New regulations that will allow Taiwan's chip makers and LCD panel makers to invest in China formally took effect Friday, and several companies are expected to file investment applications beginning March 1.

Under the new laws, approved by the Ministry of Economic Affairs (MOEA) on Feb. 23, Taiwan's flat panel sector will be permitted to build up to three 6th generation and above TFT-LCD production lines in China.

Local companies will only be allowed, however, to run factories that are at least one generation behind their most advanced plants in Taiwan.

That means AU Optronics Corp. (AUO) , the world's third-largest LCD maker, can apply to build a 7.5-generation facility, while Chi Mei Optoelectronics can only apply to set up a 6.5-generation plant.

AUO said Friday that it would soon submit an application to set up a 7.5-generation plant in eastern or southeastern China to maintain its competitiveness against Korean rivals in the Chinese market.

The South Korean government approved in late December the plans of Samsung Electronics and LG Display, the world's two biggest panel makers, LCD manufacturers, to set up a 7.5-generation and an 8th-generation panel plant in China, respectively.

AUO refused, however, to confirm media reports that it would collaborate with a Chinese panel maker to set up the facility in Kunshan in China's Jiangsu province.

MOEA officials said the ministry has formed a review panel headed by MOEA Deputy Minister Huang Chung-chiou to assess and handle applications, which are expected to be received beginning March 1.

Meanwhile, the new regulations also allow Taiwanese chip manufacturers to invest in China, but they will not be allowed to build new fabs there.

Instead, they will be limited to acquiring a full or partial stake in Chinese chip makers whose foundries are at least two generations behind the investing company's most advanced factory in Taiwan.

Under those rules, Taiwan Semiconductor Manufacturing Co. (TSMC) will be allowed to invest in 90-nanometer fabs in China because it has begun making chips in Taiwan using 45nm process technology.

United Microelectronics Corp. (UMC) has started 65nm production in Taiwan and will therefore will be allowed to invest in chip companies using 0.13 micron process technology in China.

Previously existing investment regulations stipulated that only three chip fabs could be built by Taiwanese chipmakers in China, under which TSMC, ProMOS Technologies and Powerchip Semiconductor all gained approval to build 8-inch wafer plants there using less advanced processes.

But Powerchip has yet to act, and if it does not invest by August when its permit expires, the MOEA said it will allow other manufacturers to apply for the slot.

Powerchip was recently reported as showing renewed interest in its China fab project, with Xuzhou in Jiangsu province mentioned as a potential site.

The new regulations will also provide a legal basis for TSMC's acquisition of a 10-percent stake in Semiconductor Manufacturing International Corp. (SMIC) and UMC's acquisition of a controlling stake in Chinese wafer foundry He Jian Technology (Suzhou) Co.


Source: Taiwan News