Taiwanese chipmakers want more liberal policy toward China investment


TAIPEI, Taiwan — Taiwan’s two largest chipmakers have urged the government to relax restrictions on chip investments in rival China, warning that they could lose their competitive edge because of a ban on building state-of-the art production lines on the mainland.

The appeals by Taiwan Semiconductor Manufacturing Co. and United Microelectronics Corp. followed a district court ruling Friday acquitting UMC’s former chairman of breaking a Taiwan law by illegally setting up a chip company in China.

TSMC is the world’s largest producer of made-to-order chips, followed by UMC.

Taiwan tightly guards the export of chip-making technology for fear of losing its dominance in the global semiconductor industry. The government only permits chipmakers to invest in 0.18 millimeter chip production in China.

UMC Chairman Jackson Hu urged the government to relax the restrictions, noting Intel Corp. is planning to upgrade its Chinese chip facilities to 90- and 65-nanometer productions.

Echoing him, TSMC Chairman Morris Chang warned Saturday that Taiwan could lose its leading edge in chip production, noting the company’s less advanced Chinese production lines have failed to keep up with the demand by its clients.

Taiwan and China split amid civil war in 1949, and Taiwan fears its state-of-the-art technologies could benefit its rival.

Hu also said authorities should further allow the company to own a minority stake in China-based HeJian Technology Co. after the court found company executives not guilty of breaching shareholders’ trust in providing technology, financial assistance, and transferring chip orders to HeJian.

“Our two companies will cooperate closer from now on,” Hu told reporters late Saturday on the sidelines of a company sports event.

HeJian, set up in 2001 by former UMC employers, earlier offered UMC a 15 percent share in the company in exchange for its technical assistance.

Before the indictment, UMC executives accused Taiwanese leaders of ordering the probe against the company to discourage large-scale Taiwanese investment in China. Such investment now amounts to more than US$100 billion (euro70 billion).

Many Taiwanese firms have tried to escape the government’s investment restrictions by seeking public listings in Hong Kong or setting up subsidiaries in third countries.

Friday’s court ruling – being appealed by prosecutors – could add pressure on Taiwan’s independence-leaning leaders to take a more liberal policy toward investing in China.

However, Premier Chang Chung-hsiung said authorities will wait for a higher court’s final verdict before making any possible policy changes.