The head of Taiwan's largest semiconductor company said yesterday he hopes the government will allow firms to begin operating in China so they can take advantage of its vast market.
"[Taiwan's chip industry] really hopes the government opens up and at least lets us get started in China. ... Why? There is only one reason, the market," said Morris Chang (張忠謀), chairman of Taiwan Semiconductor Manufacturing Co (TSMC, 台積電).
PHOTO: CHEN CHENG-CHANG, TAIPEI TIMES
Chang said Chinese companies typically shun chipmaking services from Taiwan because they can make purchases in China.
Cost is also an issue. Currently, the value-added tax on chips imported into China is 17 percent, versus the 6 to 7 percent tariff charged for chips imported into Taiwan. Analysts say the tariff will erode over time as China implements its WTO commitments. For now, the tariffs keep a lid on competition from places like Taiwan.
A large number of Taiwanese firms have looked to the Chinese market as a potential savior during the economic downturn. The market research firm Dataquest Inc predicts chip sales in China will expand by 6 percent this year, after declining 18 percent last year. The firm pointed out more chips were consumed in China last year, but too much competition and price erosion killed profits.
Chang said Taiwan's industry needs time to make a start in China, and hopes the government will allow companies to begin moving older, 8-inch chip-making gear across the strait. For TSMC, there is "no timetable" on when to set up a manufacturing plant in China, he said.
According to Chang Chun-yen (張俊彥), president of National Chiao Tung University, however, now is not the time for chipmakers like TSMC or rival United Microelectronics Corp (聯電) to move their manufacturing sites to China. The infrastructure there is inferior to Taiwan's, he said.
Some analysts agreed, pointing out that China currently has only one 8-inch wafer plant. Industries that produce chipmaking materials are as yet undeveloped in China, and there is not enough help available from chip equipment vendors yet, either.
In contrast, Taiwan has a mature infrastructure for the manufacture of 8-inch wafers, making it a prime location for the industry.
Still, TSMC's Chang is looking to the future and only asked for a chance to begin developing a presence in China. So far, the company has opened a liaison office in Shanghai in order to survey the market and make contacts. Back home, the company has one advanced 300mm wafer plant in production and one under construction, in addition to seven 8-inch wafer plants and two 6-inch plants.
He also debunked the myth that labor costs in China's tech industry are lower than in Taiwan, saying, "they are probably higher." Analysts agreed, saying that labor costs in the realm of 8-inch manufacturing may, in fact, be higher in China. Overall, though, costs are lower in China.
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