The company said in Taipei last Thursday that it had signed a letter of intent with Shanghai officials to build the chip plant in Songjiang Science and Technology Park.

TSMC committed itself to investing up to US$10 billion in chip production on the Chinese mainland over the next eight years.

Publicity officials with the Shanghai Songjiang district government told China Daily that "the contract does exist, but further details are confidential as it needs to be approved by the Taiwan authorities."

They refused to comment on the amount of the investment involved but said the TSMC project would be "the city's and possibly the country's largest-ever chip production project."

Swiss-based Christ Ltd, a world-leading supplier of water treatment systems, said it was in final negotiation with TSMC for the supply and installation of an ultra-pure water system for its massive chip production project in Shanghai.

Alex Zhu, managing director with Christ Ltd's Chinese head office in Shanghai, said: "our company has signed a contract with TSMC." TSMC's initial investment in Shanghai would reach at least US$1.2-1.3 billion, Zhu predicted.

Taiwan authorities had been preventing Taiwan-based chip businesses from rushing to the mainland in the fear they would stop investing on the island in order to cut costs. The ban was relaxed on August 12 under pressure from the island's semiconductor manufacturers.

But Taiwan authorities still required manufacturers to begin to produce chips etched on 200-millimetre (8-inch) semiconductor wafers on the mainland after they had begun producing more advanced 300-millmetre (12-inch) wafers on the island to ensure that Taiwan maintains its dominance in the semiconductor industry.

(China Daily September 2, 2002)