Taiwan eases restrictions on China chip investments

After months of protracted negotiations, the Taiwanese government announced March 28 long-awaited plans to ease restrictions on Taiwanese chip companies that want to invest in semiconductor manufacturing facilities in mainland China.

Under the new investment policy, which was announced by Premier Yu Shyi-kun, Taiwanese chip makers will be able to apply for permission to build 200-millimetre wafer fabrications plants, known as fabs, in China only after they have completed construction of 300-millimetre fabs in Taiwan and those fabs have reached volume production.

Taiwan Semiconductor Manufacturing Co. Ltd. and United Microelectronics Corp. have begun production at 300-millimetre lines in Taiwan while other local chip makers have also announced plans to build 300-millimetre plants in Taiwan.

Compared to 200-millimetre wafers, 300-millimetre wafers offer significant cost advantages. A 300-millimetre wafer can produce 2.5 times as many chips as a 200-millimetre wafer and offers a 30 per cent reduction in costs once a 300-millimetre fab has reached volume production.

While Taiwan has eased curbs on investment, the government aims to maintain some control over the chip production capacity that Taiwanese chip makers can build in China.

Taiwanese chip companies will be allowed to invest in no more than three 200-millimetre fabs by 2005, according to a policy statement issued by the Taiwan government. Priority has been given to plants that employ used chip-making equipment, it said, adding that a discussion of rules affecting plants that use new equipment will be discussed in two years’ time.

The new regulations are expected to be sent to Taiwan’s Legislative Yuan for approval before May 10.

Friday’s announcement brings to a close a heated political battle between supporters of lifting regulations that banned investments in Chinese semiconductor manufacturing operations and those who argued that easing restrictions would undermine Taiwan’s national security and lead to increased unemployment as Taiwanese chip companies shifted their manufacturing operations across the Taiwan Strait to China.