The nation's semiconductor packagers, testers and IC designers may follow in the footsteps of Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) by setting up shop in China, a chip industry veteran said yesterday.
"Since the government conditionally allowed domestic chipmakers to invest in eight-inch wafer factories in China, the industry's downstream and upstream players have also been eagerly waiting for the chance to enter the mainland market," said Gordon Chen (陳文咸), president of the Taiwan Semiconductor Industry Association (TSIA, 台灣半導體產業協會).
"Until the government rules are set, they cannot make any legitimate moves to China," said Chen, adding that TSIA plans to hold its quarterly board meeting next Tuesday and is expected to draft a proposal on the subject.
The government still bans domestic companies from setting up facilities in China to conduct chip packaging, testing or designing.
But the restrictions have actually proved useless, an analyst said.
"If the government wants to continue its ban to stem industrial hollowing-out, it will likely result in more companies moving there via their subsidiaries or third locations," said George Wu (
Advanced Semiconductor Engineering Inc (日月光), the second-largest chip packager, is planning to build a plant in Shanghai once Taiwan ends a ban on investments in China, while Siliconware Precision Industries Co (矽品精密), the third-largest chip packager, has started production at its packaging business in Wuxi, Jiangsu Province, in August.
"Companies that fear they're losing out on China's growing market and will not stay here just because the government wants to ground them in Taiwan, especially if their competitors from other nations have gone," Wu said.
According to Wu, the shift of packagers and testers to China is necessary because they are in a business where the barriers to entry are low while pricing pressure is extremely tight.
Nicky Lu (盧超群), a TSIA executive and chairman of Etron Technology Inc (鈺創科技), said packagers, testers, IC design houses and contract chipmakers are all part of the semiconductor industry and they have already established a strong and efficient supply chain based on mutual collaboration.
"If they could move together to the mainland, they would grab as large a market share as possible in that booming market," said Lu, whose chip design firm already does business in Shanghai.
While design firms are also keen on entering the market across the Strait, the move does have its risks.
According to Wu, companies such as Etron and ChipMos Technologies Inc, a subsidiary of Mosel Vitelic Inc (
Indeed, a steady supply of intellectual property from Taiwan, plus the growing influence of foreign R&D activities in China, is accelerating the evolution of China's IC design capabilities, according to Mark Saunderson, publisher of Electronic Engineering Times-Asia.
"Over time, China's reliance on imported IC technologies is expected to diminish. ... While Taiwan has somewhat of a head start in IC design capabilities, the mainland is catching up," he said in a statement.
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