The race is on to build China into the next semiconductor powerhouse, and although Taiwan's government forbids cross-strait investment in the sector, Taiwanese chip firms are hoping for a piece of the action.
Taiwan's political nemesis already has around a dozen semiconductor manufacturing plants. Motorola Inc, NEC Corp and other foreign firms have joined China's nascent chip industry, which includes Semiconductor Manufacturing International Corp (
Domestic consumption of semiconductors in China is expected to grow in line with production. By 2005, China's consumption of semiconductors is projected to reach US$41 billion, up from around US$15 billion this year, according to the China Center of Information Industry Development.
China's state-run Xinhua News Agency reported last week that China imported US$16.6 billion's worth of microchips last year, a 25 percent increase over 2000, while it exported US$2.5 billion in chips, a 10 percent drop over the same period.
Many of the chips imported were not for domestic consumption, instead going into export-bound computers and other electronics products. China exported US$13.1 billion in computers last year, up 19 percent from the previous year.
By contrast, Taiwanese officials reported last week that revenues at the Hsinchu Science-based Industrial Park (新竹科學園區), dropped 28.7 percent year-on-year last year to NT$662.5 billion (US$18.9 billion).
Falling revenues at the Hsinchu park were exacerbated by slumping chip sales, which make up 60 percent of the park's revenue. Sales of chips fell 35 percent year-on-year to NT$376.9 billion because of the global tech slump.
The same tech slump is sending companies scrambling to China for cheaper land and labor and the other perks that allowed China's electronics industry to continue expanding in a weak global market.
As more mobile phones, CD-ROM and DVD players, computers and other gadgets are produced in China, the chips that go into these products will likely be made there as well.
Taiwan's chip industry also developed in line with its information-technology industry. But now China's IT sector has overtaken Taiwan's, leaving Taiwan as the fourth largest IT manufacturer behind the US, Japan and China.
Led by powerhouses Taiwan Semiconductor Manufacturing Co (TSMC,
A future where Taiwan's chip industry is dominated by China's is precisely what government officials here want to avoid. The government has already put off deciding whether to allow local chipmakers to invest in China three times.
Lin Hsin-yi (
Such a delay could allow rivals to Taiwan's top two chipmakers to win over China's fledgling industry.
Chartered Semiconductor Manufacturing Co (特許), the world's third largest contract chipmaker behind TSMC and UMC, has already announced technology partnerships with two firms in China and plans to run two technology forums in China next month, which analysts say should help it cement more new business relationships ahead of TSMC and UMC.
The brightest spot for the local chip industry versus that of China appears to be in chip design.
The production value of Taiwan's emerging chip-design industry is expected to grow 24 percent to NT$148 billion (US$4.23 billion) this year from NT$119.2 billion (US$3.41 billion) last year, according to the Ministry of Economic Affairs.
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