Wed, Aug 01, 2007 - Page 8 News List

A tale of two Taiwanese tech firms

By Hsu Wen-fu 許文輔

The nation's wafer processing and manufacturing service industries have been the best in the world for a long time. When Taiwan Semiconductor Manufacturing Co (TSMC) and United Microelectronics Corp (UMC) started mass producing 12-inch wafers, the US and European integrated chip (IC) industries were able to move away from manufacturing semiconductors themselves -- as integrated device manufacturers (IDM) -- to concentrate on design and sales.

Wafer manufacturing was left to TSMC and UMC and packaging and testing was also outsourced to Taiwanese companies such as ASE Group, Siliconware Precision Industries Co and Chipbond Corp. It is thanks to the large investments that the government made in the semiconductor manufacturing sector over the past 30 years that the industry can provide high-yield, high-quality manufacturing services and let the global semiconductor industry continue to enjoy double-digit growth.

In the beginning of 2002, the Ministry of Economic Affairs suddenly announced it was open to the possibility of eight-inch wafer manufacturers shifting their production to China. Fortunately, the Taiwan Association of University Professors, the Taiwanese Engineers' Association, the Taiwan Solidarity Union and other civic groups started a movement to stop this and TSMC and UMC production stayed in Taiwan for a while longer.

Only when the next generation of 12-inch wafers was brought into production were the companies allowed to move their eight-inch wafer fabs to China. In this way, Taiwan maintained its advantage.

But the ministry's willingness to allow older technology to move to China was not an effective management policy. Because the ministry was only thinking about manufacturers' demands, it nearly gave Taiwan's strategic industry away so China could copy it. Fortunately, the National Security Council (NSC) and the Mainland Affairs Council (MAC) intervened, asking the National Science Council to write drafts of what would become the National Technology Protection Law (國家科技保護法) and the Regulations Governing Technology Professionals from the Taiwan Area Taking up Employment in the Mainland Area (台灣地區特定科技人員進入大陸地區任職許可辦法).

The NSC and MAC were thus able to delay wafer manufacturers from moving their production lines to China for five years. Thanks to government intervention, Taiwan has retained both its leading position in the industry and high-tech jobs.

Unlike the law-abiding TSMC, near the end of 2001, UMC invested in a partner company that then built a factory in Suzhou, China, to manufacture eight-inch wafers.

Note that it wasn't until the beginning of 2002 that the ministry said it might consider allowing wafer manufacturing to move to China. Last August, the president of China's Hejian Technology (Suzhou) gave UMC 15 percent of his company's stock. To UMC shareholders, this meant there finally was a clear transaction.

The ministry issued UMC an official warning and also fined the company NT$5 million (US$152,000), but suddenly and unexpectedly, on June 24 the Taipei High Administrative Court ruled that the ministry had not produced any clear evidence that UMC had broken the law and it then overturned the fine.

The ministry has been neglectful in its handling of the UMC's activities. The ministry kept putting off investigating this prime example of serious economic crime for many years. It did not handle the case well or provide proof that UMC had broken the law. This shows that the Democratic Progressive Party has been an absentee government as far as the high-tech industry goes.

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