Siliconware gains toehold in China

Siliconware Precision Industries Co (矽品精密), the third-largest chip packager, said it will invest in a Chinese company that assembles camera parts, joining companies seizing a toehold in China while they wait for Taiwan to lift its ban on chip-related manufacturing across the Strait.

Siliconware said it may invest US$7.5 million in a company that assembles semiconductors, lenses and other parts for camera modules. Those operations don't violate the existing ban.

"The investment's a preliminary move before the government decision," said David Yu, who helps manage US$2.3 billion in stocks at National Investment Trust Co (建宏投信). "They have to move to the mainland or they'll face growing competition from there."

Siliconware and other chip-related companies want the ban lifted so they can move production to China to keep up with rivals such as Pennsylvania-based Amkor Technology Inc, who are already taking advantage of mainland labor costs a tenth of those in Taiwan.

Taiwan, which has held back its most advanced technology from rival China for 50 years, is now under pressure to help domestic industries suffering from the nation's worst recession in a quarter century and the global chip industry's worst-ever slump.

Taiwan's Advanced Semiconductor Engineering Inc (日月光), the second-largest chip packager, plans to complete construction of a plant in China by the second quarter of next year, Assistant Vice President Freddie Liu (劉英武) said.

"We're hoping the government will allow us to expand our business into China," Liu said. "We're building a plant within regulations, to shorten lead time."

A government-appointed committee is scheduled to meet Dec. 13 to consider removing investment curbs on chip manufacturing and related activities in China -- one of the last major bans on Taiwanese industry investing in China.

At a meeting last week, the panel announced that notebook-computer makers and mobile-phone makers will be allowed access to China for the first time. The easing took effect yesterday.

Like their semiconductor counterparts, Quanta Computer Inc (廣達電腦) and other notebook makers built allowable plants in China in advance of the easing to position themselves in the market. With the end of restrictions, Quanta said it plans to build a second plant in China next year.

China's growing demand for handsets, computers and other electronics gadgets is boosting demand for chips to run them in the world's biggest consumer market.

China's US$10 billion personal computer market is expanding even as global sales shrink. In July, it overtook the US to become the biggest cellular phone market, while sales in the rest of the world dropped.

"If there's large demand around Shanghai for end-product chips from companies such as notebook makers, they'll need packaging and testing companies there," Yu said.

Taiwan Semiconductor Manu-facturing Co (TSMC, 台積電), whose chips Advanced Semiconductor cuts from wafers and packages in plastic, said it plans to invest in chip plants in China within three years.

Before then, the largest made-to-order chipmaker will set up a sales office in Shanghai.

United Microelectronics Corp (聯電), TSMC's biggest rival, hasn't announced any China strategy yet.