Wed, Jul 26, 2000 page18

• ASE plan to set up shop in China adds to debate

  TECH TRANSFER The chip packaging and testing company wants to set up in China, adding pressure on the government to loosen rules on cross-strait trade

  • By Cybil Chou / STAFF REPORTER
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  Chang Hung-ben (張洪本) chairman of Advanced Semiconductor Engineering Inc (ASE, 日月光半導體製造股份有限公司) announced recently that his company would consider setting up an IC chip packaging and testing company in China, once the government loosened the current ban on Taiwan investment in that country's semiconductor industry.

  ASE is the first Taiwan company to officially announce plans to invest in IC packaging and testing in China, with an investment thought to be up to NT$7 billion, pending approval of the government.

  The government is concerned the announcement by ASE, the world's second largest chip packaging and the world's largest chip testing firm, may encourage other semiconductor industry players to follow suit.

  Investment in China's semiconductor industry is prohibited to protect core industry technologies in Taiwan.

  Motorola Inc, the world's second-largest mobile phone maker recently said it is in discussions with China to invest up to US$2 billion to equip a chip plant. Other chip makers, including Japan's NEC Corp have also looked to build factories in China.

  Industry representatives have expressed concern that competitors setting up chip factories in China will undermine Taiwan companies' competitiveness on the Chinese market, given the tariffs on exported chips to China.

  Seeing that the movement toward setting up high-technology manufacturing sites in China as an inevitability, Minister of Economics Lin Hsin-yi (林信義) recently promised that the government would review relevant restrictions on investment.

  "Lifting restrictions is better than tightening regulations," Lin said.

  Lin said internationalization of industries is an inevitable trend, and it is crucial for industries to maintain international competitiveness by utilizing global operations strategies, including utilizing resources in China and its lucrative markets after its accession to the WTO.

  According to the Investment Commission under the Ministry of Economic Affairs (經濟部), high-tech investment in China during the first five months this year has reached US$1 billion, which marked a year-on-year US$ 400 million increase and a jump of 141 percent.

  Investment in Jiangsu and Guangdong provinces accounted for 48 percent and 31 percent of Taiwan's high-tech investment in China, respectively, with the remainder going mostly to Fujian Province.

  Other than semiconductor industry players like ASE, major notebook computer manufacturers, for example, are also eagerly anticipating the government's approval to set up factories to manufacture notebook computers in China.

  Current regulations only allow investment in manufacturing PCs less sophisticated than 486 models.

  Local media reported that computer manufacturers, trying to seize the lucrative notebook computer market in China, have aggressively set up operations to make motherboards, monitors and desktop PCs and PC peripherals, which are already allowed to be manufactured in China.

  Officials at Quanta Computer Inc (廣達電腦), Taiwan's leading notebook PC maker, said the company is considering investing in China to make peripherals, such as motherboards and denied media reports that the investment is a move to make notebook computers, saying such manufacturing is not yet legally approved by the government.

  Currently, local investment in China falls into the categories of approved, case by case and prohibited. Prohibited investment is in products estimated as a potential national security threat, such as core technologies.

  Officials at the Investment Commission said authorities have completed the draft of a revision of policies for investment in China, with several restrictions to be lifted. One may be the opening of investment in packaging and testing of 6-inch wafers.

  Taiwan Semiconductor Manu-facturing Corporation (TSMC, 台積電), the country's leading chip maker, would likely be forced to follow the crowd to invest in China.

  In response to the anticipated loosening regulation on investment in the semiconductor industry, however, Morris Chang (張忠謀), chairman of TSMC, recently said that new investments would be mainly based in Taiwan for the next 5 to 10 years.

  According to MOEA statistics, over 50 percent of Taiwanese businessmen would consider increasing their investments in China.

  The exodus of Taiwanese high-tech firms has triggered widespread concern in the government over the narrowing margin over China in the island's industrial base.

  "It is difficult for the government to maintain the competitiveness of local industries by restricting the transfer of high value-added technology to China if the local investment environment is less competitive than in China," said Fu Feng-cheng (傅豐誠), research fellow of the China Institute of Economic Research (中華經濟研究院).

  Fu explained that while Taiwan now has an advantage in high-tech expertise over China, it is possible that China will eventually obtain more sophisticated expertise from other countries in exchange for the lure of its huge market.

  To help local industries maintain competitiveness, more effort will have to go into providing investment incentives at home, Fu added.

  For your information

  The issue, at a glance

  * Advanced Semiconductor Engineering has said it will invest in IC facilities in China * The plan follows closely similar announcements from Motorola Inc and Japan's NEC * Industry representatives have been concerned that global competitors will get to the China market first, undermining Taiwan companies
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