Taiwan permits chip assemblers, panel makers to go to China

This article was published by the Taiwan Headlines on April 28, 2006. It reports that Taiwan's Ministry of Economic Affairs recently announced that it will allow the nation's lower-end chip assemblers and LCD makers to open production facilities in China.

According to this article, the announcement sent a wave of surprise through Taiwan's high-tech industry, which has been banned from making most investments in China on grounds that the investments would benefit China while harming Taiwan.

According to the Ministry of Economic Affairs, the aforementioned move is the government's first step of its "effective liberalization" after adopting the policy of "effective management" for China-bounded investments. This is despite the fact that the liberalization is of a conditional nature, and the policy could still change in the future.

The government originally planned to allow the lower-end manufacturers to invest in China in 2005. However, China's promulgation of its Anti-Secession Law in March 2005 angered Taiwan, and the government decided to indefinitely put off the plan.

Although Taiwan's high-tech enterprises urged the government to lift the ban as soon as possible so that they could compete with Chinese and international rivals, the government refused to do so. According to industry insiders, the government's sudden change of mind now could be its countermeasure against a recent economic forum co-organized by the Chinese Communist Party and Taiwan's opposition Kuomintang.

The announcement came shortly after the government decided that it would further loosen restrictions on the three direct links between Taiwan and China via Kinmen.

According to the Ministry of Economic Affairs, the government would treat such China-bounded investments as "significant investments", which are required to have headquarters in Taiwan and have made strategic acquisitions overseas outside China. Meanwhile, the government would not review the new investment applications according to requirements set for investments in 200-mm wafer fabs in China by Taiwan's chipmakers. This means the review process from now on would be much shorter.