Feb. 27, 2003 – Hsinchu, Taiwan – Taiwan Semiconductor Manufacturing (TSMC) has become the first Taiwanese chipmaker to win approval to begin investing in a fabrication plant in China.

TSMC “may now legally invest in China”, Shih Yen-shiang, vice minister in Taiwan’s Ministry of Economic Affairs said.

The announcement clears the first hurdle in a process seen as a blueprint for future Taiwanese chip investments in China, reported the Financial Times. The government had conditionally removed restrictions on such investments last year. The company applied in September to invest US$898 million to build a 200mm wafer plant in Songjiang, near Shanghai.

But the government’s long-anticipated decision immediately provoked protest from the Taiwan Solidarity Union (TSU), a party whose votes are important for Taiwan’s minority government. “TSMC may not invest a penny in China before the second stage approval has gone through,” TSU Secretary General Lin Chih-chia said. The government had previously agreed to this in consultations with the TSU.

The final approval requires TSMC to prove its plant for 300mm wafer production in Taiwan has reached “mass production” output – a term still to be defined by an expert commission. That creates room for more political maneuvering, some critics fear.

A further area of contention is how the rules for future investments in China are to be fixed. The TSU said the government had promised to grant second-stage approval to TSMC only after a technology protection law had been passed.