Taiwan to end ban on LCD, chip investment in China

 Taiwanese liquid crystal display and semiconductor companies will soon be able to invest in China, an official said Wednesday, amid efforts to forge closer trade ties with the mainland in the hope of boosting Taiwan’s sluggish economy.

The government wants Taiwanese companies to benefit from the mainland’s cheap labor but is afraid of transferring advanced technology to its huge economic rival, so it has crafted limitations on the kinds of factories that can set up shop in China.

Vice Minister of Economic Affairs Huang Jung-chiou said Taiwan’s government will allow LCD companies to set up a maximum of three “sixth-generation” or better factories in China, provided that the technology used in them is at least a generation behind that used in Taiwan and the companies also have begun development of next-generation factories on the island.

Sixth-generation LCD factories can produce glass sheets as large as 59 inches by 73 inches (1,500 mm by 1,850 mm) and are several generations behind the newest technology. There will be no restrictions on factories using older technology, Huang said.

Huang said Taiwan will also allow local semiconductor companies to buy a stake in Chinese counterparts or merge with them, but the production technology used by the Chinese enterprises must be at least two generations behind that used domestically by the Taiwanese investors.

Huang said the government will completely remove restrictions on investments in China by semiconductor testing and packaging companies, although amounts higher than $50 million will still require official approval.

Huang said the government does not plan to loosen restrictions on construction of wafer plants in China. Wafers are thin slices of semiconducting materials used to make integrated circuits and other semiconductor devices.

Currently Taiwan permits up to three Taiwanese-owned factories in China capable of making 8-inch wafers, and only two companies have successfully built such plants on the mainland.

LCDs and semiconductors are key parts of Taiwan’s technology industry. Strong global demand for high-tech components is an important driver of Taiwan’s export-reliant economy.

Taiwan and China split amid civil war in 1949, but Beijing continues to claim the island as part of its territory.

Since President Ma Ying-jeou took office in May 2008, he has eased his predecessor’s anti-China stance and pushed for better ties with the mainland. He has allowed Chinese investment in Taiwan and relaxed restrictions on Taiwanese investment in China.

Associated Press