Taiwan eases curbs on firms setting up chip foundries in China

Taipei

TAIWAN has relaxed curbs on its companies setting up semiconductor manufacturing plants in China, in a bid to enable them to compete better for mainland clients.

The island's economics ministry said it will allow a maximum of three wholly owned 12-inch wafer foundries to be set up in China by Taiwanese companies, easing previous rules that limited such investments to mostly older technology and to joint ventures.

Amid political tensions between the neighbours, Taiwan has restricted manufacturing activities of its prized semiconductor sector in China, with an eye to protecting intellectual property and trade secrets. But competition from China's fast-growing fledgling chip industry has put pressure on Taiwanese companies to widen their mainland footprint.

And foreign companies are also building their presence in the mainland. While Samsung Electronics already has a huge chip plant in China, Intel and Qualcomm have announced investments in China.

As a result, Taiwan Semiconductor Manufacturing Co (TSMC) and its smaller domestic rivals had urged the island nation to relax the curbs.

China views self-ruled Taiwan as a renegade province and has not ruled out the use of force to bring it under its control. But relations have improved in recent years.

The relaxation was detailed in revised regulations posted on the ministry's website that took effect on Friday. Taiwan already allows 8-inch plants, which tend to use less cutting-edge technology, to operate in China as joint ventures.

TSMC, the world's largest contract chipmaker, has said that its Chinese clients would prefer to work with the company in China and that it could see itself expanding production in China. A TSMC representative said on Tuesday that the company was still evaluating the potential of setting up a new 12-inch plant in China.

The new investments would come at a time when Beijing is keen to attract foreign capital and foreign chip technologies into the country. REUTERS