TSMC has no plans for 12-inch chip factory in China

Taiwan Semiconductor Manufacturing Co. has no plans to build an advanced 12-inch chip factory in China, nor has it made any investments in Chinese chip design companies, the company said in half page advertisements on the front page of some of Taiwan's largest newspapers Wednesday.

Free IT resource Virtualization Insights from Top Experts - Learn how virtualization gets real! Sponsored by Dell Free IT resource Try Sun servers, workstations and storage products free for 60-days. Sponsored by Sun Microsystems

The world's largest contract chip maker made the statements in response to local reports in Taiwanese newspapers that had speculated on TSMC investment in some Chinese chip design houses. The reports caught the Taiwan government's attention and prompted TSMC to explain its position.

Plans to invest in China's semiconductor industry are highly scrutinized in Taiwan, which sits just 160 kilometers (100 miles) off the coast of its enemy. The two separated in 1949 after civil war, and Beijing has long threatened to take the island by force if it moves toward independence. The government of Taiwan, which is far more technologically advanced than its developing neighbor, created a number of rules governing investment in China's chip industry for fear the technology could be used by China's military and due to the possibility of job losses on the island.

"TSMC wants the government to let it use 180-nanometer technology in China, so they're trying to show the government that they abide by all of its rules," said James Huang, a chip industry analyst at SinoPac Securities in Taipei, on why the company might have placed the advertisement. Taiwanese companies have asked the government for permission to use 180-nanometer production technology in China, a more advanced manufacturing process than the 250-nanometer technology currently allowed.

TSMC said it wanted to clear up any possible public misunderstanding regarding reports in local newspapers that had speculated on such investments.

"TSMC's investment and technology transfer in mainland China fully abides by all regulations of the (Taiwan government)," TSMC said.

Two venture capital funds affiliated to TSMC, the Emerging Alliance Fund and VTAF II Fund, have made no investments in Chinese companies, TSMC said, adding they will abide by government rules if they do make any investments.

Recent allegations of Taiwanese companies skirting regulations and investing in China's high-tech sector have caused Taipei to slow its opening of such investment to China. Taiwanese companies still aren't allowed to build chip assembly facilities in China, for example, and two more companies have applied to build chip factories, plans which appear to be in limbo despite the fact that the applicants already fulfill the legal requirements.

TSMC is the only Taiwanese chip maker that's gone through the approval process and legally set up a plant in Shanghai.