Ministry ponders over Chinese investment in Taiwan’s IC design industry

By J.Fan

In face of China’s uprising red supply chain, the Ministry of Economic Affairs is assessing the possibility of Chinese investments in Taiwan’s IC design industry, the heart of Taiwan’s economy. The government officials stated that they do not have a timetable for the evaluation.

The Ministry of Economic Affairs (MOEA) pointed out that as China’s Tsinghua Holdings grows stronger, MediaTek Inc., one of the nation’s leading firms in the IC design industry, is trying to fight against the red supply chain and securing its market share in China by forming an alliance with Chinese investors.

MediaTek Inc. appealed to the Ministry of Economic Affairs to open doors to Chinese investors, but the Ministry is still pondering over the idea. In the past year, MediaTek chairman Tsai Ming-kai has been in touch with the leaders of the Ministry of Industry and Information Technology of the People’s Republic of China.

By loosening the restraints, it will provide more growth opportunities and operation flexibility for local chip designers, said MediaTek in a statement. According to Liberty Times report, they formed a professional team and hoped to ally with technology firms such as China Mobile and Beijing Xiaomi Technology Co., Ltd in order to combat Spreadtrum Communications (now a subsidy of Tsinghua Holdings).

Director General of Taiwan’s Industrial Development Bureau (IDB) Wu Ming-ji mentioned his inclination to ease the regulation on Chinese investors in Taiwan’s IC design industry when he submitted the “strategy for increasing the competitive advantage in the semi-conductor industry” to the Executive Yuan. He said that Chinese investors should be able to invest in Taiwan’s IC design firms through alliances but they cannot hold control over the firms.

“We are considering it, but we have not yet carried out a formal evaluation,” the ministry’s Industrial Development Bureau Deputy Director-General Leu Jang-hwa told the press.

Currently, the government has allowed Chinese to invest in Taiwan’s semiconductor manufacturing industry and semiconductor engineering process but they cannot have control power and they have to go through official examinations. After hearing the feasibility of opening the last door of the semiconductor industry to Chinese investors, some firms of the IC design industry are concerned over the change in government’s policy. Wu also suggests to relax the job restriction on Chinese professional workers.

The IC design industry is concerned that once the doors are open, many small manufacturers will be the first to bear the brunt. Although the government would require the Chinese investors to relinquish their control power, the small companies are defenseless from the massive funding of China. Other IC design firms are worried about the likelihood of brain drainage. If the Chinese investors are allowed to invest in the IC design industry, they could steal the whole professional team to China. It is not unprecedented in the technology industry.

The firms urged that even though the Chinese investors cannot hold direct power, they would still have access to the company’s business secrets and intellectual properties as a major shareholder and infiltrate the firms step by step. At the moment, MOEA says they are still deliberating on the change in regulations for Chinese investments in the IC design industry.

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