Thu, Feb 27, 2003 - Page 1 News List

TSMC gets China go-ahead

TOUGH DECISION The investment commission has approved the chipmaker's first stage of its China development project despite political reservations

By Bill Heaney  /  STAFF REPORTER

The Investment Commission yesterday gave the green light to plans by Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the nation's top chip-maker, to construct a factory in China.

With the commission's approval yesterday, TSMC can now transfer to China up to 6 percent, or approximately US$50 million, of the planned total investment to set up TSMC (Shanghai) Ltd.

The first cash injection will be used to prepare the building that will eventually house the semiconductor manufacturing plant, or fab.

"Taiwan Semiconductor Manufacturing Co has fulfilled the requirements for the first phase of investment in China," Vice Minister of Economic Affairs Shih Yen-Hsiang (施顏祥) told the press yesterday morning.

"TSMC can now legally invest in China," he said.

TSMC spokesperson Tzeng Jin-hao (曾晉皓) said yesterday that the timetable for the second phase will depend on TSMC. The company now plans to meet with the Shanghai government -- which has already prepared land for the project at the Songjiang Industrial Park on the outskirts of the city -- to sign an official agreement launching the project, Tzeng said.

Equipment will be moved to the plant when "local market conditions are right," Tzeng said yesterday, without elaborating.

In March last year, the government lifted a decades-old ban on investing in semiconductor plants in China.

Last month, a government review body gave TSMC preliminary approval to invest in an 8-inch wafer fab in Shanghai, but passed the case to the ministry's Investment Commission to verify where the company would find the majority of funding for the US$898 million plan.

The ministry was concerned too much money would be moved out of Taiwan in one go. TSMC has promised to use foreign exchange holdings for the investment.

Fearing the loss of advanced technology to rivals in China, the government has stipulated that currently only obsolete 8-inch equipment can be moved across the Strait.

TSMC has pledged to invest NT$200 billion in Taiwan to build three more 12-inch wafer fabs over the next five years to convince the government that the most advanced technology will remain in this country.

Originally TSMC planned to begin mass-producing chips in China by the end of this year. China's semiconductor market is expected to be the second largest in the world after the US by 2004, US-based tech research firm International Data Corp (IDC) reported on Monday.

At TSMC's last investors' conference, chairman Morris Chang (張忠謀) said that date is now more likely to be the second half of next year. The delay is not expected to hurt the company as it has the technological edge over its rivals in China.

"TSMC realizes that China's market potential is not going to expand very rapidly," said Rick Hsu (徐禕成), a chip-industry analyst at Nomura International in Taipei.

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