Intel May Face Hurdle on China Factory, TSMC Chairman Says

The U.S. government may prove to be a major hurdle in any plan by Intel to build an advanced chip factory in China, the chairman of Taiwan Semiconductor Manufacturing (TSMC) said Wednesday.

The head of the world’s largest contract chip maker should know. His company and many others must also follow certain U.S. technology export regulations, and the Taiwan government is often far more strict than the United States on China issues due to their adversarial relationship.

The U.S. Commerce Department, which is in charge of vetting applications to transfer sensitive technologies to countries deemed high risks, such as China, may not let Intel build the kind of high-tech chip factory it wants. The fear is that the equipment used to make the chips, or the chips themselves, could be used for military purposes. But it’s hard to tell if such interference would have any impact on Intel because the chip giant has refused to comment on the proposed plant, saying it has made no formal announcement of the project.

Chinese authorities on Tuesday approved an Intel project to build a US$2.5 billion factory to produce chips, including microprocessors, on 300-millimeter (12-inch) wafers using a 90-nanometer manufacturing process. The U.S. government may oppose plans to build such a high-tech factory in China if Intel moves forward in the near term, said Morris Chang, chairman of TSMC, during a talk in Taipei.

Chang said that advances in chip technology mean that such a plant could be acceptable a few years from now, because U.S. regulations generally allow older production technology to be transferred to China, but not now. The Chinese statement gave no time frame for the project.

The United States has long been a proponent of controlling the sale or transfer of sensitive technologies to certain countries. It is also a champion of the Wassenaar Arrangement, a Cold War-era agreement by a group of nations to ensure that sensitive technologies and machinery that could be used to make weapons would not be exported to communist or rogue nations.

The fall of the Iron Curtain has led to looser export controls, but the United States remains committed to keeping sensitive technologies out of the hands of certain countries, such as China. Semiconductors are on the list of sensitive technologies, and companies in America have to apply for permission to export certain kinds of chip machinery and other technology to China. In fact, foreign companies that transfer American-made chip machinery to rogue nations can face sanctions by the United States, including the inability to procure new machines in the future.

The U.S. Office of National Security and Technology Transfer Controls, under the Commerce Department, has said it judges export applications on a case-by-case basis, but that the higher level the technology, the more difficult it can be to pass.

In practice, Chinese companies have had some difficulties obtaining chip equipment that will enable them to make chips on 300-millimeter wafers or using 90-nanometer technology, though some companies have succeeded, including Shanghai’s Semiconductor Manufacturing International and HSSL Hynix-ST Semiconductor, a joint venture between Europe’s STMicroelectronics and South Korea’s Hynix Semiconductor.

The majority of Chinese chip makers are producing chips on 200-millimeter (8-inch) wafers using 180-nanometer technology, meaning components on the chips are twice as big as 90 nanometers. The nanometer term describes the size of the smallest feature that can be created using a production process. There are about three to six atoms in a nanometer, depending on the type of atom, and there are a billion nanometers in a meter.

During his talk, Chang lamented the slow progress by the Taiwan government in allowing chip technology transfer to China. TSMC won permission to begin using 180-nanometer technology in China late last year, but Chang said the technology is already old school.

“Intel will start mass production at 45 nanometers this year. When that happens, even 90-nanometer technology will be two generations old,” he said.

-Dan Nystedt, IDG News Service (Taipei Bureau)

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