Taiwan Semiconductor Manufact-uring Co (TSMC, 台積電) and Advanced Semiconductor Engin-eering Inc (日月光半導體) may be forced to delay more than US$1.1 billion in chipmaking investments in China after the election of President Chen Shui-bian (陳水扁) ended in dispute, investors said.
Chen did not allow TSMC and other chipmakers to start production in China during his first term, after pledging before 2000 to let local firms open factories in China.
TSMC, the world's biggest so-called foundry, which makes chips based on customers' designs, aims to start the country's first chip plant in China by the end of this year to compete with Shanghai's Semiconductor Manufacturing International Corp (
"There's only one area where politics may actually matter: in some of the industries like the foundries," said Andrew Tan, who manages a US$100 million Taiwan equity portfolio at Tokio Marine Asset Management in Singapore.
"There were expectations that if [Chinese Nationalist Party (KMT) Chairman] Lien Chan (連戰) had won this election, probably these guys could go in," he said.
"TSMC would like to go to China as soon as possible," said Albert King, chief investment officer of Prophet Capital. "Semiconductor Manufacturing has put a lot of pressure on them."
China's chip market will increase by 30 percent to US$38 billion this year, according to market researcher Gartner Inc.
Taiwan's chipmakers want to move some production to China to be closer to customers such as mobile phone and personal-computer manufacturers.
"Chen's election would definitely be more negative for Taiwan's chipmakers," said Dan Heyler, a Merrill Lynch analyst.
The Chinese government is setting up a factory building for TSMC in the Shanghai suburb of Songjiang. The company plans to move in depreciated production equipment from Taiwan in a US$898 million facility to compete with new rivals in Shanghai such as Semiconductor Manufacturing and Grace Semiconductor.
Semiconductor Manufacturing's next-door neighbor, Grace Semiconductor, started production in December and plans its initial share sale by the end of this year.
TSMC expects that the old equipment it will move to China, on which has it recouped its investment, will be more cost competitive than Semiconductor Manufacturing's new machinery.
The Taiwanese chipmaker got approval in principle from the Chen administration last year, but still awaits a green light to move the equipment to China.
"At this point, we still expect to start production in China by the end of this year," said TSMC spokesman Tzeng Jinnhaw (
Other chipmakers in Taiwan, such as United Microelectronics Corp (
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