The Taiwan government is considering lifting a ban on Chinese investment in the semiconductor "design" sector, which covers such companies as fabless MediaTek and foundries Taiwan Semiconductor Manufacturing Co. (TSMC) and United Microelectronics Corp. (UMC).

Chinese investments in other parts of the semiconductor ecosystem, such as test and assembly are allowed but chip design and manufacturing are given protection as the jewel in Taiwan's economy, John Deng, Taiwan's minister for economic affairs, said that a "relaxation of this policy may now be needed," in a Financial Times article.

The move comes shortly after a visit to Taiwan by Zhao Weiguo, the chair of Tsinghua Unigroup, a Chinese government controlled holding company that is a primary vehicle for implementing Chinese policy of expansion in semiconductors. During his visit Zhao said his firm plans to invest about $47 billion over the next five years in a bid to become the world's third-biggest chipmaker.

Zhao also said there were a number of companies that could be suitable for investment but until the regulations change there's no point in opening talks and as a result, Tsinghua Unigroup is focused on investing in the U.S.

Previously Zhao said that China should ban the sale in China of Taiwan-made chips if Taiwan is not as open to investment from China as China is to Taiwan investment. Such a ban would have major implications as the global consumer electronics equipment ecosystem has come to depend on flows of Taiwan-made chips to Chinese factories for low-cost assembly.

However, a relaxation of the rules in Taiwan would also be highly contentious. On the one hand it would provide access to large amounts of investment that could drive Taiwan's semiconductor industry higher; on the other it could be a mechanism that would drive further integration of China with Taiwan. Officially mainland China sees Taiwan as part of China and has the ultimate goal of re-unification.

So Deng's comments, which come two months of an election in Taiwan, could be a political move in a landscape divided between those that seek closer ties with China and those that are sceptical of them.

MediaTek has responded to Zhao's overtures by way of a filing with the Taiwan Stock Exchange saying it is willing to join forces with Chinese companies, as far as government policies allow. Tsinghua said it would be interested in merging Spreadtrum Communications, RDA Microelectronics and MediaTek if the Taiwan government eases its restrictions.

By: DocMemory
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