TSMC's China plant on track, Chang says

Taiwan Semiconductor Manufac-turing Co (TSMC, 台積電), the world's largest supplier of made-to-order chips, said it's on schedule to start up its first plant in China this year.

"We've done all the preparatory work, and we should be ready to start before the end of the year," TSMC chairman Morris Chang (張忠謀) said in an interview with Bloomberg at the annual Boao Forum for Asia conference on Hainan island.

He declined to provide more details.

The Ministry of Economic Affairs said last Thursday that the Hsinchu-based chipmaker has met all conditions required for government approval to start production at the US$898 million wafer plant in Shanghai's Songjiang Science Park. TSMC would be the first Taiwanese chipmaker to win approval for a factory in China.

``The China market offers huge potential and being there provides the opportunity for us to compete and work with our rivals in China,'' Chang said after delivering a speech about business cooperation, corporate brand names and economic globalization.

Asked about TSMC's future development and his outlook for the semiconductor sector across the Taiwan Strait, Chang said the company has maintained a roughly 30 percent annual growth rate on average over the past 15 years.

As consumers are buying electronics and firms are unfreezing budgets for equipment after a three-year slump in spending, Chang said he is confident that TSMC would continue prospering at an annual rate of 20 percent on average over the next 10 years.

Market researcher Gartner Inc in February revised upward its prediction for semiconductor sales this year, saying that worldwide chip sales will rise 23 percent to US$216.9 billion this year, the biggest increase since 2000, as demand improves for chips in devices such as DVD players and communications equipment.

The US-based Gartner predicted last November a 20 percent sales gain for this year from US$177 billion last year.

Despite a promising business environment, Chang said he has no intention to restrict the company's business on made-to-order manufacturing alone; instead he wanted to develop TSMC's future business modeling after International Business Machines Corp or Hewllet-Packard Co. He didn't elaborate.

Chang has headed the company since its inception in 1987. Investors have said that finding a replacement for 73-year-old Chang seems to become one of the biggest competitive challenges for TSMC, in addition to the emergence of Shanghai-based Semiconductor Manufacturing International Corp (SMIC, 中芯國際集成電路).

SMIC has become China's biggest chipmaker in the three years since it was founded. The company and next-door neighbor Grace Semiconductor Manufacturing Corp

(宏力半導體) are aiming to take business away from TSMC and United Microelectronics Corp (UMC, 聯電), the world's second largest made-to-order chipmaker.

Chang acknowledged that Chinese semiconductor companies are both a rival and a partner to TSMC.

But if semiconductor industries on both sides can undertake integration well, they may double their competitiveness and thus become an invincible competitor in the world's semiconductor market in 10 years, he added.

TSMC is due to announce its first quarter results at an investors conference on Friday, while its UMC is slated to report its first quarter figures on Wednesday.