Contract analysis

1. Executive Summary 1.1 Purpose of This Document This document constitutes entity-level contemporaneous transfer pricing documentation for Halcyon Semiconductor Inc. ("HSI") for the fiscal year ended December 31, 2023 (hereinafter, "FY 2023"). It has been prepared by Calderwood & Harkness LLP, with economic analysis performed by Meridian Economics GmbH, to establish that HSI's intercompany transactions with its pare

1. Tangible Goods (Wafer/Die Sales). HSAG manufactures and sells semiconductor wafers and singulated die to HSI under the Master Intercompany Supply Agreement, which became effective January 1, 2019 and was amended on July 1, 2022 (the "Supply Agreement"). HSI receives these wafers and die, arranges for packaging and testing by third-party subcontractors where required, and resells finished and packaged semiconductor

2. Royalties (IP License). HSI pays HSAG a running royalty of 6.0% on IP-attributable revenues for the right to use HSAG's proprietary semiconductor process technology and design libraries under the IP License Agreement effective January 1, 2019 (the "License Agreement"). The royalty base is computed by applying the IP-attributable share (approximately 18.1% of HSI's net US revenues) to derive the IP-attributable rev

3. Cost-Sharing Contributions (R&D CSA). HSI participates in a Qualified Cost Sharing Arrangement with HSAG (the "CSA"), effective July 15, 2018, pursuant to which the parties share qualified research and development costs for next-generation 2nm and sub-2nm semiconductor process technology development. HSI's cost-sharing percentage is 22.5%, reflecting its anticipated benefit share from the exploitation of cost-shar

2. Overview of the Halcyon Group 2.1 Corporate Structure Halcyon Semiconductor AG ("HSAG"). HSAG is an Aktiengesellschaft organized and existing under the laws of the Federal Republic of Germany. HSAG is publicly listed on the Frankfurt Stock Exchange (XETRA trading system) under the International Securities Identification Number DE000HSA0017 (WKN: HSA001). HSAG's registered office is located at Halcyon-Allee 12, 010

3. Functional Analysis 3.1 Methodology The functional analysis set forth in this section was prepared in accordance with the analytical framework prescribed by Treas. Reg. § 1.482-1(d)(3), which requires an examination of the functions performed, assets employed, and risks assumed by the parties to controlled transactions, as well as Chapter I of the OECD Transfer Pricing Guidelines for Multinational Enterprises and

4. Controlled Transactions — Description 4.1 Transaction 1: Tangible Goods (Wafer/Die Sales) Governing Agreement. The intercompany sale of semiconductor wafers and singulated die from HSAG to HSI is governed by the Master Intercompany Supply Agreement between HSAG and HSI (the "Supply Agreement"). The Supply Agreement became effective on January 1, 2019 and was amended on July 1, 2022 to, among other things, update p

5. Economic Analysis — Tangible Goods (CPM/TNMM) 5.1 Method Selection and Best Method Analysis In accordance with Treas. Reg. § 1.482-1(c) (the "best method rule"), Calderwood & Harkness LLP and Meridian Economics GmbH considered all of the specified transfer pricing methods available under the Treasury Regulations and the OECD Transfer Pricing Guidelines, and determined that the Comparable Profits Method ("CPM") und