As a company having 28 nm and smaller feature size capacity, SMIC is likely to receive tax deduction since 2021.
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On December 16, 2020, State Council issues Several Policies on Further Encouraging the Development of the Software and Integrated Circuit Industries (Chinese: 进一步鼓励软件产业和集成电路产业发展的若干政策). It is the first tax deduction policy in the chips manufacturing field since 2010. IC manufacturing companies that having 28 nm and smaller feature size capacity and already making a profit will receive income tax deductions from the first year to the tenth year of operation. 65nm and 130nm feature sizes will also receive tax deduction but less.
Till now, SMIC is the only one company that has 28 nm and smaller feature size capacity in China A stock market. However, SMIC's international subsidiaries, SMIC North (28nm) and SMIC South (14nm) have not made profits in 2019, which means SMIC cannot receive the benefit recently. A person familiar with the matter said, if both subsidiaries start to make profits in 2021, SMIC's annual income tax deduction will reach USD 10 million.
According to Huatai Securities, in 2020, the sales of the global IC market is expected to increase by 16% year-on-year, reaching a historical high of USD 68.9 billion. After the downward adjustment in 2019, the upstream and downstream companies in the IC industry shows a strong recovery momentum.