June 8, 2009 – Multiple media reports indicate Taiwan authorities are mulling over plans to relax restrictions on local companies investing in leading-edge chipmaking operations in mainland China.

Taiwan has for several years restricted chipmakers on the island to transferring 200mm/0.18μm process technology to the mainland, and only if they have 300mm fabs already running on the island; several memory firms and TSMC are among those who have taken advantage or filed to shift some operations. Firms have been hungry to gain a foothold in China, where demand is spiking — and where both domestic IC suppliers (led by SMIC) and international firms (e.g. Intel, Hynix) have not the same level of restriction.

President Ma Ying-jeou, who was elected president in March 2008 amid expectations of more liberal relations with the mainland, is now quoted by regional news as saying Taiwan is “not excluding the possibility” of relaxing the rules to allow transfers of more leading-edge 300mm chipmaking to the mainland.

“We are not ruling out allowing our 12-inch wafer fabs to go to China. The economics ministry is currently evaluating this plan,” Ma Ying-jeou said, quoted by Reuters.

Key thinking behind the policy shift is the recognition that 300mm chip operations have been “globalized” beyond Taiwan’s borders. Yang Chiung-ying, caucus whip for the ruling party KMT, quoted by the Taiwan Economic News, pledged the party’s support, noting that globalization has accelerated the flow of capital across borders and the Taiwan government “should not prohibit businesses from exploring overseas markets.” The Taiwan Economic News also noted support for the plan from John Hsuan, designated head of the proposed Taiwan Memory and vice-chair at UMC — which after withstanding ~3 years of government scrutiny recently voted to take over its 200mm Chinese partner He-Jian, and would doubtless welcome a relaxed 300mm policy.

While domestic semiconductor firms generally agree that widening the policy to 300mm will be helpful, opposition leaders — who prior to Ma Ying-jeou instituted and maintained the 200mm/0.18μm rules — suggest that Taiwan’s 300mm chipmaking prowess is its “economic lifeline”, and shifting even some of those operations to the mainland will result in massive losses in profits and jobs (either layoffs or “brain drain”), and ultimately an “eradication” of the local industry, notes the Taiwan News. The Taipei Times listed similar objections from the Democratic Progressive Party spokesman Cheng Wen-tsang, who warned that lifting the 300mm ban would hand the leading chipmaking position to China.