Taipei, June 30, 2010 (CENS)--Investment Commission of the Ministry of Economic Affairs (MOEA) recently approved an application filed by Taiwan Semiconductor Manufacturing Co. (TSMC) for indirectly holding 1.7 billion shares, or an 8% stake, of Semiconductor Manufacturing International Co. (SMIC) based on a settlement between the two chipmakers over several intellectual property disputes.

Executive Sectary L.D. Fan of the commission pointed out that this is the first government permission allowing Taiwan`s firms to holding stakes in mainland China`s 300-mm wafer fab. In the application, TSMC stressed it will not get involved in SMIC`s management, and assured it will not leak technologies to the mainland rival.

Taiwan government has so far only permitted local enterprises to directly invest in the mainland`s 200-mm wafer fab. Fan said the government still bans Taiwanese firms from making direct investment in the mainland`s 300-mm fab. He elaborated that the government demands in principle the island`s chipmakers to technologically lead their mainland rivals by at least two generations before they are eligible to invest in the mainland`s fabs. Fan added that TSMC is the case since its 45-nm process has come on stream whereas SMIC is still depending on 0.13-micorn process for major revenue.

Senior MOEA officials pointed out that the government permission is based on the Nov. 10 2009 settlement between TSMC and SMIC over certain intellectual property disputes. According to the settlement, SMIC agrees to pay TSMC US$200 million by installment in five years after signing the settlement and pay TSMC 1.7 billion of its common shares. Also, TSMC is eligible to subscribe to 695 million SMIC shares at HK$1.3 per unit.

In response to the commission`s permission, TSMC Chairman and Chief Executive Morris Chang said yesterday that the permission is well within expectation and his company will not increase stakes in SMIC after taking over the permitted quota. Chang also noted that the signing of ECFA (Economic Cooperation Framework Agreement) between Taiwan and the mainland is a good thing to Taiwan but will not affect foundry industry or his company.
(by Ken Liu)