Taiwan’s Investment Commission on Wednesday gave Taiwan Semiconductor Manufacturing Co. (TSMC) approval to build its first 12-inch wafer fab in Nanjing, China.

The Nanjing facility would be able to produce up to 20,000 12-inch wafers per month and would start commercial production of 16 nanometer process technology in the second half of 2018, according to TSMC.

Before TSMC is allowed to send equipment to Nanjing for the 12-inch wafer fab, it must furnish proof that commercial production on the more advanced 10 nanometer process has begun in Taiwan, according to the Investment Commission.

The 12-inch fab project in mainland China is aimed at increasing business opportunities in the world’s fastest-growing chip market but would also have a positive effect on additional expansion in Taiwan, TSMC said in a statement. The firm emphasised that it would own 100% of the plant, which would help TSMC safeguard its intellectual property.

Market analysts told the state-affiliated Central News Agency that they expect TSMC to retain its lead in the Chinese market.

The 12-inch wafer plant, set to be the most sophisticated in mainland China, is poised to hurt the price advantage of local competitors Shanghai Huali Microelectronics Corporation and Semiconductor Manufacturing International Corporation, analysts said.