Chang's change of heart sign of China's chip boom

Morris Chang (張忠謀) was born in China, but unlike some Chinese emigres, he feels little desire to return.

"There's a big gap between what I'm used to, and what China has become," Chang said at his company, Taiwan Semiconductor Manufacturing Corp (TSCM), which sits in this vast science park.

In addition to being a longtime China skeptic, Chang, 70, is arguably the most influential technology executive in Taiwan. He has spoken often of his belief that China, despite becoming a hotbed of computer manufacturing, was not ready to compete in the more advanced business of integrated circuits.

So when Chang declared recently that the future of the world's chip industry was not in Taiwan -- or the US -- but in China, political and business leaders here sat up and took notice.

WTO entry

Chang's conversion was well-timed. On Sept. 17, China cleared the last hurdle in its 15-year quest to enter the WTO. The next day, Taiwan received clearance to join the WTO, the club of trading nations.

Experts say this will accelerate China's emergence as a technology power. It will also deepen the commercial ties between the China and Taiwan.

Chang's change of heart is the latest sign of how China's economic rise is roiling Taiwan. What started in the 1980s as a trickle of companies moving to China has turned into a torrent as the initial wave of small-time garment or footwear makers eager to tap China's cheap labor has spread to Taiwan's biggest and most sophisticated companies.

For years, Chang was not impressed by the talk of a new economic giant in the east. He says he believed -- based on a career at Texas Instruments, and 16 years in Taiwan, helping to build its technology industry -- that China was not yet ready to succeed.

But that was before Shanghai became home to two chip ventures started by Taiwanese entrepreneurs. One of those, Semiconductor Manufacturing International, is run by Richard Chang, who sold his Taiwan operations to TSMC last year. Richard Chang (張汝京), who is not related to Morris, has since lured away 50 of TSMC's engineers.

"I thought it would be very tough for these ventures to succeed," Morris Chang said. "But then our engineers started going over to them. That changed my thinking."

Now, Chang is rushing to establish a liaison office for TSMC in Shanghai. He says his company, the world's largest contract manufacturer of chips, is now likely to build plants in China.

Government climbs aboard

Even Taiwan's government, which has tried to stem the exodus with strict limits on the amount of money local companies can invest in China, now recognizes that its commercial future is tied to China's.

"We see the need for Taiwanese firms to expand into China," said Tsai Ing-wen (蔡英文), the chairwoman of the government's Mainland Affairs Council.

"A lot of people say Taiwan has to open up, otherwise its economy will suffer. There is a need to establish momentum."

Last month, Taiwan's president, Chen Shui-bian (陳水扁), accepted the recommendation of a government-business commission to scrap a US$50 million limit on investments in China.

The decision ends a policy known as "no haste, be patient," which had been adopted by Chen's predecessor, Lee Teng-hui (李登輝), who viewed the flow of capital to China as a threat to Taiwan's security.

In some ways, the lifting of investment curbs is merely a recognition of reality.