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January 11, 2007 11:43 am

Taiwan to make more chips in China

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Promos, Taiwan’s second-largest memory chipmaker, expects to start mass production in Chongqing in Central China in the third quarter of 2008, the company said on Thursday.

The announcement follows the Taiwanese government’s long-awaited move last month to relax restrictions on semiconductor investment in China and give the green light for the mainland investment plans of Promos and Powerchip, its larger rival.

Taiwan has approved an initial investment of $365m. But it is understood that the total investment will reach at least double that amount. The government of the Chongqing municipality will shoulder part of the cost of the plant, and Promos will buy back shares in the venture from it later.

Ben Tseng, Promos vice president, said equipment would be moved to the Chongqing plant in the second quarter next year, and production would reach 60,000 wafers per month by the end of 2008.

Taiwan’s government strictly controls investment in infrastructure and technology industries in China because it is concerned that Taiwan will become too economically dependent on Beijing, which claims the self-ruled island as part of its territory.

Taiwan Semiconductor Manufacturing, the world’s largest contract chipmaker, is so far the only Taiwanese chipmaker with a manufacturing presence on the mainland. It gained government approval after Taiwan lifted its complete ban on chip investments in China in 2002.

Promos and Powerchip had initially been expected to gain approval soon afterwards, but this was delayed until Taipei put together a comprehensive review mechanism for big and sensitive investments in China late last year which helped silence domestic anti-China critics.

Taipei also said last month that it would allow chipmakers to upgrade their China plants to use mainstream 0.18 micron technology, which most of their Chinese competitors already have. Taipei had formerly demanded that its companies limit themselves to less advanced process technology in China.

Originally, the Taiwanese government had expected its chipmakers to move their older 8-inch capacity from Taiwan to China.

Mr Tseng said Promos would move its 8-inch plant from Hsinchu eventually but would buy new equipment for the first phase of its Chongqing plant first.

“We are still waiting for approval for using 0.18 micron in China, so we cannot possibly dismantle the plant here where it can run at 0.18 micron and build it up again in China to run at 0.25,” he said.

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