Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC), the world’s biggest contract chipmaker, said on Monday that it has entered an agreement with the government of Nanjing to build a $3 billion advanced wafer manufacturing facility in the city.
The deal comes after TSMC announced its intentions in December to establish its first wholly owned advanced fabrication plant in China, highlighting the growing importance of the Chinese market for semiconductor manufacturers.
"We aim to provide closer support to customers as well as expand our business opportunities in China in step with the rapid growth of the Chinese semiconductor market over the last several years," TSMC Chairman Morris Chang told Reuters in a statement.
"We look forward to stronger collaboration with our customers to further expand our market share in China," Chang said.
The move is seen by analysts as TSMC's way to go solo in order to protect its lead in the industry even as competitors, namely from China, are steadily buying smaller players.
TSMC previously urged Chinese authorities to allow 12-inch semiconductor facilities, which use more advanced technology than plants making 8-inch chips, to be wholly owned out of concern for intellectual property protection. The company already has a wholly owned 8-inch chipmaking plant near Shanghai.
According to TSMC, the planned facility, which will begin production in the second half of 2018, will have an estimated production capacity of 20,000 12-inch wafers per month and includes the construction of a design service center.
Taiwan retains a tight grip over the manufacturing activities of its prized semiconductor sector in China, amid political tension between the neighbors.
However, competition from China's growing, though fledgling, chip industry has prompted Taiwanese companies to expand their footprint in the mainland.