Contract analysis

Section C — Type of APA Requested Section D — APA Term Section E — Covered Transactions (Summary) Transaction 1 — Sale of Semiconductor Wafers and Singulated Die (Tangible Goods) HSAG manufactures and sells semiconductor wafers and singulated die to HSI under the Master Intercompany Supply Agreement. HSI resells finished and packaged semiconductors to unrelated US customers. In FY 2024, the aggregate value of interco

Section I — Representations and Signatures The undersigned hereby represent and declare, under penalties of perjury, that the information contained in this application, including all supporting schedules, appendices, and attachments, is true, correct, and complete to the best of their knowledge and belief. The Applicant further consents to the disclosure of return information to the Bundeszentralamt für Steuern (BZSt

1. Executive Summary Halcyon Semiconductor Inc. ("HSI" or the "Applicant"), a Delaware corporation and wholly owned subsidiary of Halcyon Semiconductor AG ("HSAG" or the "Parent"), respectfully submits this Application for Advance Pricing Agreement ("APA") pursuant to Revenue Procedure 2015-41. This application is filed with the Internal Revenue Service's Advance Pricing and Mutual Agreement Program ("APMA") within t

1. Tangible Goods — Semiconductor Wafer and Die Sales (HSAG → HSI): HSAG manufactures advanced-node semiconductor wafers and singulated die at its fabrication facilities in Germany and sells these products to HSI under a Master Intercompany Supply Agreement. In FY 2024, intercompany tangible goods transfers totaled approximately €987,600,000 (approximately $1,076,000,000).

2. Royalties — IP License (HSI → HSAG): HSI pays HSAG a running royalty under an IP License Agreement for the right to use HSAG's proprietary semiconductor process technology, design libraries, and related intangibles in its US operations. In FY 2024, royalty payments totaled approximately €68,400,000 (approximately $70,500,000).

3. Cost-Sharing Contributions — Qualified Cost Sharing Arrangement (HSI → HSAG): HSI makes cost-sharing contributions to HSAG under a Qualified Cost Sharing Arrangement for next-generation 2nm and sub-2nm process technology research and development. HSI's cost-sharing percentage is 22.5%, reflecting its anticipated benefit share from North American exploitation rights. In FY 2024, HSI's cost-sharing contributions tot

2. Description of the Halcyon Semiconductor Group 2.1 Overview of HSAG Halcyon Semiconductor AG ("HSAG") is an Aktiengesellschaft organized and existing under the laws of the Federal Republic of Germany. HSAG's shares are publicly listed on the Frankfurt Stock Exchange under the XETRA electronic trading system. The company's International Securities Identification Number (ISIN) is DE000HSA0017, and its Wertpapierkenn

3. Description of Covered Transactions This Section 3 describes the three intercompany transactions between HSAG and HSI that are proposed to be covered by the bilateral APA. Each transaction is described in terms of its factual background, contractual framework, and economic substance. 3.1 Transaction 1 — Tangible Goods: Semiconductor Wafer and Die Sales (HSAG → HSI) 3.1.1 Transaction Description. Transaction 1 invo

1. Semiconductor Process Technology: HSAG's proprietary process technology for the fabrication of integrated circuits at the 7nm, 5nm, and 3nm process nodes. This technology is the product of HSAG's substantial and sustained R&D investment (€1,420,000,000 in FY 2024 alone) and represents the core competitive advantage of the HSAG group. The process technology encompasses process recipes, equipment specifications, yie

2. Design Libraries and Related Design IP: HSAG maintains an extensive library of standard cell designs, input/output cells, memory compilers, analog/mixed-signal IP blocks, and interface protocol IP blocks that are optimized for each of HSAG's process nodes. HSI's design-support engineers at the Santa Clara design center utilize these libraries to develop customer-specific reference designs and application notes, wh

3. Trademarks and Trade Names: HSI is authorized to use the "Halcyon" brand name, logo, and associated trademarks in its North American marketing and customer-facing activities. The HSAG brand is well-recognized in the semiconductor industry and carries significant goodwill, particularly among automotive OEM and data-center customers. The licensed intangibles represent high-value, unique assets developed and maintain

4. Functional Analysis Summary This section summarizes the functions performed, assets employed, and risks assumed by each of HSI and HSAG in connection with the covered transactions. A detailed functional analysis for each entity is provided in the Functional Analysis Memoranda filed as Appendix D. 4.1 Functions, Assets, and Risks — HSI Functions Performed. HSI performs the following functions in connection with the

5. Proposed Transfer Pricing Methods 5.1 Transaction 1 — Tangible Goods: CPM/TNMM 5.1.1 Method Selection and Best Method Analysis. For Transaction 1 (intercompany sale of semiconductor wafers and die from HSAG to HSI), the Applicant proposes the use of the Comparable Profits Method ("CPM") under Treasury Regulation § 1.482-5, which is functionally equivalent to the Transactional Net Margin Method ("TNMM") as describe