About a year ago TSMC received approvement by Taiwan's government to start building a fab near Shanghai. J.H. Tzend, a spokesman for TSMC, said that the work is on track and the fab will be able to start production before the end of this year.
Taiwan has moved cautiously to permit the island's semiconductor makers to move production to China. Some officials have expressed fears that moving too quickly would lead chip makers to shift their production to China from Taiwan and hurt the development of Taiwan's semiconductor industry.
The production at the new fab in China will help TSMC in two ways. In Taiwan all their fabs are already running at or near full capacity, and the extra capacity at the new fab can help to meet the rising semiconductor demand.
The new fab will also help TSMC to compete against competitors like Semiconductor Manufacturing Internation, which benefits from a Chinese tax policy that gives a rebate of a value-added tax on chips for some semiconfuctors produced domestically. This semiconductor VAT rebate is not offered for chips produced outside China.
While TSMC expects to begin production at the fab near Shanghai before the end of this year, the company is still awaiting the second phase of approval from Taiwan's government required to begin moving in chip-manufacturing equipment at the fab near Shanghai, Tzeng said. TSMC has not received any indication of when the government will give the go ahead for the company to begin moving in equipment, he said.
Taiwan's Ministry of Economic Affairs (MOEA) gave its preliminary approval of TSMC's plans to open a fab in China in January 2003. Under plans submitted to the MOEA in September 2002, TSMC is seeking approval to established a Chinese subsidiary, tentatively called TSMC (Shanghai) Corp., and will invest US$898 million [M] in the subsidiary to construct a 200-millimeter fab in Shanghai's Songjiang Science Park.
Last week, TSMC cleared a major hurdle required for receiving second-phase approval from the government when the MOEA issued a statement that the company's 300-millimeter fab in Hsinchu, Taiwan, is operating at near full capacity. Government certification that the 300-millimeter plant is running at full capacity is one of the requirements for approval of TSMC's plans to begin chip production in China.