TSMC may be making chips in China in 2003

Taiwan Semiconductor Manufac-turing Co (TSMC, 台積電), the world's biggest maker of chips for other companies, said it's scouting factory sites and will start its first production in China as early as next year.

"I expect we'll start production in about 18 to 24 months after we select a site within three months," TSMC spokesman Chuck Byers said.

TSMC and other chipmakers in Taiwan are expanding into the world's third-largest chip market after the Taiwan government last month scrapped a ban on chip investment there. The chip market in China was valued at US$12 billion last year and is expected to grow by a third each of the next three years, according to the Chinese government.

"China is something of a closed market," Byers said. "To sell there, you have to be there."

The chipmakers are betting on rising demand from electronics companies, who feed off the world's largest consumer and mobile phone markets. Foreign companies such as Motorola Inc have said they'll spend more than US$10 billion in China.

Taiwan chipmakers are anxious to make up for time they lost while their government dithered over allowing them take some of the world's best technology across the Taiwan Strait to a political rival.

United Microelectronics Corp (UMC, 聯電), TSMC's next-largest rival, hasn't made public its mainland investment plans, though at least one industrial park in China said it has signed a preliminary factory-site agreement with the company.

China rivals say the company may buy stakes in at least two plants there.

"We have no concrete plan for production in China at this time," UMC spokesman Alex Hinnawi said.

UMC plans to take an equity stake in China's Central Semiconductor Manufacturing Corp by providing some unused chip-making equipment, said Nasa Tsai, president of Grace Semiconductor Manufacturing Corp (宏力半導體) in Shanghai. Tsai, who said he helped found Central Semiconductor and is still a shareholder, said UMC's plan is still under negotiation.

Shanghai Belling Corp (上海貝嶺) also said it's in talks with UMC to buy some of the Taiwan company's older equipment.

Taiwan's lifting of the ban is contingent on local chipmakers investing in 300mm plants on the island. That advanced technology is still banned from transfer to China.

TSMC is proceeding with plants to build two 300mm wafer plants in Taiwan, Byers said.

Chinese-language media said the company plans to begin construction on two new 12-inch wafer plants in Taiwan this year.

One of the cutting-edge plants, which will use 0.09 micron process technology, will be built in the Hsinchu Science-based Industrial Park (新竹科學園區), while the other will be built in the Tainan Science-based Industrial Park (台南科學園區), the report said, quoting the company's Deputy Chief Executive Officer Tseng Fan-cheng (曾繁城) as saying at a conference in the US.

In related news, UMC said it will open a chip plant in Singapore ahead of schedule to meet better-than-expected demand for semiconductors. The US$3.6 billion UMCi facility, a venture with Infineon Technologies AG, Europe's second-largest chipmaker, will start production in the second quarter next year, UMC said.

``We expect UMCi to enter production just in time to meet rising demand,'' said Chairman Robert Tsao (曹興誠) in a statement.

UMC said the plant would start production in the first quarter of 2003 when it announced the project. The company delayed the opening by several quarters last year, when a slump in chip industry resulted in global sales falling by a third to US$138 billion, according to Alex Hinnawi, a UMC spokesman.