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Monday, 11 March, 2002, 10:39 GMT
Taiwan resists microchip move to China
People against Taiwanese semiconductor firms' plans to set up in China take to the streets in protest
People take to the streets in protest
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By Helen Leavey in Taiwan

Dr Hsu Wen is a worried man. The research and development manager at Taiwan semiconductor firm Asia Pacific Microsystems has been told his job is safe, but he is not sure for how long.

The 38-year-old, who is married with two young sons, is concerned about plans by some of the island's top chipmakers to set up eight-inch wafer production facilities in China.

Although Taiwanese businessmen have poured around $60bn into China in the last decade, the island's firms are currently banned from building chipmaking facilities across the Strait.

They are lobbying the government to have that rule changed. A final decision is expected towards the end of March.

An engineer at Taiwan Semiconductor Manufacturing Company
High-tech secrets

Dr Hsu believes that if these firms are allowed to set up on the mainland, other smaller companies in the same field will be forced to move as well, leaving him and thousands of others facing either unemployment or relocation to China.

"The 8-inch wafer business is one of the most competitive on the island. We have a very strong competitive edge over the rest of the world so we do not want it to go to China," he said.

"If the big companies go, so will many other smaller ones. Workers are worried they will have to move to China. But we want to stay in Taiwan."

The row over whether these firms should be allowed to go to China has rapidly become more than just a simple economic decision about how best to serve Taiwan's multi-billion dollar chipmaking industry.

Protecting technology

Politics has also crept into the argument. Pro-independence supporters, including former president Lee Tung-hui, don't want Taiwan to give China any eight-inch technology.

They believe this will tie Taiwan more closely to China and so give Beijing more leverage to its demands to reunify with the island, which it considers a renegade province.

This is something the government in Taipei is also worried about. That is part of the reason why it has so many limits on Taiwanese investment in China, and why it is thinking hard about the issue.

However, for firms such as Taiwan Semiconductor Manufacturing Company (TSMC) and United Microelectronics Corp (UMC) - the world's largest and second-largest maker of chips on a contract basis - the issue is about simple economics.

Continuing advances in the industry mean eight-inch wafer production is starting to be pushed aside by 12-inch production. This allows more chips to be made per wafer.

This development, and a slump in orders, means about one-third of Taiwan's 20-odd eight-inch facilities are currently idle.

Future success possible

But some of the island's semiconductor firms believe they can put their eight-inch technology to good use by moving some of it to the mainland, where they can find cheaper costs, a common language, and a huge potential chip market.

Frank Huang is president of the Taipei Computer Association, which represents 4,000 IT companies in Taiwan.

He said: "This is about economics and is nothing to do with politics. Can we really afford to stay out of China in the world today or forget about it? I don't think so. But the more debate and delay there is, the more it becomes about politics."

Wen Chi-hung, research director at the Taiwan IT think tank Market Intelligence Centre, added: "I think the government should let these firms go to China. There are some competitors in China just starting to get established."

"If our government doesn't allow firms to go there, maybe competitors will catch up and get bigger and become a real threat."

But the call to keep the issue focused on economics is not one being heard by everyone.

Taking to the streets

On 9 March, hundreds of people carrying banners and flags, including Dr Hsu, took to the streets of Taipei to protest at the firms' plans to set up eight-inch wafer production in China.

Government ministers appear set to allow the move, but with heavy restrictions.

In an indication that she supports the companies' proposals, Vice-President Annette Lu said: "No matter where Taiwan's capital goes, the most important thing is that the money will return here."

But whatever the final decision is, it is certain not everyone will be happy.

See also:

13 Aug 01 | Business
Taiwan to free up China investment
06 Dec 01 | Business
When the chips are down
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