LSI's China Plan Changed by Taiwan Election

U.S. chip designer LSI Corp. has opened two new offices in Taiwan, investments the company had put off until a new president with a pro-business attitude toward China was elected on the island.

Since Taiwan's March 22 presidential election, LSI has moved into the world's tallest building, Taipei 101, as well as a new engineering center in Hsinchu, the heart of Taiwan's Silicon Valley.

"The political situation is far clearer now," said Arun Kant, head of LSI's Asia operations, on the sidelines of a news conference. "Our plan was, once this gets settled, we are investing."

Companies operating out of Taiwan should find business with China a lot easier due to the change in power on the island. The current administration, which rules until May 20, has moved slowly to drop Cold War-era barriers to doing business with China, including bans against direct air and cargo links. The winner of the election, Nationalist Party (Kuomintang) candidate Ma Ying-jeou, has pledged to work for direct flights and shipping with China, allow companies to invest more there, and ease technology transfer restrictions.

The ability to have engineers fly back and forth between Taiwan and China is very important to LSI, Kant said. The company has research operations in a few cities in China, including 100 engineers in Shanghai charged with the development of several products. It's important for LSI to be able to fly them to Taiwan and have Taiwanese engineers fly to China for troubleshooting and other issues.

LSI's contract manufacturing partner is Taiwan Semiconductor Manufacturing (TSMC), which is headquartered in Hsinchu. That's why LSI opened an engineering office there, to tweak chip designs so they match up with TSMC's manufacturing specifications.

Officials in Taiwan are currently targeting July 4 as the date to start direct flights between Taiwan and China. The date could prove to be a challenge to meet though, because Taiwanese and Chinese negotiators often trip over details, especially sovereignty issues.

Taiwan and China split in 1949 amid civil war, and China has vowed to use force if necessary to take the island back. The Taiwanese are in no hurry to return to China, as they've enjoyed democratic legislative and presidential elections since the 1990s and have a far more advanced economy. Still, China is the main destination of Taiwanese investment, which is currently estimated at around US$150 billion. Taiwanese companies employ an estimated 5 million to 20 million workers in China.

Much of that investment has been in information technology. A war today between Taiwan and China would halt the global IT industry due to the sheer volume of PCs, mobile phones, iPods and other devices and components made in both places.

LSI's new Taipei office is for the company to work with equipment makers that use LSI chips in their products, and expand its market presence.

Taipei 101 will remain the world's tallest building until the Burj Dubai, in Dubai, opens.

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