November 15, 2006 – After months of pressure from domestic chipmakers, the Taiwan government says that by year’s end it will lower the restrictions for transferring process technologies to mainland China to 0.18-micron, from the current 0.25-micron level.

Taiwan chipmakers have urged their government to relax restrictions on chip technology transfers to mainland China, as the Chinese chip industry starts to get on its feet, led by flagship foundry Semiconductor Manufacturing International Corp. (SMIC), which already offers 90nm process technologies on 300mm wafers, and has signed global customers including Freescale, Qualcomm, Broadcom, and TI away from Taiwan rivals TSMC and UMC, according to the Taiwan Economic News.

Under the Wassenaar Agreement, Taiwan chipmakers are allowed to make chips outside the nation using 0.18-micron processing technology, but since 2002 Taiwan policy has restricted such investments in China to 0.25-micron, and any chipmakers applying for permission to move older 200mm sites must have operating leading-edge 300mm fabs in Taiwan with volume production for at least six months. Only TSMC has received the green light for such investments, and the foundry has also pushed for relaxing the rules to 0.18-micron transfers. Powerchip and Promos recently revised their requests to invest in mainland chipmaking facilities capable of 0.18-micron process technologies, after government delays in reviewing their requests for 0.25-micron investments.

In an interview with the Associated Press, Executive Secretary Huang Chin-tan of the Investment Commission under the Ministry of Economic Affairs (MOEA) indicated that a preliminary consensus has been reached with other ministries and the Cabinet-level Mainland Affairs Council regarding the ProMos and PowerChip applications, and the consensus also is leaning toward removing the ban on 0.18-micron process technology transfers.

Once the ban is lifted, TSMC will be the first to benefit, converting its 200mm fab in the mainland from 0.25-micron to 0.18-micron, after starting to move the equipment this summer in anticipation of the policy change, the paper noted.

Rupert Hammond-Chambers, president of the US-Taiwan Business Council, said in a statement that Taiwan’s willingness to relax its China investment regulations will strengthen domestic chipmakers’ competitiveness. “A competitive presence in China will assist Taiwan in becoming the manufacturing partner of choice for the Chinese market,” he said, adding that there also will be benefits from greater supply-chain integration with their global customers and suppliers, many of whom are already established within China.

However, Taiwan’s move to open technology transfers to China is not without precedent — and that’s not necessarily good news. Back in April, Taiwan said it would allow packaging and testing companies to invest in China, but as yet no licenses have been granted, Hammond-Chambers pointed out.

Reports surfaced in early October that Taiwan policymakers were narrowing their timeline for revisiting the restrictions. But Taiwan officials have been quietly approaching the negotiations, however, with opposition to the revision from the Taiwan Solidarity Union, a promoter of Taiwan independence.