27 October 2016
TSMC will build the planned wafer plant in Nanjing and expects to start production in 2018. Photo: Reuters
TSMC will build the planned wafer plant in Nanjing and expects to start production in 2018. Photo: Reuters

Taiwan Semiconductor planning chip plant in China

Taiwan Semiconductor Manufacturing Co. (TSMC) is planning a US$3 billion advanced chip plant in mainland China, hoping that cost advantages will outweigh competitive pressures.

The world’s largest chip maker by revenue will build the factory is in the eastern Chinese city of Nanjing, the Wall Street Journal reports.

The move comes as Taiwan debates the role of the mainland for its chip makers, a flagship industry for the island.

Taiwan’s government restricts its chip makers’ manufacturing activities in China due to concerns that its larger neighbor will eventually gain the know-how to build a competing chip industry of its own.

Already, China has moved to bulk up its chip industry, which it sees as essential to moving up the value chain of products it makes as well as securing a safe domestic source of components.

Taiwanese chip makers have moved to consolidate and look for deals abroad.

Still, they have advocated for freer cross-strait investment for their industry, arguing it is necessary for them to stay cost competitive against Chinese rivals.

TSMC’s proposed factory was expected after Taiwan loosened regulations this year.

TSMC is one of several major semiconductor companies that have announced new investments in China this year.

But while some international chip makers have struck joint ventures with Chinese companies, TSMC’s new plant will be wholly owned, as the company seeks to maintain its technology edge over its Chinese counterparts.

TSMC said Monday it had submitted an application to Taiwan’s Ministry of Economic Affairs to build a wholly owned manufacturing facility for 12-inch wafers and a design-service center in Nanjing.

Thin slices of silicon, or wafers, are a key part of chip manufacturing, with wafers of larger diameter better but harder to make.

Taiwan announced over the summer it would allow its companies to open this specific kind of chip factory in China.

TSMC expects production to start in the second half of 2018.

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