Government may loosen China rules

The government is mulling going one step further in its cross-strait trade policy by allowing Taiwanese semiconductor companies to make chips using more advanced technologies in China, in order to safeguard their competitiveness, a government official said yesterday.

"We expect to see some bright spots in the government's [cross-strait trade] policy," said Huang Chin-tan (黃慶堂), head of the Investment Commission under the Ministry of Economic Affairs.

Huang's remarks came after Premier Frank Hsieh (謝長廷) said on Monday that the government would consider revising certain China-bound investment regulations, if they were limiting Taiwanese firms' competitiveness.

Hsieh paid a visit to Hsinchu Science Park on Monday, where he met with Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) Chairman Morris Chang (張忠謀) and AU Optronics Corp (友達光電) Chairman Lee Kun-yao (李焜耀), according to Chinese-language newspaper reports.

The government currently only allows local companies to produce chips at their Chinese factories using the less-advanced 0.25-micron process technology, out of fear that Taiwan will lose its competitive edge to China.

But, the policy has incurred complaints from TSMC, the world's biggest contract chipmaker, that the limitation is eroding its competitiveness in the world's fastest-growing chip market.

Some of TSMC's customers have requested chips made at the more advanced 0.18-micron process technology at its Chinese plant in Shanghai, and have threatened to turn to other companies for the service, Chang said on Monday.

Now, a ray of hope for a policy change is emerging.

Lifting the ban on export of 0.18-micron process technology to China would do little harm to Taiwan's semiconductor industry as the technology is already widely adopted in the industry, said Huang, citing a recent internal ministry report.

But, escalating cross-strait tensions got in the way, after Beijing enacted the "Anti-Secession" Law in March to block Taiwan from independence, Huang said.

At the beginning of the year, TSMC applied to make chips at 0.18-micron process technology, but has not yet received a positive response from the government.

"TSMC is making progress in chipmaking technologies and certainly hopes to sell chips manufactured at more advanced technologies in China," company spokesman Tseng Jin-hao (曾晉皓) said yesterday.

Powerchip Semiconductor Corp (力晶半導體), Taiwan's biggest computer memory chipmaker, and smaller rival ProMOS Technologies Inc (茂德科技), meanwhile, are still waiting for the government to review their applications to set up factories in China. They've been waiting six months.

Three years ago, the government agreed to allow three local semiconductor companies to build a total of three eight-inch factories in China by the end of this year. The factories were to only be allowed to make chips at the less-advanced 0.25-micron process technology.