As many of its competitors in the chip industry form partnerships in China,Taiwan Semiconductor Manufacturing said on Monday that it was taking a different route: setting up a new manufacturing plant without help from a local partner.
The move is designed to protect its technology while playing to a China market brimming with makers of inexpensive smartphones. It is charting a course between keeping complex chip production facilities outside China and licensing technology to Chinese partners.
In an announcement Monday, Taiwan Semiconductor said it had submitted an application to Taiwan’s Ministry of Economic Affairs to invest in an advanced chip production facility in Nanjing, China. The total value of the investment is expected to be about $3 billion, though a spokesman for the company said it expected to save money by using equipment from facilities in Taiwan and capitalizing on Chinese subsidies.
In a nod to concerns about advanced chip protection technology being leaked to Chinese competitors, Taiwan Semiconductor said in a separate statement that by the time the facility in China is up and running, an advanced operation in Taiwan would be churning out chips a generation more sophisticated.
The company added that it “comprehensively protects its proprietary information” and, in referring to its fabrication plant, emphasized that it would “have whole ownership of the fab in China, which will help protect our intellectual property rights.”
Taiwan Semiconductor’s approach stands in contrast to some of its rivals and partners in chip making. With the Chinese government set to spend tens of billions of dollars to build its chip industry, many foreign companies have been setting up partnerships and licensing technology in China.
During the past year, Qualcomm has partnered with the Chinese chip maker Semiconductor Manufacturing International to develop advanced chip production; Intel has invested in a subsidiary of China’s new national chip champion, Tsinghua Unigroup; and IBM has licensed some of its chip technology to a smaller Chinese partner.
As new links have grown, so, too, have concerns. In the United States, politicians and defense analysts say they are worried about Chinese theft of technology or advantages gained by close cooperation in the semiconductor industry. Advanced chip technology powers supercomputers that are used to manage defense systems, research new weapons and model things like nuclear detonations.
With an economy still based heavily on the chip supply chain, Taiwan’s government has also been particularly careful about allowing its most advanced semiconductor firms, like Taiwan Semiconductor, to cooperate closely with China.
Still, the recent spending spree by the Chinese government and chip companies has made a major impression on the island, and people in the industry in Taiwan acknowledge that the Chinese market is critical. For example, in its statement Taiwan Semiconductor said more than 50 percent of its revenue over the past five years had come from Chinese customers.
By PAUL MOZUR December 7, 2015 in The New York Times