Taiwan-China chip tech transfers welcome, but devil’s in the details

by James Montgomery, News Editor

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. But with a lot of unanswered questions about the specifics — and the government’s history of delays and silence in previous related policy moves — for now the decision seems to be as politically motivated as it is supportive of Taiwan’s technology competitiveness.

Days ago, Executive Secretary Huang Chin-tan of the Investment Commission under the Ministry of Economic Affairs (MOEA) told the Associated Press that a preliminary consensus has been reached with other ministries, leaning toward removing the ban on 0.18-micron process technology transfers, and approving long-delayed applications from ProMos and PowerChip applications, which had been refiled to petition for 0.18-micron processes.

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 already have leading-edge 300mm fabs running at volume production in Taiwan for at least six months. So far, only TSMC has received the green light for such investments. Meanwhile, the Chinese chip industry is starting to get on its feet, led by flagship foundry Semiconductor Manufacturing International Corp. (SMIC), which has lured business from some customers of Taiwan rivals TSMC and UMC including Freescale, Qualcomm, Broadcom, and TI, according to the Taiwan Economic News.

The decision to relax chip technology transfers is welcome news to Taiwan’s chipmaking industry, but there’s still a glaring lack of details to be filled in, noted Rupert Hammond-Chambers, president of the US-Taiwan Business Council. “That raises a red flag for us,” he told WaferNEWS, noting that earlier in the year the government similarly relaxed restrictions to allow packaging and test companies to move operations over to the mainland — but nine months later the MOEA has yet to grant a single company license, or even disclose what the process requirements are.

“[The MOEA] will need to establish clear parameters” such as the size of a prospective investment into China (e.g., up to $X dollars, or X% of net worth), an area that is dictated by general Taiwan law but with some leeway, Hammond-Chambers explained. “That gauges how quickly [chipmakers] can ramp up, the facilities they can build, whether they can do it themselves or need a JV.”

TSMC has already started moving 0.18-micron-capable equipment over to its mainland facilities in anticipation of a policy change. By February, the government could approve similar moves for Powerchip and Promos, who theoretically could have equipment installed and lines running within a year or so. However, with those 0.18-micron lines still running at high utilization levels where they are now, strategically it would make more sense for Powerchip and Promos to pocket the transfer papers until demand slackens, then shut the lines down and move them to the mainland, Hammond-Chambers said.

Having TSMC and eventually Powerchip and Promos moving operations to the mainland opens up a world of possibilities for suppliers and subcons that cluster around them, he added, pointing to significant growth among mainland OEMs and ODMs.

Until more details emerge about the process and requirements, the decision likely has just as much to do with politics as chip industry competitiveness. “First and foremost, this will be a coup for the Taiwan government to overcome some opposition” led by the Taiwan Solidarity Union (TSU), said Hammond-Chambers, pointing out that the TSU has already helped stave off other government-supported liberalization initiatives, particularly in technology areas. He added that the TSU likely will try and snag these chip technology transfers as well — particularly ahead of big changes coming next year to Taiwan’s parliament, which will shrink in half to 112 members and likely condense to a more moderate makeup, marginalizing groups like the TSU. “I think you’ll see a pretty concerted effort” from the Chen administration to smooth the 0.18-micron transfer process, he said. “[This administration] wants to prove they can deal with China, in sound businesslike manner.”

It’s also perhaps more than a coincidence that Taiwan’s representative to the recent Asia-Pacific Economic Cooperation (APEC) summit in Vietnam was not president Chen Shui-bian — it was Morris Chang, TSMC chairman and outspoken Taiwan industry figure. “That’s an interesting timing,” mused Hammond-Chambers, who speculates there may have been a quid-pro-quo at work. — J.M.

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