You are here: Home » Reuters » News
Business Standard

China's ties with Taiwan chip firms under scrutiny as U.S. trade war heats up

Reuters  |  TAIPEI 

By and Yimou Lee

TAIPEI (Reuters) - Washington's decision to cut off U.S. supplies to a Chinese chip-maker spotlights mounting tensions over China's drive to be a in and the ways in which companies are helping it get there.

Shut out of major global deals in recent years, has been quietly strengthening cooperation with chip firms by encouraging the transfer of chip-making expertise into the mainland.

(UMC) <2303.TW> last week halted research and development activities with its Chinese state-backed partner Fujian Jinhua Co Ltd, following the U.S. move.

Taiwan firms such as have helped supply with a steady pipeline of chip expertise in exchange for access to the fast-growing chip market there.

has faced a shortage of (IC) chips for years. In 2017, it imported $270 billion worth of semiconductors, more than its imports of  

At least 10 joint ventures or partnerships have been set up in the last few years between Chinese and Taiwanese firms, according to industry experts, luring Taiwanese talent with hefty salaries and generous perks.

"Such companies will need to also take care to ensure no patent or IP infringement is involved as the U.S. has export control means to restrict support of critical technology," said Randy Abrams, an at in Taipei.

Among the most valuable cross-strait partnerships for China would be ones that strengthen its and memory chip production. Those two sectors require much-needed help from overseas firms due to the complexity of the and intense capital requirements, analysts have said.


But the transfer between China and self-ruled Taiwan has raised concerns amid the Sino-U.S. trade war and escalating tensions across the

China has aggressively used "market-distorting subsidies" and "forced transfers" to capture traditional and emerging technology industries, Brent Christensen, the of America's de facto embassy in Taipei, told a gathering in late September.

"These actions are harming the United States' economy, Taiwan's economy, and other economies."

Taiwan is one of the largest exporters of IC globally and many worry the island could lose a key economic engine to its political foe.

views the island's chipmakers' cooperation with China cautiously and has implemented policies to ensure Taiwan's most advanced technology is not transferred.

"When businesses go to the mainland to invest in production, they must accept controls including one that requires the to be a generation behind," the economics ministry's industrial development bureau said in a statement to


Cooperation between and Fujian Jinhua came under scrutiny last month, when the put the Chinese company on a list of entities that cannot buy components, software and from U.S. firms amid allegations it stole intellectual property from U.S.-based Fujian Jinhua denied the allegations.

Fujian Jinhua now faces big challenges to reach commercial high volume production as expected in 2020, industry observers say.

Last week, both and Fujian Jinhua, which was only founded in 2016, were charged with conspiring to steal trade secrets from Micron in a indictment.

"Taiwanese tech companies need to carefully re-evaluate their positions and supply chain arrangements as the tension between the two super powers escalates," Bernstein said.

While China will need at least six years before it can catch up in chip manufacturing, according to some estimates, the scale of its chip-making abilities is already seen as a threat in other parts of the

Barely 2-1/2 years after breaking ground on a 12-inch plant in China, Nexchip, a joint venture between the Chinese city of and Taiwan DRAM maker Powerchip, started producing 8,000 wafers a month. Wafers are thin pieces of material, usually consisting of silicon, used to make chips.

Nexchip's main goal is to produce liquid crystal display ICs for flat-panel makers.

Using Powerchip's resources and Taiwanese talent, which make up a quarter of its 1,200 employees, is helping reduce China's reliance on foreign chip suppliers.

With an aim to become "the world's No.1 chipmaker for display drivers," plans to build three more 12-inch plants and ramp up its monthly production to 20,000 wafers by 2019, according to a person with direct knowledge of the matter.

After visiting late last year, researchers from Taiwan's chip hub, Hsinchu Science Park, said progress at the plant was a "breakthrough".

"This will likely increase Taiwan firms' needs to invest in the China market, and it will be a test for the (Taiwan) government's industrial policy."

($1 = 6.9602 Chinese yuan renminbi)

(Reporting by and in Taipei)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Wed, November 07 2018. 04:41 IST