Taiwanese Front-Runner to Loosen Tech Transfer

Taiwanese presidential hopeful Ma Ying-jeou plans to loosen technology transfer and investment regulations if the people of Taiwan vote him into office later this month.

The popular politician, leading the race to become the next president in all major polls, said that so long as a Taiwanese technology company keeps its headquarters in Taiwan, there will be very few restrictions on what it can do in China in terms of investment.

The people of Taiwan will cast their votes on March 22.

Such a change in policy would be welcome among Taiwanese technology companies, which currently face myriad restrictions, including a cap on the amount of money they can invest as well as strict guidelines on the kinds of technologies allowed in China. Taiwanese companies are required to gain approval for high-tech investments to China because Taipei fears the technology may boost the military threat against the island.

Taiwan and China separated in 1949 amid civil war, and Beijing has long threatened to take the island by force if it moves towards formal independence.

Ma, the candidate for the Kuomintang (KMT, or Nationalist Party), said some restrictions on sensitive technologies would remain if he wins the election. Taiwan follows international agreements to control the transfer of technology deemed dangerous for possible use in making military items, such as semiconductor technology.

Still, he pointed out that Taiwan has room to loosen its regulations. U.S. chip maker Intel won permission from Washington to build a US$2.5 billion 12-inch chip factory in China last year, far more advanced technology than Taipei allows and a possible sign that the government has been too inflexible.

"That shows how far behind our policy is. We have to allow our chip makers to be competitive in this area," he said during a news conference in Taipei.

The island's vaunted semiconductor industry, for example, has done little in terms of taking advantage of Chinese investment incentives and low-cost labor because of the restrictions. Taiwan Semiconductor Manufacturing (TSMC) has built a legacy chip factory in China that still uses old production technology, an 8-inch plant with 180-nanometer technology.

The main trouble is that the restrictions hamper TSMC in its fight against Chinese rival Semiconductor Manufacturing International (SMIC). SMIC is attracting the most lucrative chip customers in the China market because it uses 90-nanometer and 65-nanometer production technologies, which are very advanced. The best technology used to mass produce chips at Intel is 45-nanometer, just one generation ahead of 65-nanometer technology.

Late last year, Ma's main rival in the presidential race, the Democratic Progressive Party'sFrank Hsieh, also said he would seek a technology transfer policy more in line with what the U.S. allows, if elected.