Flat-panel and chip makers will be allowed to invest in manufacturing facilities in China provided they already use more-advanced technology in Taiwan, Minister of Economic Affairs Shih Yen-Shiang said at a press conference today in Taipei. The new rules will be effective “within days,” he said.
Easing of rules would allow AU Optronics Corp., Chi Mei Optoelectronics Corp. and Innolux Display Corp. to compete with South Korea’s Samsung Electronics Co. and LG Display Co. by manufacturing panels closer to their customers in China. Taiwan Semiconductor Manufacturing Co., the largest custom-chip maker, and AU plan to take advantage of the new rules, they said today.
“The growth driver for the LCD industry is televisions, so the key will be larger factories,” said Richard Ko, who rates AU “outperform” at Jih Sun Securities Ltd. in Taipei. “If the LCD industry is healthy this year then it will be beneficial to those who go first, but if the industry isn’t as healthy as expected, first movers may face bigger risks in building more capacity in China.”
Innolux added 0.6 percent to close at NT$50.60 in Taipei, AU advanced 0.3 percent to NT$36.30 and Chi Mei was unchanged at NT$24.05. The benchmark Taiex index rose 1.1 percent.
Panel makers can start a combined total of three LCD factories of sixth generation or above in China, as long as the applicant already has a plant in Taiwan that’s at least one generation ahead, the ministry said in a statement. There’ll be no restrictions on facilities below sixth generation, it said.
Chipmakers can apply to invest in or build factories in China that are two generations less advanced than those already on the island, it said.
Benefit Taiwanese Companies
Taiwan Semiconductor, which currently operates a plant near Shanghai that produces chips on 8-inch wafers, plans to upgrade the facility to 0.13 micron technology from 0.18 micron, JH Tzeng, spokesman for the Hsinchu-based company, said by phone after the announcement. Taiwan Semiconductor operates more- advanced 12-inch factories in Taiwan.
Chipmakers remain limited to building plants in China that can make 8-inch wafers or less, the ministry said.
The new rules will pave the way for Taiwan Semiconductor to use technology as advanced as 90 nanometers in China, Woody Duh director general of the economic ministry’s industrial development bureau said. Taiwan companies were previously restricted to 180 nanometers, or 0.18 micron, the ministry said.
AU, based in Hsinchu and currently Taiwan’s largest LCD maker, operates a 7.5-generation factory in Taichung, Taiwan and is building an 8.5-generation plant that can make panels the size of a pool table. The later generations enable makers to supply larger screens more efficiently for use in televisions.
“The move will increase the competence of Taiwan panel industry,” AU said in a statement after the government’s announcement. The new rules will help shorten the company’s shipment cycle and facilitate on-site services in China.
Building Advanced Plants
Chi Mei, which plans to merge with Innolux next month to overtake AU in Taiwan, is also building an 8.5-generation plant in Kaohsiung, southern Taiwan.
“If Taiwan doesn’t invest in China, we may lag behind and lose our competitive advantage,” Taiwan Premier Wu Den-yih said Dec. 8.
Taiwan maintains restrictions on the value and type of investments it allows its companies to have in China, with advanced chip-making and the manufacture of ethylene among those currently banned, to prevent strategic technologies from migrating to the mainland.
China is Taiwan’s largest export market and regards the independently governed island as part of its territory, threatening to attack if it declares formal independence. The two sides split 60 years ago after Mao Zedong’s communists took control of China, forcing the Kuomintang to retreat to Taiwan.
Suwon, Korea-based Samsung, the world’s largest LCD maker, said Oct. 16 it will spend 2.6 trillion won ($2.2 billion) to build a 7.5-generation panel factory in China. Two days earlier, Seoul-based LG Display, the second-biggest, said it will form a $4 billion venture for an 8th-generation LCD plant in Guangzhou.
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