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Letter from the President

Over the past 3 years, the US-Taiwan Business Council has produced a weekly summary of semiconductor news from Taiwan, China, and the US. This service has been free-of-charge and broadly distributed.

The Council is currently expanding into a suite of products that will extensively cover the semiconductor industry as it relates to Taiwan, China, and the United States. These products will include two weekly eBulletins, a quarterly analysis report, an annual analysis report, and an ongoing series of events that will include a large meeting in San Jose, California on September 15 and 16, 2003. An executive summary of the second quarter 2002 analysis report is included below.

These services, however, will now be available to members only. If you are a member and wish to receive the full suite of products, please forward us your contact information. For our non-members, I hope you will consider membership in our organization as we continue to provide new solutions and services. Our 27 years of unmatched access and experience in the Taiwan market position us perfectly to empower companies in this rapidly developing and increasingly integrated U.S., Taiwan, and China market.

Rupert Hammond Chambers
President
US-Taiwan Business Council

Executive Summary
Semiconductor Report - Quarter 2, 2002
July 1, 2002

The largest single issue facing Taiwan as a whole over the past three months has been the lack of rain. A tropical island nation, Taiwan is not used to dealing with water shortages, and in fact has spent more time in its history dealing with excess water - typhoons and tropical storms, flooding and mud slides.

Despite initial headaches, the water emergency did have the timely side-effect of taking public attention off chipmakers' plans to invest in China, causing a great sigh of relief to well up from government offices throughout Taipei. However, with an administrative order in place, chipmakers have already begun scouting locations for 8-inch wafer facilities in China, presumably Songjiang for TSMC and Suzhou for UMC. Both locations are near Shanghai.

In the coming months, as they begin to file applications to actually invest money and begin construction, political turmoil is likely to surface again. This issue is too emotionally charged not to receive more scrutiny from politicians desiring media attention or cash, and from pro-independence advocates attempting to stymie the integration of Taiwan's economy with that of China's. The remainder of the year promises to be exciting in this arena.

Water and political troubles have almost drowned out the technological and business advances made by chipmakers in Taiwan over the past few months. As Morris Chang predicted years ago, integrated device manufacturers (IDMs) are now farming out more and more production to his company, thanks to the downturn. Both he and Robert Tsao of UMC predict the foundry industry will produce 50 percent of the world's semiconductors by the year 2010, up from around 12 percent now.

This, the second quarterly report will examine the water situation briefly and then report on progress made on political issues with respect to relations between Taiwan chipmakers and China. The report will also examine technological advances in Taiwan, with a special section on the development of 'system-on-a-chip' ICs and some recent advances by TSMC.

Table of Contents
Letter from the President 1
About the US-Taiwan Business Council 3
Semiconductor Analysis 5
Introduction 5
Water: Not a Small Issue in Taiwan 5
Chips to China Part II, the TSU Strikes Back 6
Chip Equipment to China 9
Technology Section: SoC Chips and TSMC Advances 9
TSMC's Growing Technology Prowess 11
Infineon Completes Its Taiwan Invasion 13
The Investigation: US Justice Department Looks into DRAM 14
Future Challenges and Conclusion 14
Taiwan Semiconductor Industry/Government Contact Information 17
Biographies of Taiwan Government Contacts 27
United States Semiconductor Industry/Government Contact Information 37
Biographies of US Government Contacts 45
Suggestions of Sources for Taiwan Semiconductor Industry Information 59
Semiconductor Headlines: Second Quarter, 2002 61
Appendix: Trends in Trade and Investment 71

This report is available to our members starting July 1, 2002. To purchase a copy of this report (US$50 for non-members), use this order form.

If you have any questions about the report, please contact Judson Payne, the Council's Director of Corporate Affairs. You can also call us at (703) 465-2930, or email us at Council@us-taiwan.org.

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