TSMC denies plan to flout China ban

Taiwan Semiconductor Manufac-turing Co (TSMC, 台積電), the world's top contract chipmaker, yesterday said it has no immediate plans to make chips with relatively advanced technology at its Chinese plant because of the government's restrictions on such activities.

The company's clarification came after a Chinese-language newspaper reported that the chipmaker recently planned to move a batch of old equipment to its plant in Shanghai -- including machinery capable of making chips on more advanced 0.18-micron processing technology -- to get around a government ban on using advanced technology in China.

"We won't make chips on 0.18-micron processing technology in China unless we have approval from the government," Tzeng Jinn-haw (曾晉皓), a spokesman for TSMC, said in a phone interview.

Tzeng it is true that some old machines -- which will eventually be moved to the Shanghai factory -- can make chips using different technologies, including the latest0.18-micron processing technology.

"It is certain that we will continue to move more old equipment to our Chinese plant to expand our capacity. But, we haven't set a schedule for the relocation in the near future yet," Tzeng said.

TSMC to boost the output of its Shanghai factory to around 15,000 wafers per month by the end of this year, from 5,000 wafers a month at the beginning of the year.

Local are now only permitted to make chips on less-advanced 0.25-micron processing technology in China.

The restriction, however, is contrary to the government's recent relaxation of rules governing the exporting of semiconductor equipment. The new rules abide by the Wassenaar Agreement, which allows local chipmakers to make chips outside the nation using 0.18-micron processing technology.

The government explained in a statement yesterday that local chipmakers are only allowed to export such equipment after they have received the green light from the investment watchdog, the Ministry of Economic Affairs.

TSMC local peers have been calling for further relaxation of the rules, in a bid to fend off growing competition in the fast-growing Chinese chip-manufacturing market, as well as to meet customers' growing needs for chips made on 0.18-micron processing technology.

But, political factors have been getting in the way.

"It's a matter of national security rather than an issue of industry development," Minister of Economic Affairs Ho Mei-yueh (何美玥) said last month.

The decision was a far cry from the ministry's internal report, which found that Taiwan's semiconductor industry will not be hurt if the government allows local chipmakers to produce chips on 0.18-micron processing technology in China, according to Ho.

To safeguard Taiwan's competitiveness, the government agreed only in 2003 to allow three Taiwanese chipmakers to make chips using less advanced 0.25-micron processing technology as from the end of this year.

TSMC the first Taiwanese chipmaker to get government approval to manufacture chips in China. Taiwan's biggest memory-chip maker, Powerchip Semiconductor Corp (力晶半導體), and smaller rival ProMOS Technologies Inc (茂德科技) filed applications to set up factories in China late last year. Both applications are still under review.