TSMC Gets Green Light for Shanghai Fab
Taiwan Semiconductor Manufacturing Corporation, the world's
largest contract chip foundry, signed an agreement Monday
with Shanghai city officials to invest US$898 million
in a 200mm wafer plant in Shanghai's Songjiang Science
Park. It will manufacture 35,000 wafers a month using
0.25-micron technology.
TSMC has been involved in extensive negotiations with
the Taiwan authorities and the Chinese government about
setting up a fab in China for more than five years. The
chairman of the company, Morris Chang, was formerly a
senior engineer, then vice president, at Texas Instruments
before returning to Taiwan at the invitation of the Taiwan
government in the early eighties. Working with K.T. Li,
an official in Taiwan's Economics Ministry, he was instrumental
in the founding of Taiwan's Hsinchu Science Park and later
TSMC.
Morris Chang and TSMC were instrumental in introducing
the concept of the "virtual fab". Under this
business concept, chip design and manufacture were completely
separated, and TSMC acted as a "virtual fab"
for chip design firms, so that they would not have to
invest capital in a chip foundry. The average capital
investment for a modern chip fab is US$1-2 billion. The
model has been a resounding success, and has now become
the standard business model.
In the past five years, TSMC has come under increased
pressure from new Taiwan-funded chip fabs, most of which
are being built in the Shanghai region. However, TSMC
has not been able to move into China as quickly as its
newer competitors because the Taiwan government is concerned
that some leading-edge technology will be transferred
to China, and the island will lose its technological leadership.
If TSMC did not move to China, it risked sacrificing that
major market to its competition. As a compromise, TSMC
agreed not to make 300mm wafers in China, and will instead
make the less modern 200mm wafers. A significant number
of American hardware design engineers of Chinese extraction
have already moved, along with their families, from Silicon
Valley to Shanghai to help in the setup and management
of the new fabs.
It is believed that like its China competitors, more
than 50% of TSMC's China production will go to products
sold in the China market. In contrast, most of TSMC's
Taiwan production is shipped out of the island by air.
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