Monday, April 01, 2002
Taiwan edges open chipmakers' door to China
REUTERS
TAIPEI: Taiwan lifted a ban on local chipmakers building plants in political archrival China on Friday but set tough conditions for what it called a "small-scale, low-level opening."
Though Taiwan made good on a promise to lift the barrier for its semiconductor industry, the world's fourth-largest, the limits allow only current generation technology in this fast-moving industry to set up shop across the Taiwan Straits.
Taiwan's government, wary of becoming economically dependent on a political rival, walks a fine political line on this touchy issue, which involves its fastest-growing industry and its biggest-capitalised listed firms.
Semiconductor firms applauded the opportunity to cash in on the world's fastest-growing market for microchips and held out hope for further deregulation.
"As competition in the mainland semiconductor market is the trend of the future, we will permit manufacturers to begin positioning themselves in China, under the precondition of improving the development of the domestic semiconductor industry and ensuring core technology will not be lost to the mainland," Premier Yu Shyi-kun told a news conference.
Yu said Taiwan firms would be allowed to build chip plants using eight-inch silicon wafers in China only after their Taiwan plants using next-generation 12-inch, or 300 mm wafers had entered steady mass production for six months.
Chipmakers building chip plants using old equipment would be given priority, and the government would set an initial limit of three plants by 2005.
Taiwan firms would be also limited to manufacturing microchips with circuits 0.25 microns or wider.
That compares with 0.13 micron circuits used in the most powerful chips available to consumers, such as Intel Corp's Pentium 4 processor.
"The government said it would allow three fabs before 2005. That's a little low, but I think it's OK," said Andrew Lu, a semiconductor analyst for Salomon Smith Barney in Taipei. "I think it would be much more reasonable to allow five or six."
A FINE LINE Beijing considers self-governing Taiwan a breakaway province that must eventually be reunified, by force if necessary.
Critics have held demonstrations against the proposed removal of the ban, warning jobs will move to China just as they did when light industry such as textiles and toys fled for the cheaper labour markets of the mainland.
However, local chipmakers argue foreign competitors would swoop in if they were forbidden from building plants in China.
Older facilities would stand idle if they remained in Taiwan but could be put to work meeting China's surging demand for semiconductors used in home appliances, which usually require less demanding technology, they say.
At the forefront of the campaign to lift the ban were the world's two largest contract chipmakers, Taiwan Semiconductor Manufacturing Co (TSMC) and United Microelectronic Corp (UMC), which together account for some 15 percent of the Taiwan stock market's capitalisation.
"TSMC highly welcomes this measure, but we have no timetable for going to the mainland," said J.H. Tzeng, the company's public relations manager.
TSMC set up a representative office in Shanghai last year and is in the midst of sizing up investment sites.
Archrival UMC plans to take over operations of an unnamed partner firm in China and has sold equipment to chipmaker Shanghai Belling.
Taiwanese capital and know-how have already arrived in China's chip sector. Shanghai's Semiconductor Manufacturing International and Grace Semiconductor Manufacturing Co both have Taiwanese backers.
Yu pledged the government would thoroughly investigate any Taiwan chipmakers that invested in China without government permission.
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