Taiwanese firms are facing increasing challenges and competition from China, even as the government pushes for ever-closer trade ties with Beijing to benefit from the growth of the world’s second-largest economy.
Without any supporting measures, the nation’s chipmakers are likely to suffer the brunt of China’s aggressive expansion into the semiconductor industry over the next few years. Beijing is determined to make China the global semiconductor industry’s leader by 2020 based on a 1 trillion yuan (US$161.18 billion) blueprint released last year.
In its latest efforts to enhance its semiconductor industry’s strength, a Chinese consortium led by Summitview Capital in mid-March announced that it would acquire US memorychip designer Integrated Silicon Solution for US$640 million.
The deal will open a door for China to enter the DRAM industry and give Chinese manufacturers a say in the development of the global DRAM chip industry in three years at the earliest, market researcher TrendForce Corp said.
China could further obtain manufacturing technologies via mergers and acquisitions, as well as consolidation, helping it gain technological capabilities equal to those of global rivals, TrendForce said.
There is no doubt that in terms of technological capabilities, Taiwanese companies are far ahead of their Chinese counterparts, which are still in their infancy.
“We are not worried about losing our technological edge,” a local DRAM industry veteran said. “It will take at least 10 years for China to overcome the technological obstacles.”
However, apart from technology, the gravest concern for local chipmakers is unfair competition, which could hamper their expansion in China. They fear that in the long run, uneven standards in China will jeopardize their competitiveness and ultimately their survival.
Beijing has been funding China’s semiconductor industry by subsidizing equipment purchases and offering tax incentives, allowing Chinese chipmakers to sell products at lower prices than Taiwanese companies, a semiconductor insider said.
Strong government support also gives more leeway for Chinese chipmakers to stay in the market, even though they barely make profits, the person said.
To protect and nurture China’s semiconductor industry, Beijing is using “antimonopoly” rules to hamper foreign chip companies, including those from Taiwan, from expanding in China.
US handset chip supplier Qualcomm Inc is one of the latest foreign firms reeling from the crackdown. Qualcomm in February settled with the Chinese National Development Reform Commission over alleged breaches of China’s antimonopoly law.
Before the case was settled, US President Barack Obama expressed the US government’s concern about the motive behind the Chinese regulations.
Taiwan’s MediaTek Inc faced similar problems when it push for a merger with Chinese TV chipmaker MStar Semiconductor Inc. The merger was delayed for about one year before receiving conditional approval from the Chinese government in 2013. MediaTek and MStar have to keep their TV chip business independent for three years, the Chinese authorities ruled.
Since then, MediaTek has actively participated in China’s scheme to develop the chip industry there. That is the approach it adopted to safeguard its position in China, because apparently it does not hold out any hope of Taipei speaking up for its interests.
However, smaller Taiwanese firms need the government’s help to deter China from abusing antimonopoly regulations. After all, it is the government’s responsibility to protect the interests of its people, and closer trade ties with China should benefit local companies without sacrificing their interests.
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