December 29, 2006
In recent years, the Taiwanese practitioners in the domestic semiconductor industry have intensely petitioned for the lifting of restrictions on China-bound investments in establishing eight-inch silicon wafer foundries in China using Taiwan’s 0.18-micron process technology. In January 2005, the industry practitioners submitted an application to the Investment Commission of the Ministry of Economic Affairs (MOEA) for China-bound 0.18-micron investments plans. However, the government’s review of this open-door policy was affected due to the consideration of the divergent views in Taiwan on the lifting of restrictions on producing wafers in China using 0.18-micron process technology, as well as changes in cross-strait relations caused by China's passage of the “anti-separation law” (ALS) in March 2005. In July 2006, the Taiwanese government invited representatives of various sectors to convene the Conference on Sustainable Development of Taiwan's Economy (CSDTE). Conferees assigned issues of lifting restrictions on eight-inch silicon wafer fabrication using 0.18-micron technology to the Panel on Global Deployment and Cross-strait Economic and Trade Relations for further discussion. The panel reached a consensual opinion, which read that, “Under the principle of maintaining Taiwan's technological edge and preventing the outflow of core technologies, related restrictions can be reviewed if related industrial technologies have already been maturely developed in China or such technologies not bound under the Wassenaar Arrangement and other international agreements. However, the impact on the overall industry, domestic employment and other factors should still be considered.” In accordance with the conclusions reached by the CSDTE, the relevant government agencies have reviewed policies on eight-inch wafer fabrication technology and have decided that the restrictions on technologies used for producing eight-inch wafers in China will be relaxed to 0.18-micron, from the current 0.25-micron level. Such permission is limited to the transfer of technology by a parent company in Taiwan to its invested enterprise in China for self-use only.
The government has made its decision to loosen restrictions on China-bound investments in producing eight-inch wafers using Taiwan’s wafer technologies based on the consideration of the following major factors:
1. According with International Norms
In March 2002, the Executive Yuan introduced policies to allow Taiwanese wafer industry practitioners to make China-bound investments in eight-inch wafer fabrication. It indicated at the time that according to the policy principle, management of technology should be in step with the international community. Moreover, in reference to the Wassenaar Arrangement and U.S. regulations on technology controls, the ceiling on fabrication technology for such investments would be set at the 0.25-micron level and above. In December 2004, the Wassenaar Arrangement was revised, easing controls over semiconductor fabrication equipment from 0.35-micron to 0.18-micron processes (i.e., the minimum resolution of microlithography equipment). The U.S. government also revised its export control list to remove controls over process technologies at 0.18 micron and above, and adopting a case-by-case review principle for technologies smaller than 0.18 micron. Since there are no restrictions internationally on wafer equipment using process technologies at 0.18 micron and above, it is necessary for Taiwan to ease its current 0.25-micron limit to accord with international norms.
2. Advantages for the semiconductor industry outweigh disadvantages
(1) Taiwan's semiconductor manufacturing technology has advanced sharply. In 2002, when the government deregulated China-bound investments in establishing eight-inch wafer plants using 0.25-micron process technology, eight-inch fabs were still the mainstay of the domestic semiconductor industry and wafermakers had just begun to use 0.13-micron process technology. At present, there are ten 12-inch wafer fabs in Taiwan's semiconductor industry, representing one-fourth of the global total. Moreover, wafer fabrication technology has advanced from the 90nm level to the 65nm level, which means a four- generation gap from 0.25-micron technology. Consequently, deregulating the restrictions on process technologies at 0.18 micron and above will nearly have no impact on the domestic semiconductor industry.
(2) 0.18-micron process technology is already in widespread use in China. Relevant data indicates that China's wafer plants have introduced technologies from international sources and currently are operating with 0.18- to 0.13-micron process technologies. Some have introduced 90nm generation technology. Moreover, more than half of China's semiconductor design industry is designing digital products using 0.18- to 0.13-micron technologies. The restrictions imposed by the Taiwanese government on the establishment of wafer plants in China using Taiwan’s 0.25-micron process technology are clearly affecting the enterprises invested in China by Taiwanese wafer industry practitioners in terms of their competitive ability in the Chinese market.
(3) From the perspective of market competition, the production value of China's semiconductor market surpassed US$35 billion in 2005, making it is the fastest growing market in the world. Local and foreign wafermakers in China have no difficulty acquiring advanced semiconductor technologies, and 0.18-micron process technology is in widespread use now in China. The Taiwanese government's restrictions on 0.18-micron process technology hardly constitute an obstacle to the acquisition of such technology by China's local wafer industry practitioners. On the contrary, such restrictions will not only squeeze and limit the space needed by Taiwanese enterprises for their survival and development, but will also make it difficult to achieve the original objectives of the policy of deregulating China-bound investments by Taiwanese wafermakers.
(4) In sum, allowing wafermakers to invest in 0.18-micron process technology in China will have no negative impact on the domestic semiconductor industry. Rather, it will enable the enterprises invested in China by Taiwanese wafermakers to become more competitive. With a view to helping Taiwan's semiconductor industry become more competitive, therefore, it is imperative that the government ease the restrictions on producing wafers in China based on Taiwan’s semiconductor technologies.
The technological edges of Taiwan's semiconductor industry lie not only in fabrication technology, but also more importantly in its integrated management techniques in the wafermaking side of the industry. In order to prevent the effects of technological spreading in China from putting competitive pressure on Taiwan's semiconductor industry, the transfer of 0.18-micron process technology will be not only limited to internal operations between Taiwan’s parent companies and Taiwan-invested enterprises in China, but it will also be allowed for self-use only. Moreover, if their invested enterprises in China have an operational need to engage in technical cooperation with another local enterprise on non-critical processes, Taiwanese industry practitioners must report such matter to the MOEA to ensure that Taiwan's core advantages are not weakened.
Furthermore, the MOEA and relevant agencies have established a set of accompanying management measures, under which domestic wafermakers must apply for permission to make China-bound investments according to the relevant regulations in the revised “Directions Governing the Review and Supervision of Investment in IC Foundries in Mainland China” promulgated by the MOEA on December 29, 2006, and the “Directions Governing Policy Review and Coordination for Major China-bound Investment Projects” announced by the MOEA on December 14, 2006. Moreover, a cross-ministry inspection and supervision team will be formed by the heads of relevant agencies to handle review, inspection and supervision of such cases before and after the investment is made. Prior to the legislative passage of the “Technology Protection Act,” moreover, a supervisory committee will be formed, in accordance with the “Operation Mechanisms of the Ministry of Economic Affairs for the Supervision and Management of China-bound Investments or Technological Cooperation Engaged in by Taiwan’s Semiconductor Industry,” to effectively manage matters related to equipment export and technology transfers by Taiwanese wafermakers that have established plants in China.
Facing the rapid progress of semiconductor technologies and the major trends of global competition, the government will continue to adjust related policies under strategic considerations and the thinking of “proactive management and effective liberalization,” as well as the precondition of effective risk management. The government will also exert all efforts to help upgrade Taiwan’s semiconductor industry and help it deployed globally to expand niches, so as to further consolidate the key position and competitive edges of Taiwan in the global semiconductor market.