + subsidy quickly build Hengqin Guangdong-Macao in-depth cooperation zone

In addition to its own advantages, the construction of the Hengqin Guangdong-Macao in-depth cooperation zone also requires a large number of talents. In the “plan” released this time, many convenient policies are also given for high-end talents. In addition, for domestic and overseas high-end talents and talents in short supply working in the cooperation zone, the part of their personal income tax exceeding 15% will be exempted.

The domestic implementation of a progressive tax system for individual taxes, the annual income of more than 300,000 yuan, the individual tax rate is 20%, exceeding 420,000, 660,000, and 960,000, respectively increasing to 30%, 35%, and 45%. If the 15% or more part is exempted, it will undoubtedly be more attractive to high-end talents at home and abroad.

At the same time, Zhuhai also issued the “Implementation Rules for the Management of Special Funds for Promoting the Development of the Integrated Circuit Industry in Zhuhai” (hereinafter referred to as the “Implementation Rules”) on September 3 to provide resettlement subsidies and subsidy standards for newly recruited integrated circuit-related professionals. For full-time master students 30,000 yuan per person, full-time doctoral students 50,000 yuan per person, the same company’s annual subsidy amount is not more than 5 million yuan. A training subsidy of 5,000 yuan/person for new R&D personnel in integrated circuit companies will be given. The number of subsidies for the same company shall not exceed 200 person-times per year, and a maximum of 2 million yuan will be given to projects selected for entrepreneurial talents in Zhuhai.

It is not only for talents, but also has corresponding support policies for enterprises. The “Plan” pointed out that in the future, eligible industrial enterprises in the cooperation zone will be levied at a reduced rate of 15% corporate income tax, and eligible capital expenditures of enterprises will be allowed to deduct or accelerate depreciation and amortization before the one-off tax in the current period of expenditure. . Enterprise income tax shall be exempted on the income obtained by newly-added overseas direct investment of tourism, modern service, and high-tech industrial enterprises established in the cooperation zone.

In the “Implementation Rules”, not only a large number of subsidy policies are given, but also great support is given to the collaborative innovation of Guangdong, Hong Kong and Macao. Each Hong Kong and Macau science and technology project can receive a maximum amount of support of 200,000 yuan. The approved branch will be rewarded with a maximum of 2 million yuan to support the construction and scientific research activities of the branch.

The Guangdong-Hong Kong-Macao joint laboratory adopts a supporting subsidy method. According to the national or provincial-level project funding obtained by the project lead application unit, no more than 50% of the financial support is given, and the maximum is not more than 2 million yuan to support the Guangdong-Hong Kong-Macao joint experiment. Laboratory construction and scientific research activities.

Guangdong-Hong Kong-Macao science and technology cooperation projects and international science and technology cooperation projects involving relevant units from Hong Kong and Macao adopt supporting subsidies, and no more than 50% of the funding support will be given according to the national or provincial project funding received by the project lead application unit, and the maximum is no more than 500,000 yuan is used for the expenses incurred in the process of project research and development. These policies obviously also apply to the Hengqin Guangdong-Macao Deep Cooperation Zone.

According to the plan, the management committee of the cooperation zone will implement a dual director system. The governor of Guangdong Province and the chief executive of the Macao Special Administrative Region will jointly serve. The Macao Special Administrative Region appoints an executive deputy director; Guangdong and Macao will form development and investment companies as needed; the cooperation zone will increase Managed by Guangdong Province.

For Macau, the cooperation zone will greatly expand Macau’s multi-industry development and make Macau’s industrial structure no longer single. For the mainland, the cooperation zone will also be an excellent experimental window to build a new high-level and open system integrated with Macau.

Build a characteristic microelectronics industry chain

In addition to relevant subsidies and preferential policies in the “Plan”, it is mentioned in the construction of integrated circuits, electronic components and other industries that it is necessary to speed up the construction of a microelectronics industry chain for characteristic chip design, testing and testing. So the question is, what is the characteristic chip design, test and inspection industry chain?

China’s semiconductor industry is currently undergoing rapid development, especially this year. Regardless of whether it is chip design, packaging and testing, equipment or foundry industries, most of the net profits of related listed companies have doubled, and even some companies The net profit has doubled ten times.

With profits, companies can use more funds to invest in research and development, forming a positive cycle. However, today’s semiconductor companies, most of which are still concentrated in low-end products, and these products have low profits. In particular, domestic related companies have stricter requirements on the cost of domestic semiconductors, which has resulted in thinner profits.

However, the development of semiconductor companies requires a large amount of capital investment, which makes it difficult for companies to grow bigger and stronger. So is there any way to enable domestic semiconductor companies to obtain sufficient profits and gain a certain competitive advantage in similar products?

One is that government subsidies can help companies to tide over economic difficulties, but this method is difficult to maintain for too long, and it is also easy for companies to form path dependence, and it is difficult to effectively enhance the competitiveness of products. The other is to reduce the cost of enterprises and actively seize market share through better and cheaper products, which has a strong driving effect on strengthening the competitiveness of their own products.

To reduce the product cost of semiconductor companies, we can start from taxation, personnel, procurement and other aspects. The “Plan” mentions that in addition to tax and personnel reductions and subsidies, eligible capital expenditures for companies are allowed to be incurred in expenditures. The current one-off pre-tax deduction or accelerated depreciation and amortization.

At the same time, for the goods of enterprises in the cooperation zone that do not contain imported materials or contain imported materials that have a value added of 30% or more in the cooperation zone, they will be exempted from import tariffs when entering the mainland through the “second line”.

Financial subsidies on the one hand and tax reductions and exemptions on the other hand can greatly reduce the cost of enterprises and increase the competitiveness of their products. And after the formation of an industrial cluster in the cooperation zone, a joint force will be formed to accelerate the development of the integrated circuit industry.

The construction of the Hengqin Guangdong-Macao in-depth cooperation zone is a diversified development area tailored for Macao, which promotes the upgrading of Macao’s industry. For Zhuhai, it will also become a new development opportunity and will have far-reaching implications for the integrated circuit industry across the country. Impact. The promotion of talents, enterprises, and policies has also made a pilot project for the development of the Greater Bay Area. If the rapid development of the semiconductor industry in recent years is the window period of the times, then the construction of the cooperation zone is a platform for us to create and take off.

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