March 26, 2002 – Taiwan – US export laws may play a small role in the controversy surrounding plans to allow Taiwan’s semiconductor companies to expand into mainland China.

While Taiwan continues to debate the pros and cons of allowing chipmakers to open fabs across the strait, restrictions that the US puts on the export of technologies into mainland China with potential military applications have direct impact on what technology Taiwan will be allowed to export, reported the Financial Times.

As most semiconductor manufacturing equipment is exported from the US, the terms of US export laws are taken into account. The laws are aimed at keeping advanced US technologies, that could be used for nuclear weapons production, out of the hands of the Chinese military.

The Federal Bureau of Export Administration, under the US Department of Commerce, separates nations into a four-tier system by which it governs technology exports. The first tier remains quota free and applied to mostly Western European countries. The second tier, into which Taiwan finds itself, has restrictions, although they remain limited.

Mainland China is listed in the third tier, along with the former Soviet republics, and many Middle East countries. This tier has more rigid restrictions. But the fourth tier, consisting of Iraq, Iran, Libya, North Korea, Cuba, Sudan, and Syria, strictly prohibits exports of technology.

Companies that ignore these restrictions are subject to fines and entire countries may find a readjustment of tier placement if these limits are ignored.

China’s industry is not sophisticated enough to develop 300mm wafers, and the US and other chipmaking nations have agreed not to provide China the technology, citing security concerns, both militarily and due to rampant piracy.