Contract analysis

1. Executive Summary The purpose of this memorandum is to document the functions performed, assets employed, and risks assumed by Halcyon Semiconductor Inc. ("HSI") in the context of its controlled transactions with its parent entity, Halcyon Semiconductor AG ("HSAG"), and to support the characterization of HSI as the tested party for transfer pricing purposes. This functional analysis is a foundational component of

2. Sources of Information and Methodology 2.1 Interviews Conducted In connection with the preparation of this memorandum, Calderwood & Harkness LLP conducted in-depth interviews with the following key HSI personnel: Victor Almeida, President & General Manager, HSI. Mr. Almeida was interviewed regarding HSI's overall business operations, strategic direction, competitive positioning in the North American semiconductor

1. HSI Audited Financial Statements (FY 2022–2024). The standalone audited financial statements of HSI for the fiscal years ended December 31, 2022, December 31, 2023, and December 31, 2024, as audited by Gresham Whitfield LLP (US engagement partner: Janet Okonkwo; Houston office at 811 Main Street, Suite 3400, Houston, TX 77002). These financial statements include the balance sheet, income statement, statement of ca

2. Master Intercompany Supply Agreement. The Master Intercompany Supply Agreement between HSAG and HSI, effective January 1, 2019, as amended by Amendment No. 1 dated July 1, 2022. This agreement governs the purchase and sale of semiconductor wafers and singulated die from HSAG to HSI, including pricing terms, delivery terms (CIP Austin per Incoterms 2020), quality specifications, warranty provisions, and return/exch

3. IP License Agreement. The IP License Agreement between HSAG (as licensor) and HSI (as licensee), effective January 1, 2019. This agreement grants HSI a non-exclusive, non-transferable license to use HSAG's proprietary semiconductor process technology, design libraries, related intangible property, and the "Halcyon" trade name and trademarks in connection with HSI's US distribution and design-support activities.

4. Qualified Cost Sharing Arrangement. The Qualified Cost Sharing Arrangement between HSAG and HSI, effective July 15, 2018, including all amendments and schedules. This arrangement governs the joint development of next-generation 2nm and sub-2nm process technology, including the allocation of R&D costs based on anticipated benefit shares. Reviewed in conjunction with this agreement was the Platform Contribution Tran

5. HSI Organizational Charts, Headcount Reports, and Job Descriptions. Current organizational charts showing HSI's reporting structure, headcount data by location and function as of December 31, 2024, and representative job descriptions for key functional roles including account managers, sales engineers, design-support engineers, applications engineers, supply chain analysts, and customer service representatives.

6. HSI Internal Management Reports. Selected internal management reports provided by HSI, including sales pipeline data, customer account summaries by segment (automotive OEM, industrial IoT, data center/hyperscaler), inventory aging reports, and product line profitability reports. These reports were reviewed for the purpose of understanding HSI's operational activities and the relative significance of various busine

7. HSAG Consolidated Annual Report (FY 2024). The consolidated annual report of HSAG for FY 2024, including the group organizational structure documentation, segment reporting, and descriptions of HSAG's global business operations, R&D activities, and intellectual property portfolio.

8. Input from Meridian Economics GmbH. Functional analysis framework materials and comparability factor analysis provided by Meridian Economics GmbH (Dr. Annika Breitner, Managing Director; Maximilian Voss, Senior Analyst; Leopoldstraße 145, 80804 Munich, Germany). Meridian Economics GmbH has been engaged by HSAG to provide economic advisory support in connection with the bilateral APA and has provided input on the f

3. Overview of HSI 3.1 Corporate Structure and History HSI is a C-corporation organized under the laws of the State of Delaware. Its Delaware incorporation file number is 7341825, and its Federal Employer Identification Number ("EIN") is 84-2917630. HSI's registered agent in Delaware is Capitol Registered Agents LLC, located at 1209 Orange Street, Wilmington, Delaware 19801. HSI is a wholly owned subsidiary of Halcyo

4. Controlled Transactions This section describes the controlled transactions between HSI and HSAG that are the subject of the bilateral APA and the contemporaneous transfer pricing documentation. For FY 2024, HSI engaged in three principal categories of controlled transactions with HSAG: (1) the purchase of tangible goods (semiconductor wafers and die); (2) royalty payments for licensed intellectual property; and (3

5. Functions Performed by HSI This section provides a detailed analysis of the economically significant functions performed by HSI in connection with its controlled transactions with HSAG. As described below, HSI's functions are centered on distribution, marketing, design support, customer service, and supply chain management — activities that, while commercially important, are routine in nature relative to the high-

6. Assets Employed by HSI This section describes the tangible assets, intangible assets, and financial assets employed by HSI in connection with its controlled transactions with HSAG. As detailed below, HSI's asset base is modest relative to the Halcyon group as a whole, and HSI does not own unique or valuable intangible property. 6.1 Tangible Assets HSI's tangible assets consist primarily of leased office space, IT

7. Risks Assumed by HSI This section analyzes the economically significant risks assumed by HSI in connection with its controlled transactions with HSAG. The analysis considers both the contractual allocation of risks under the intercompany agreements and the actual conduct of the parties in managing and controlling those risks, consistent with the framework set forth in Paragraphs 1.56–1.106 of the OECD Guidelines a