Taiwan Semiconductor Manufac-turing Co (TSMC, 台積電) said technology piracy in China will not deter it from proceeding with manufacturing plans.
China needs to enforce its existing patent laws, said Richard Thurston, TSMC's general counsel, at a chip industry event in Hsinchu.
Growth of the local chip-making industry in China will be hampered if the nation fails to protect so-called intellectual property, he said.
TSMC, which registered some of its patents in China earlier this year, expects to start production within four years.
The company has several patent cases pending in Chinese courts, including one filed in March against a former manager. TSMC alleged she leaked technology secrets to Semiconductor Manufacturing International Corp (SMIC, 中芯國際集成電路), a rival in Shanghai that started production last year.
"SMIC got a bit lucky when they hired a few of our former employees," Thurston said in an interview.
"Now they're going to have to watch out because other companies will be trying to do the same thing to them," he said.
Courts in China will soon pass judgment on cases involving patent violations by several former TSMC employees hired by SMIC, Thurston said. He declined to say how many people have been accused.
China has designated chipmaking as a strategic industry. The Chinese government expects local chip production to account for a "significant" amount of world output by 2010, said Dan Brody, an analyst with the US Information Technology Office in Beijing.
Chinese chipmakers currently have about 1.5 percent of the world market, he said.
SMIC and Grace Semiconductor Manufacturing Corp (宏力半導體), both headquartered in adjacent lots in a Shanghai industrial park, are some of TSMC's latest rivals.
Grace Semiconductor, founded by the son of Chinese President Jiang Zemin (江澤民), plans to start production next year.
TSMC will invest US$898 million in its plant, which will make 35,000 8-inch silicon wafers a month, or about 15 percent of the company's output in the second quarter.
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