Sun, Mar 17, 2002 - Page 8 News List

Delay fab investments for one year

By Lee Chang-kuei 李長貴

In the debate over the opening up of investments in eight-inch fabs in China, arguments based on different political and professional viewpoints have been presented. All these arguments for and against are accurate. What is needed is a practical approach that balances the overall development of Taiwan's economy with the needs of industry.

Nobel laureate James Heckman criticized Taiwan for placing too much emphasis on politics. He believes that the chances of China's military attacking Taiwan are very low, and that Taiwanese companies investing in eight-inch fabs in China should not present a problem. Heckman also points out that the two sides of Taiwan Strait have already joined the WTO, something that should help facilitate peace in the Taiwan Strait.

Of course, Heckman was speaking strictly from the standpoint of an academic. He makes his argument based on the assumption that the cross-strait relationship is no longer a problem, and the "one China" debate has been muted. However, he does not understand that China is waging a new propaganda war based on economic unification. Taiwanese businessmen have in fact become the tools of propaganda for China.

Taiwan's government should analyze this investment issue from the standpoint of national economic development. However, the Ministry of Economic Affairs is taking the side of individual businesses, while academics call for the governmental not to interfere in investment decisions and to separate political and economic issues. The two camps essentially propose that each business be allowed to make investment decisions freely. These arguments are based on a lack of understanding that government, politics, law, national stability and industry investments are all closely linked. The government plays a key role in the success or failure of industrial development.

On the other hand, the Taiwan Semiconductor Industry Association (台灣半導體協會) supports the "speed management strategy" adopted by the 145 upstream and downstream manufacturers of the semiconductor industry. Under this strategy, these manufacturers have already moved into the market in China. The association believes that the "speed strategy" is the only way for high-technology industries to survive. Sanctions and regulations against investments in China are harmful to the future development of the semiconductor industry because China will become the biggest semiconductor market in the world, so the association thinks.

Lin Hsin-yi (林信義), the vice premier and head of the Council of Economic Planning and Development, says that the government's basic direction is to open up investments for eight-inch fabs in China, but not without regulations. Lin has indicated that the amount of investment allowed in China will be based on the size of the company doing the investing. The total cannot be greater than 20 percent of the market value of the investing foundry in Taiwan. Currently, Taiwan has 23 eight-inch fabs, and three 12-inch fabs.

Taiwan's eight-inch fabs are running at about 70 percent of production capacity, meaning that 30 percent of production capacity is idle. Building an eight-inch fab costs about NT$35 billion. This 30 percent idle capacity, or, in other words, production facilities that cost NT$260 billion, can be put to good use in China. This can be accomplished by the formation of a "strategic alliance" investment company through the merger and acquisition of the 23 fabs in Taiwan.

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