The TSU is claiming victory in its battle with the DPP-led government over whether to allow Taiwanese chipmakers to set up eight-inch wafer fabs in China.
On Monday, party officials told reporters the Cabinet has agreed to consider its proposal that the measure be delayed until 12-inch wafer manufacturing in Taiwan is fully ramped up.
PHOTO: LIAO RAY-SHANG, TAIPEI TIMES
In exchange, the TSU cancelled a protest against the government's plan that was scheduled for Friday.
"It is not the TSU but the Cabinet that has budged on the issue," TSU Chairman Huang Chu-wen (黃主文) said late Monday night.
"I would not use words such as `win' or `lose' to characterize the development. Instead, it appears to me the government has at last realized what it should do," Huang said.
The TSU has argued that 12-inch wafer manufacturing -- still in its early stages in Taiwan and around the world -- should reach full speed before eight-inch fabs are allowed to migrate to China.
There are 23 eight-inch wafer plants in Taiwan that produce 80 percent of the nation's chip-production value. Three 12-inch wafer plants account for 12 percent.
According to TSU lawmakers, Premier Yu Shyi-kun agreed to consider the TSU's position in a meeting on Sunday.
"The government will go ahead and declare at the end of this month that restrictions will be eased," TSU legislative whip Lo Chih-ming (
"But chipmakers will have to wait for a certain period of time before they can set up eight-inch wafer foundries across the Strait," Lo said.
Lo said legislation to create an agency to monitor the flow of technology to China would also have to be passed.
In addition, the TSU says the Cabinet has agreed to develop ways to monitor private-sector investment in China and solicit opinions from the party before the measures are finalized.
The party says it has agreed to call off Friday's protest because of the concessions it has gained from the Cabinet.
Small, but influential
Despite its small size -- the TSU has just 13 seats in the legislature -- the party has spoken with a loud voice on the eight-inch wafer issue. The DPP government has been forced to listen because it needs its pan-green ally in stand-offs against the pan-blue camp consisting of the KMT and PFP.
TSU spiritual leader and former president Lee Teng-hui (
An inter-ministerial task force plans to announce its recommendations on the issue at the end of this month.
Earlier, key panelists, notably Lin Hsin-yi (
But officials have been quiet about its intentions recently, leading TSU members to say they've won. "We don't hear such statements lately, do we?" Huang said.
Still, chipmakers remain upbeat, saying the government is sympathetic to their cause and recognizes that globalization is a trend.
Gordon Chen (
At the heart of the debate is whether chipmakers should be allowed to move aging eight-inch manufacturing equipment to China, where a nascent semiconductor industry is beginning to grow.
Globalization vs. National security
Both Taiwan Semiconductor Manufacturing Co (
Chip executives note that eight-inch wafer technology isn't unique to Taiwan. If they don't go to China, they argue, competitors from other countries will get their first and seize the lead in the Chinese market.
There are four eight-inch wafer fabs today in China. While 0.25-micron manufacturing is common, two of those fabs have said they plan to make chips with linewidths of 0.18 microns.
Shanghai-based Semiconductor Manufacturing International Corp plans to license 0.18-micron processing technology from Japan's Toshiba Corp and Singapore-based Chartered Semiconductor Manufacturing, according to reports.
Hua Hong NEC Electronics Co Ltd, a partnership with Japan's NEC, also wants to make chips using the 0.18-micron process. The company makes chips on a contract basis, competing with TSMC, UMC and Chartered.
Lee Yuan-tseh (
"If they can maintain their price structure for eight-inch wafers, they will help Taiwan chipmakers to preserve their competitive edge and will have great opportunity to absorb the majority of orders in the Chinese market," he said in an open letter recently.
Doubts linger
Still, worries over national security remain. Politicians and scholars fear China is attempting to lure Taiwanese businesses across the Strait in an attempt to gain leverage over Taipei.
Huang Tien-lin (
Huang argues that Taiwan's "silicon shield" ensures the nation help from the US in case of an attack, and that shield will be maintained as long as the US computer industry is dependent on Taiwan for original equipment manufacturing.
Liu Chin-hsin (
Ultimately, China aims to clone Taiwan's IT industry as a part of its own economic program. "That explains why China has lured professionals across the Strait," Liu said.
Lin also backs the TSU line that 12-inch wafer foundries should reach full production before eight-inch fabs are allowed to cross the Strait.
Taiwanese chipmakers have said they plan to build 10 more 12-inch wafer fabs in Taiwan within the next five years. That's expected to create an estimated 20,000 jobs, more than enough to compensate for job losses as the result of any cross-strait migration.
Walking the tightrope
Seeking to strike a balance, the government has indicated it plans to give conditional approval for migration by local chipmakers.
"The key lies in whether the government can effectively regulate China-bound investment," Premier Yu Shyi-kun said earlier.
Under a preliminary management plan, chip firms must keep their base of operations in Taiwan. The amount of capital they are allowed to invest in China will be determined by their total net assets.
A chipmaker with less than NT$5 billion in assets will be allowed to invest 40 percent of the value of its assets in China. Those with between NT$5 billion and NT$10 billion in assets will be allowed up to 30 percent. A company with assets above NT$10 billion will be allowed to invest 20 percent of the value of its assets in China.
With NT$270 billion in assets, TSMC would be allowed to invest NT$55.5 billion. UMC, with NT$230 billion in assets, would be allowed up to NT$47.5 billion.
The cost of building a new eight-inch plant is around NT$35 billion, while moving used equipment into a plant would lower the cost to NT$22 billion.
In Taiwan, the highest technology in use today is found in 12-inch fabs using 0.13-micron processing technology. But investors would be limited to setting up eight-inch fabs in China that use an etching process of 0.25 microns or larger.
There has been speculation that TSMC and UMC will not be allowed to invest in China until next January, which means 2004 will be the earliest that their eight-inch fabs can reach full production.
But market watchers say demand for eight-inch wafers will peak in 2005 and then start to decline.
Jeffrey Koo (
"If the government continues to ban the nation's chipmakers from investing in China for another two years, they may as well not even bother. Because by that time, it will be too late," Koo said.
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