Together, Wong and Chang are likely to have up to 12 production lines turning out eight-inch silicon wafers by the end of next year. By the middle of next year, Chang plans to begin experimental production of 12-inch silicon wafers, the most advanced in the industry. The world's largest computer-chip maker, Taiwan Semiconductor Manufacturing Co., or TSMC, only recently began producing these wafers. Crucially, SMIC's move into production of advanced chips while possibly fraught with teething problems will allow China to leapfrog existing technology and close the gap on the Americans. Beijing late last year introduced incentives that made the bait for Taiwan chip entrepreneurs even more enticing.
Local governments add sweeteners.
Shanghai has offered not to tax the year-end bonuses of semiconductor employees, which in Taiwan can run as high as 24 months' salary. With such a vast market, Taiwanese semiconductor makers will have to locate their plants there to cater to China's demand for all things electronic. The best technology will almost certainly follow. The likely entry this year of both China and Taiwan to the World Trade Organization should accelerate economic convergence. China will also have a more stable and better designed infrastructure.