LONDON, UK: The world's largest foundry, Taiwan Semiconductor Manufacturing Co. Ltd. has received approval from the Taiwanese Ministry of Economic Affairs (MOEA) to take up a 10 percent stake in Semiconductor Manufacturing International Corp., its Chinese rival.
According to EETimes, there was a statement from the MOEA saying that TSMC's stake in SMIC is acceptable and is not in breach of the need to maintain a technology advantage over China and to protect Taiwanese workers.
This new development is the outcome of an out-of-court settlement of a legal dispute between TSMC and SMIC. TSMC had alleged that SMIC had been infringing its patents and using its trade secrets. According to the settlement that was reached to resolve this dispute, SMIC agreed to pay TSMC $200 million and additionally stocks equivalent to 8 percent holding in SMIC. Also sanctioned were warrants to purchase a further 2 percent.
TSMC was, however, unable to take up the stock or exercise the warrants because of the restrictions on Taiwanese companies investing in China that was being maintained by the Taiwanese government. In February the government in Taiwan relaxed restrictions on high tech investment in China, paving the way for this new course of action.
According to reports the stipulations according to the new investment regulations are that Taiwanese chip makers can now acquire full or partial stakes in Chinese chip makers whose manufacturing capabilities are two generations or more behind the investors' most advanced facilities in Taiwan.