TSMC China Plant Gets Green Light

Taiwan’s Investment Commission on February 3 approved plans by Taiwan Semiconductor Manufacturing Co. (TSMC) to build a US$3-billion 12-inch wafer plant in Nanjing, the largest investment by a Taiwanese chipmaker since the government eased restrictions on wholly owned semiconductor production facilities in China last August. The move by the world’s number-one contract chipmaker is intended to boost market share in China’s rapidly growing semiconductor industry while enabling it to protect its intellectual property. TSMC currently holds an estimated 55% of the global semiconductor foundry market, and the Nanjing investment is forecast to raise this level to 57% when it begins operation in 2018.

By law, a Taiwan chipmaker’s Chinese plants must be one generation behind its domestic operation. TSMC must thus show the Industrial Development Bureau (IDB) evidence that it has moved to mostly 10-nanometer chips by volume in Taiwan for more than a year before starting 16-nanometer chip production in Nanjing. The investment announcement comes on the heels of news that two other Taiwan companies – Powerchip Technology and United Microelectronics (UMC) – will construct 12-inch wafer plants in China.

Media Acquisitions Under Scrutiny

The Investment Commission under the Ministry of Economic Affairs (MOEA) announced February 2 that it would suspend consideration of North Haven Private Equity Asia (NHPEA)’s application to acquire Taiwanese cable provider China Network Systems (CNS) until after the new legislature is in place and can offer its perspective on the issue. NHPEA is a subsidiary of Morgan Stanley Private Equity Asia.

The deal was already approved by the Fair Trade Commission (FTC) and the National Communications Commission (NCC), with conditions that NHPEA accepted. Final approval by the Investment Commission would ordinarily be a formality, but the deal became politicized when members of the Legislative Yuan questioned the role of Far EasTone Telecommunications Co. (FET) in the acquisition. Under current Taiwan law, government-invested firms are prohibited from holding a stake in media companies. FET, which is invested in by all four of the government’s investment funds, is buying NT$17.12 billion (US$509.4 million) in non-convertible corporate bonds issued by NHPEA. While NHPEA contends that this arrangement has been structured in conformity with the law and ensures that FET will have no management authority or influence over policy in CNS – a position that the FTC and NCC have upheld – critics have interpreted the arrangement as a way for FET to invest in CNS in circumvention of the law.

In other telecom news, Lu Fang-ming, chairman of Hon Hai-controlled Asia Pacific Telecom, has agreed to buy 100% of Macquarie APTT Management, the trustee-manager of Singapore-listed Asian Pay Television Trust (APTT), the owner of Taiwan Broadband Communications, from the Singapore unit of Australia’s Macquarie Group bank. Taiwan Broadband is the nation’s largest cable provider by number of subscribers and the move is seen as a way for Hon Hai to diversify its operations away from its singular focus on electronics manufacturing. The deal for an undisclosed amount of money awaits the approval of the Investment Commission.

Government Takeover of Chaoyang Life Insurance

The Financial Supervisory Commission under the Executive Yuan placed Chaoyang Life Insurance Co. under government control January 26 in response to the company’s continued financial deterioration. Insurance Bureau Director-General Jenny Lee told a press conference that with NT$2.2 billion (US$65.23 million) in debt, the company has a negative valuation and has failed to carry out proposed financial improvement measures. Chaoyang is the third insurer to be put under government receivership in the past 18 months, along with Global Life Insurance and Singfor Life Insurance. The government-backed Insurance Stabilization Fund has been appointed official receiver of the distressed insurer, and the government emphasized that insurance policies issued by Chaoyang will be honored and its personnel and daily operations unaffected.

Evergreen Inheritance Bitterly Contested

The will of Chang Yung-fa, the recently deceased founder of the Evergreen Group, which includes Evergreen Marine Transport and EVA Airways, is being contested by three of his four children. Drawn up in December 2014, the will names youngest son Chang Kuo-wei as successor to the group chairmanship and sole inheritor of the multi-billion-dollar estate. Chang Kuo-wei, the chairman of EVA Airways, is the only son of Chang Yung-fa’s second wife. The three sons by Chang’s first wife, led by eldest Chang Kuo-hua, then moved to dissolve the entire management structure of Evergreen Group, in effect stripping Chang Kuo-wei of his chairmanship. The three older brothers are substantial minority stakeholders in many of the Evergreen Group’s companies.