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Allowing IC firms to move to China could be disastrous: forum

Relaxing the restrictions on Taiwanese wafer and plate foundries that move to China could cause disastrous damage to the economy, because it is not only the most profitable industry, but also at the core of the country’s high-tech industry, former government officials and academics warned yesterday.

The warning came at a conference organized by Taiwan Thinktank in response to the policy change announced by the Ministry of Economic Affairs in September that wafer and plate fabrication industries would be allowed to move to China.

The plans are already in the discussion stage and the conclusions will be announced before the end of the year, the ministry said.

“Design and fabrication of 12-inch wafers and plates are the powerhouses behind Taiwan’s economy — the annual profits of the entire integrated chip [IC] industry in the country is about NT$1.2 trillion [US$37 billion], and wafer and faceplate production alone accounts for one-third of it,” former minister of economic affairs Ho Mei-yueh (何美玥) told the conference. “Once such powerhouses are gone, what do we have to fill such a big hole?”

Ho said that wafer and plate foundries were able to create such tremendous profits because the industry is not only about fabrication.

“When a foundry receives an order, it goes out to find a local IC design firm to design the product, buys raw materials locally and tests the product locally,” she said. “When the foundries are gone, it means all those related industries will have to go with them.”

“Taiwan is the second-largest wafer producer in the world after the US, with a global market share of 69 percent, while the Chinese market only accounts for 19 percent. Why not go somewhere else if ‘close to the market’ is such a big factor?” she said. “Wafer foundries in this country get most of their orders from the US and they ship the products back to the US. I don’t see why we cannot follow the same procedures with the Chinese market, especially when we’re geographically so close to each other.”

Business consultant Chien Yao-tang (簡耀堂) said the government may have overestimated the importance of the Chinese market.

“If you remember, in 2000 when Semiconductor Manufacturing International Corp [SMIC] was founded in China, many people despaired, saying if the government didn’t lift the ban on wafer manufacturers moving to China, Taiwanese manufacturers would not be able to get a share of the Chinese market and would be left behind in the global market,” Chien said. “Ten years have passed, the Chinese IC market has been growing, but SMIC has not made a profit, except for one year, even with all the support it receives from the Chinese government.”

Former Executive Yuan adviser Hsiao Chiu-teh (蕭秋德), on the other hand, said he suspected that the government knew nothing about the industry.

“They think the semiconductor industry is like any other low-threshold, labor-intensive industry, like making PCs or umbrellas, that can easily be moved to another country,” Hsiao said. “In fact, the semiconductor industry has highly sensitive technologies at its core that are kept top secret by countries able to manufacture the products.”
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