TSMC's application for China plant runs into some problems

Taiwan Semiconductor Man-ufacturing Co (TSMC, 台積電), the world's biggest supplier of made-to-order chips, may miss its goal of winning approval this year for a plant in China after officials in Taiwan found holes in the application.

The government wants details about TSMC's existing factories that make 12-inch silicon wafers, the source of funds for the China plant and the allocation of technicians, said Tony Huang (黃慶堂), executive secretary of the government's Investment Commission, under the Ministry of Economic Affairs.

Chipmakers in Taiwan want to tap into the world's fastest growing chip market and compete with Chinese rivals such as Semiconductor Manufacturing International Corp (中芯國際集成電路).

While the government ended a ban on such investments in March, it has yet to approve any. Investors said they suspect President Chen Shui-bian (陳水扁) is reluctant to approve plans that could weaken the economy ahead of the 2004 presidential election.

"Chen's going to do everything to push the economy," said Mike Shiao, who helps manage more than NT$10 billion (US$287 million) in stocks at Invesco Taiwan Ltd (景順投信) and doesn't own shares of TSMC. "Given the tough economic situation, the government wants to delay the speed at which manufacturers are investing in China."

TSMC shares fell as much as 3 percent during trading. The stock closed at NT$49, down 2 percent.

"I can't give a timetable for approval of the application," Huang said. "We're waiting for TSMC's additional explanation and for each of the government units to reply with their suggestions."

The units include the central bank, the Ministry of Finance and the Mainland Affairs Council, which decides the government's China policy.

In September, the chipmaker filed an application with the government to invest US$898 million to build a factory in Shanghai.

The factory will start production within four years, the company said at the time.

The government shelved the chipmaker's investment plans, citing the nation's recovery from recession and a slower-than-expected economic rebound in the US, a local Chinese-language newspaper reported, citing a government official.

The government forecasts that the economy, which grew 4.77 percent in the third quarter, will grow 3.27 percent this year. The economy last year shrunk 2.18 percent, the nation's worst recession on record.

Huang denied the newspaper report.

"The application is being dealt with in the normal way," Huang said. "The economics minister will hold a meeting to approve it once the government units have no more questions and have submitted their suggestions."

The Mainland Affairs Council yesterday also denied the report, saying no high-ranking official at the council has ever asked the chip company to delay its plan to build a chip plant in China, it said in a statement.

Referring to the report, TSMC said it was unaware of a holdup in its application.

"We don't know anything about this," TSMC spokesman Tseng Jin-hao (曾晉皓) said. "We still maintain our position. We hope the government will give its approval soon."