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Chairman of Taiwan Semiconductor Manufacturing Co. has suggested during a briefing that development of various chips should be transferred to mainland China from Taiwan, but the manufacturing should stay on the island. This contradicts the well-known strategy of Taiwanese companies to outsource manufacturing to China and keep the engineering back home.

Morris Chang of TSMC noted, according to China Economic News Service, that the mainland is now the world’s biggest market for semiconductor chips with consumption of over $35 billion worth of devices every year, which makes it logical to develop chips in close collaboration with actual customers.

The chairman of TSMC said that although there are hundreds of chip design companies in China, the authorities should assist a few of them in making their operations reach economy of scale as soon as possible.

The claims by the strategy guru of TSMC are completely counter-intuitive to the Taiwanese ideas that the two sides should develop everything in Taiwan and then manufacture in China.

Mr. Chang made his claims roughly a week after China-based Semiconductor Manufacturing International Corp. (SMIC), which already has various manufacturing technologies – including leading edge 45nm – available for clients, said that it would officially enter the 32nm technology era in January 2009. Under U.S. Government export license rules, SMIC can launch 32nm logic process development as early as January 1, 2009 in all of its own leading-edge manufacturing facilities.

TSMC is currently the No. 2 taxpayer in Taiwan (NT$10.4 billion ($315 million) in the first three quarters of 2008) after Chunhgwa Telecom (NT$10.7 billion ($326 million)) and ahead of China Steel Corp. (NT$9.04 billion ($273 million)) and Foxconn Electronics (Hon Hai Precision Industry) (NT$8.01 billion (US$242 million)).

Tags: TSMC, SMIC, Semiconductors, 32nm, 45nm

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