Taiwan Eases Technology Transfer Rule

Taiwan's government on Tuesday approved a plan by Taiwan Semiconductor Manufacturing Co., the world's largest contract chip maker, to use a more advanced silicon wafer production technology in its factory in rival China, an official said.

The government agreed to let TSMC use the 0.18-micron technology in its factory in Shanghai, said company spokesman J.H. Tzeng.

The application was originally submitted by TSMC in early 2005, he said.

Up until now, the TSMC plant in China has only been authorized to use the less-advanced 0.25 micron circuits for its chips. The thinner lines, or conduits, allow chips to run faster and use less electricity.

Tzeng said the Taiwanese government ruling would allow TSMC to obtain more chip orders in the rapidly growing Chinese market because of relative cost advantages.

The chip maker set up the Shanghai plant in 2004 after the Taiwan government relaxed restrictions on semiconductor investment in China.

The Taiwanese government established the restrictions to make sure Taiwan wouldn't lose its cutting-edge technology and give a boost to China's economy at the cost of its own industry.

Taiwan and China split amid civil war in 1949. Since then the Communist colossus has repeatedly threatened to attack if Taipei makes its de facto independence permanent.

Despite the political tensions, Taiwan's chipmakers have invested heavily in China and exerted pressure on the government to liberalize the environment for technology transfer.

The chipmakers say that without a more liberalized regime they will lose their leading edge because of an inability to take advantage of China's relatively low wages.

TSMC specializes in running chip plants that produce custom-made semiconductors for tech companies that can't afford the expense of producing their own.

It produces a variety of chips for products ranging from mobile phones and laptops to digital cameras.