Semiconductor shares rallied yesterday after the government relaxed restrictions on local chip companies operating in China, with investors expecting local companies to reap more benefit from China's booming chip industry.
The government announced on Thursday night that it would allow Taiwanese chip testers and packagers to have factories in China as long as they use only less-advanced technologies.
The relaxation boosted shares in the nation's two biggest semiconductor testing and packaging service providers, Advanced Semiconductor Engineering Inc (日月光) and Siliconware Precision Industries Co (矽品).
Shares of the two companies had already risen in recent days due strong prospects for the second half of this year. Advanced Semiconductor jumped 3.69 percent to NT$36.9 and Siliconware Precision advanced 2.89 percent to NT$43.4 on the Taiwan Stock Exchange yesterday.
Lifted by tech shares, the benchmark TAIEX rose 0.5 percent higher to close at 7,171.77 points yesterday, on turnover of NT$132.97 billion (US$4.17 billion).
"Now Taiwanese companies will be able to directly compete with global rivals Amkor Technology Inc and STATS ChipPAC Ltd in the Chinese market," said Wang Bou-li (王博立), an analyst with SinoPac Securities Corp (建華證券).
Chinese contract chipmakers led by Semiconductor Manufacturing International Corp (中芯) will be the major target customers for local firms, Wang said.
"The growth rate from the Chinese market will be high," he said.
He expected local companies to start to see contributions from their Chinese operations in the second half of this year at the earliest.
Advanced Semiconductor and Siliconware Precision said they would send plans for building production lines in China to the Investment Commission for approval.
Advanced Semiconductor will now be able to offer chip testing and packaging services in China to the world's top made-to-order chipmaker Taiwan Semiconductor Manufacturing Co (TSMC,
Advanced Semiconductor now has camera module factories in Shanghai and Suzhou in southern China and Siliconware Precision also has a plant in Suzhou.
The government's latest move also prompted market speculation that it was about to further loosen its grip on China-bound investment.
Analysts said the government may speed up its review process on proposals submitted by memory chipmakers Powerchip Semiconductor Corp (力晶半導體) and ProMOS Technologies Inc (茂德科技) -- who presented their proposals in late 2004. Those proposals have been on ice since since Beijing announced its "Anti-Secession" Law in March last year.
That expectation sent Powerchip surging 5.26 percent to NT$22 and ProMOS Technologies rising 3.78 percent to NT$12.35 on the over-the-counter GRETAI Securities Market yesterday.
TSMC is currently the only Taiwanese chipmaker permitted to make chips in China using less advanced 0.25-micron processing technology.
TSMC rose 1.34 percent to NT$68.10 and rival United Microelectronics Corp (
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