In an attempt to revive Taiwan’s struggling stock market, President Ma Ying-jeou (馬英九) said on July 10 that restrictions on chip investment in China would be relaxed. But this “good news” could severely hurt the economy.
Ma said Intel is building a 12-inch wafer factory in Dalian that will use 90-nanometer technology. He said the Wassenaar Arrangement on Export Control for Conventional Arms and Dual-Use Goods and Technologies allows high-tech transfer into communist states such as China, which means Taiwan is falling behind the rest of the world because it only allows Taiwanese chipmakers to produce 8-inch or smaller wafers in China. The Ministry of Economic Affairs is planning talks with chipmakers and it may relax restrictions in September.
The problem is that Intel is just building a DRAM memory chip fab, whereas Taiwan is looking at loosening restrictions on wafer fabs, which are capable of making multiple integrated circuits with more complex technologies. We cannot just focus on the Wassenaar Arrangement. More important is the impact that the relocation of the wafer industry will have on Taiwan’s economy and society.
Taiwan has the world’s best wafer foundry industry. Including design, testing, and packing, the total production value of the industry is as high as NT$1.5 trillion (US$49.3 billion) and employs at least 150,000 people.
China used to lag far behind Taiwan in wafer technology. It began to develop 8-inch wafer foundries by launching the Tenth Five-Year Plan in 2001, which included rewards for Taiwanese businesses investing in China. Even though Taiwan tried hard to stop its businesses investing in China at the time, some went ahead without permission.
For example, Semiconductor Manufacturing International Corp chief executive officer Richard Chang (張汝京) is from Taiwan and is now in China competing with Taiwanese businesses. By 2004, the production value of China’s semiconductor industry surpassed 50 billion yuan (US$7.3 billion) and the industry employed at least 100,000 people.
In 2002, the government debated allowing investment in 8-inch fabs in China, It decided that chipmakers could produce 8-inch wafers using 0.25-micron technology in China after they mass production of 12-inch wafers began in Taiwan. By the end of 2006, the government allowed Taiwanese chipmakers to produce 8-inch wafers in China using 0.18-micron technology after they were able to produce 12-inch fabs using 90 and 65-nanometer technology in Taiwan.
As technology matures, the export of technology is only a matter of time. However, the government has to pay close attention to the timing of such exports so the country doesn’t lose its competitive advantage.
In 2006, China launched its 11th Five-Year Plan, vowing to use 0.13-micron and even smaller technologies to develop its own 12-inch wafer foundry industry, with the goal of boosting its production value to 300 billion yuan by 2010. It is keen to replace Taiwan in the global semiconductor industry. However, the quickest way to achieve that goal is to entice Taiwan’s high-tech professionals to work in China to reproduce a copy of Taiwan’s upstream, midstream and downstream semiconductor industry.
The semiconductor industry remains crucial to Taiwan and the government must do what it can to keep the industry here. Ma cannot just loosen restrictions, thereby strengthening China’s semiconductor industry and weakening Taiwan’s national competitiveness. The government must not make a decision based solely on talks with chipmakers. It should invite all sectors of society to extensively discuss the issue.
Jason Liu is a chemical engineering professor at National Taiwan University of Science and Technology.
TRANSLATED BY EDDY CHANG
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