After hearing the arguments for and against, the grounds for our country's leading chipmaker, Taiwan Semiconductor Manufacturing Co (TSMC), to invest in wafer plants in China have waned with each passing day.
Is the investment in China for the sake of that country's cheap labor? No! In the wafer-fabrication process, the cost of labor is only a small part of the total cost and should not be a reason for moving westwards to China.
Is the investment for the sake of China's enormous market? It should not be so. Now a WTO member, China must comply with the principle of national treatment. That is to say, the chips manufactured in various countries can be sold in China's market and will not receive unfair treatment.
Basically, the purpose is to secure and expand the international market (including China's domestic market) by relying entirely upon the promotion of technology and quality. The need for setting up plants in China has apparently diminished; or else disappeared all together.
Is it then for the sake of getting closer to China's market? This is seems true but is actually false. If such a reason were tenable, Taiwan and Japan should stop thinking about selling their products in European and American markets. Europe and the US, for the same reason, should not expect their chips to dominate East Asian markets because of the distance problem.
It is thus clear that the arguments for investing in China can be easily refuted.
At their wits' end, those who advocate investment in China have recently come up with another ingenious argument. They say that allowing TSMC to invest in China is like "freeing a tiger from the cage in order to bite the rivals to death." In other words, allowing TSMC to invest in China is a way to tackle and even eliminate the Shanghai-based Semiconductor Manufacturing International Corporation (SMIC) and Grace Semiconductor Manufacturing Corp (GSMC). Such argument seems to be a brilliant strategy, but people with any brains will most likely ask, "Is it possible?"
As we all know, Beijing is trying very hard to foster the growth of the semiconductor industry in order to replace Taiwan and increase financial resources. The motive is to promote the military's technological innovation so as to attack Taiwan and create a united China. Will Beijing be foolish enough to allow Taiwanese manufacturers to bite its treasured industry to death?
Anyone with common sense should understand that the assets (plants, technologies, and personnel) transferred to an enemy country can be held hostage at any time. Beijing has greeted Taiwanese businesspeople with smiles and even given them incentives and convenience, because Taiwanese businesspeople are favorable to China's development and can serve China's purposes. Once there is any sign of adversity, China -- known for its authoritarian character -- ?will definitely doom the hostages and assets to death. Who will dare to utter a sound or a word then?
Therefore, "freeing a tiger from the cage" is synonymous with "transferring the cage to China." It puts the tiger in pawn. Whether they are tigers or rabbits, Taiwanese businesspeople must be obedient to China in order to save their skins and make profits.
Of course, the tiger in "the cage transferred to China" should not dream of biting the rivals to death. On the contrary, the imaginable outcome will be that the tiger, following the bad example of others, will share the market with the rivals. The tiger will recruit relevant suppliers to transfer to China and create a conglomerate of technology industries in China.
Such reality cannot be disputed. When the TSMC proposal received initial approval, the local integrated circuit designers made their voice heard by saying that "going forward to China is imperative under the circumstances." With a predestined tone, they also used words such as "necessary" and "must be carried out" to urge the government to let go. It is apparent the hollowing out of that Taiwan's industry is already taking place.
If the authorities aim to cope with those Taiwanese businesspeople (now at SMIC and GSMC) who secretly fled to China, allowing more of them to enter the enemy's fortress and become pawns is not a solution.
The a successful strategy would be to besiege the enemy with measures and actions taken outside China. Taiwan businesses must be free of restraints in order to meet Chinese competitors head-on. That is to say, we should spend our NT$310 billion on research and study in Taiwan, raising our technological standards and the quality of our products in order to win product orders and keep jobs here.
Huang Tien-lin is a national policy adviser to President Chen Shui-bian.
Translated by Grace Shaw
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