Fri, Mar 08, 2002 - Page 1 News List

Lin outlines plans for 8-inch chip fabs

CHINA INVESTMENT Under a plan now in the works, TSMC and UMC would be able to set up one eight-inch plant each during the next two years

By Dan Nystedt  /  STAFF REPORTER

Former president Lee Teng-hui, right, participates in Peike Technology's inauguration ceremony yesterday with company president Huang Wen-chen. In his speech after the ceremony, Lee stated his opposition to a proposal that the government allow investment in eight-inch wafer plants in China.

PHOTO: CHEN MEI-NIEN

The nation's top two chipmakers will be allowed to invest a combined NT$103 billion (US$3 billion) in China under a plan being developed by the government, Lin Hsin-yi (林信義), vice premier and chairman of the Council for Economic Planning and Development, told lawmakers yesterday.

Offering a broad outline of the unfinished government plan, Lin said that Taiwan Semiconductor Manufacturing Co (台積電), the world's largest maker of chips on a contract basis, would be allowed to invest up to NT$55.5 billion.

United Microelectronics Corp (聯電), the second-largest player in the made-to-order chip industry, would be allowed to invest up to NT$47.5 billion.

Both companies would be limited to setting up older, eight-inch fabs that use an etching process of 0.25 microns or larger.

The highest technology in use today is found in 12-inch fabs using 0.13-micron processing technology. Larger wafer sizes allow manufacturers to squeeze on more chips -- thus saving costs -- as do finer line-width geometries.

The ban on Taiwanese companies setting up 12-inch fabs in China would remain, Lin said.

Lin also said that the government's final plan for "active opening, effective management" of the chip sector in China would be in place by the end of the month.

The phrase refers to the government's philosophy in regard to cross-strait investment and replaced the previous slogan of "no haste, be patient."

The government has failed three times to reach a consensus on whether to allow chip firms to set up eight-inch fabs in China.

The issue reached a fever pitch this week, with a group of academics and the TSU calling on the government to prevent the move.

Critics of the plan fear that allowing Taiwan's US$20-billion-a-year chip industry to invest in China would exacerbate unemployment, cause the nation to lose its high-tech competitiveness and threaten national security.

"The advantages in those high-tech industries is a bargaining chip for Taiwan," said Andrew Yang (楊念祖), secretary-general of the Chinese Center for Advanced Policy Studies in Taipei. "If Taiwan loses that advantage, it will lose control over the interaction between the two sides and Taiwan will fall more under China's pressure."

Lin told lawmakers yesterday that the government's management plan would ensure firms keep their base of operations in Taiwan.

The amount of capital a firm is allowed to invest in China will be determined by its total assets.

A chipmaker with less than NT$5 billion in assets will be allowed to invest 40 percent of the value of its assets in China. Those with between NT$5 billion and NT$10 billion in assets will be allowed up to 30 percent.

A company with assets above NT$10 billion will be allowed to invest up to 20 percent of the value of its assets in China, according to Lin.

With NT$270 billion in assets, TSMC will be allowed to invest NT$55.5 billion, Lin said. UMC, with NT$230 billion in assets, will be allowed up to NT$47.5 billion.

The vice premier said TSMC and UMC will likely build just one eight-inch plant in China each with a single production line during the first two years of open investment.

The cost of building a new eight-inch plant is around NT$35 billion, while moving used equipment into a new building would lower costs to NT$22 billion, Lin said.

Business leaders have long stressed that chipmakers must be permitted to invest in China to survive.

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