ACTION REQUEST - U.S. SEMICONDUCTOR EXPORT CONTROLS

C O N F I D E N T I A L TAIPEI 000278

SIPDIS

DEPT FOR EAP/TC, NP/ECNP
DEPT PLEASE PASS AIT/W

E.O. 12958: DECL: 01/21/2015
TAGS: ETTC EINV ETRD ECON PREL CH TW
SUBJECT: ACTION REQUEST - U.S. SEMICONDUCTOR EXPORT CONTROLS


Classified By: AIT Director Douglas H. Paal, Reason 1.5 (b/d)


1. (U) This cable is an action request. See paragraph 4.


2. (C) Ministry of Economic Affairs (MOEA) Investment
Commission Deputy Executive Secretary Emile Chang asked AIT
to provide information on U.S. export regulations for
semiconductor manufacturing equipment sold to entities in the
PRC. Taiwan currently prohibits any
semiconductor-manufacturing investment in the Mainland for
technology that produces chips with feature size below the
0.25-micron level. For investment at the 0.25-micron level
or above, investment is allowed upon approval from the MOEA's
Investment Commission. Taiwan Semiconductor Manufacturing
Corporation (TSMC) wishes to invest in more advanced
manufacturing capability in the PRC and recently informed
MOEA that the U.S. has allowed the export of manufacturing
equipment capable of producing chips at the 0.18-micron level.


3. (C) Based on informal consultation with NP/ECNP, AIT/T
briefed Chang on the basic principles of U.S. export control
regulations in this area. We confirmed that the U.S.
government had approved export licenses for 0.18-micron level
manufacturing equipment destined for firms located in the
PRC. The Taiwan government is considering revision of its
regulations governing semiconductor investment in the PRC to
allow investment with more advanced technologies subject to
review and approval by the Taiwan government. It wants to
maintain consistency with relevant U.S. regulations. As a
result, MOEA's Chang asked U.S. government views on Taiwan
reducing its minimum feature size limit from 0.25 to 0.18
microns. All Taiwan investment to China, including
investments involving 0.18-micron technology, would still
require approval by the Taiwan government.


4. (C) ACTION REQUEST: AIT/T asks Department to provide
guidance on this request. Please advise whether U.S.
government would have any objections to Taiwan lowering its
minimum feature size limit to 0.18 microns for semiconductor
manufacturing investment in the PRC.

Background on Taiwan's PRC Investment Control Regime
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5. (U) The Taiwan government has a fairly rigorous
application process for investment in the PRC. Standards for
semiconductor manufacturing investment are even stricter.
Semiconductor investment applications are reviewed by various
government agencies, including the Investment Commission, the
Bureau of Foreign Trade and the Mainland Affairs Council.
Many of the factors considered relate to Taiwan's domestic
economy. Firms must have a certain level of investment in
more advanced semiconductor manufacturing in Taiwan. The
Taiwan government also considers the plan's impact on
Taiwan's labor situation.


6. (U) Technology transfer is another key factor. A Taiwan
firm may only invest in Mainland entities if it will have
controlling interest in the enterprise. The Taiwan firm must
keep the rights to all intellectual property developed by the
Mainland enterprise. In addition, after approval, the Taiwan
firm must regularly submit a written report to the Taiwan
government that includes any changes in the technology used,
the acquisition of any intellectual property rights, the
plant's capacity utilization, and details on domestic and
export sales.
PAAL