Analysts and industry pundits slammed what they called a "non-decision" by the government on eight-inch chip plant investment in China, saying officials should focus more on what Taiwan's next big industry will be rather than simply stopping manufacturers from investing in China.
Premier Yu Shyi-kun announced last Friday that a committee would finalize the management policy expected to govern chip investment in China by the end of this month, and send it to the Legislative Yuan for final approval by May 10.
The question, analysts say, has always been "when" and not "if" chipmakers would be allowed to invest across the Taiwan Strait, and many expected the premier to set a firm date for opening, not simply for when the government will finalize its management plan.
"This is another way to indicate that they still don't have a decision on this sensitive issue," said Andrew Yang (
Investors are unsure how to take the premier's comments, as Taiwan's two top chipmakers, Taiwan Semiconductor Manufacturing Co (TSMC,
Entrust Securities chip analyst Henry Wang (
The government is trying to stem the outflow of industry to China. They have also seen their arch-rival grow stronger with the help of Taiwanese investments, even as Beijing continues to threaten Taiwan with an invasion.
Chipmakers want to take advantage of China's growing market and low-cost labor and land. They also want to head off competition from China's fledgling chipmakers.
The only indication on when chipmakers might be able to invest in China was given when the premier said the local industry would be allowed to build only three eight-inch wafer fabrication plants in China by 2005.
The long delay has already hurt Taiwan's chipmakers, analysts say.
New chipmakers are already sprouting up throughout China, like upstart Semiconductor Manufacturing International Corp (SMIC,
"SMIC, which was founded by a group of Taiwanese engineers, is fully booked for this year" in terms of orders for its chips, said Andy Xie (謝國忠), an Asia-Pacific analyst for Morgan Stanley Dean Witter. The company is planning to raise funds "that will allow them to expand very rapidly," he said.
Xie said SMIC is an example of how to curcumvent government policy.
The government has only been able to stop local blue-chip firms from moving to China by threatening their factories here, "but they have not been able to stop the small and medium-sized enterprises," Xie said.
Efforts to stem the flow of manufacturers across the Strait have hurt Taiwan.
Over US$50 billion has already slipped through the government's net over the past decade, and barriers to remitting profits back to Taiwan ensure that capital will remain abroad, Yang said.
It's easier to reinvest the cash in China, he said.
The government "must work on Taiwan's strategy for five years down the road, instead of just trying to slow down the exodus," Xie said.
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