By Zhou Jianqi, Research Team on” The Development of Integrated Circuit Industry”, DRC

Research report Special Issue No.40, 2017 (Total 1564) 2017-10-10

Abstract: The integrated circuit (IC) industry is featured by technology-intensive and capital-intensive development with a high-level of market concentration. R&D personnel, financing service and application channels are indispensable factors for technological innovation. However, China's IC enterprises are facing institutional constraints in these aspects. First, subject to the state-owned system and personal income tax policy, it’s difficult for them to attract high-quality personnel. Second, it is difficult for them to seek financing by listing on the stock market while the cost of bank loans is high. Third, the channels for market application are not smooth. It is suggested that the government should build up an efficient incentive mechanism for the cultivation of high-quality personnel in IC industry, carry out industry-wide pilot projects in mixed ownership enterprises, grant the treatment of personal income tax reduction or exemption to overseas and high-quality personnel and enhance the cultivation of talented personnel at home. In addition, the government needs to expand financing channels for IC enterprises including financing by listing on the stock market, and take the bank loan interest rate for IC enterprises in Europe, the United States, South Korea and Japan as the benchmark to substantially reduce the cost of financing for China's IC enterprises, support the application of China-made IC products, flesh out the preferential policy relating to the application of the "first set of technical equipment", and launch demonstration projects of China’s new IC product.

Key words: integrated circuit enterprises, technological innovation, institutional difficulty, policy options