Taiwan loosening up on China investments

Taiwan’s government will allow its biggest tech companies to invest in mainland China, but only after they provide written guarantees that they will make equal or better investments at home, a government minister said Tuesday.

“We won’t restrict the investments between Taiwan and mainland China, but [will] try to see how we can take advantage of the economic relations between the two sides,” Jaushieh Joseph Wu, chairman of the government’s Mainland Affairs Council, said at a news conference at the Foreign Correspondents’ Club of Japan.

In late December Taiwan gave the go-ahead for three local chip makers to make investments totalling more than US$800 million in factories in mainland China. Powerchip Semiconductor Corp. and ProMOS Technologies Inc. both got permission to build 8-inch (200 millimeter) wafer fabs, while Advanced Semiconductor Engineering Inc. (ASE) received approval to invest in a Shanghai-based chip assembly company.

The move came after much lobbying by the companies and was seen as a major breakthrough for the two countries. China and Taiwan separated in 1949 during a civil war between the Nationalist army of Chiang Kai-shek and the Communist forces of Mao Zedong. The two sides never reconciled and China has repeatedly threatened to attack Taiwan if the island formally declares independence from the mainland.

Before such permission was given, Wu said, the government and the companies held a series negotiations intended to ensure that Taiwan’s economy benefited as much from the investment as did that of China.

“When they are willing to put $100 in China we are asking them how much investment are you willing to put in Taiwan,” he said. “And of course they have to come up with some promise and they have to write it down.”

The companies need to reassure the government that, among other issues, the investment won’t adversely affect the employment situation in Taiwan and won’t mean the loss of core technology to Chinese competitors. They are also required to promise — again in writing — that high-level production will remain in Taiwan, he said.

The process is meant to ensure that Taiwanese companies can stay competitive in the global market and benefit from low-cost labor and operations in China, while Taiwan retains its edge as a technology hot-spot.

“The latest announcement of the 8-inch fab production in mainland China goes through the same process,” Wu said.

“And what we were told by a company like ProMOS was that they will build a 12-inch fab in Taiwan after they move their 8-inch facilities to mainland China. So I think it will be an upgrade of Taiwan’s production and I think it will be beneficial to Taiwan.”

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