Taiwan has eased restrictions on local companies setting up semiconductor plants in China, in hopes that it would make them better attract mainland clients.
According to Taiwan's economics ministry, a maximum of three wholly owned 12-inch wafer manufacturing facilities can now be established in China by Taiwanese companies, undoing previous regulations that limited such investments to older technology and joint ventures.
The relaxation was laid out in the revised regulations posted on the ministry's website that took effect on Friday.
Taiwan currently allows 8-inch wafer plants, which tend to utilize highly advanced manufacturing technologies, to operate in China as joint ventures.
Amid political tensions with China, Taiwan has imposed strict regulations on manufacturing activities of its prized semiconductor sector with its neighbor, with the aim of protecting intellectual property and trade secrets.
But as competition from China's rapidly growing chip industry continues to heat up, Taiwanese companies are under increasing pressure to invest more in the mainland.
Foreign companies have also begun building their presence in China. South Korea's Samsung Electronics Co. is already a major chip plant in the country, while Intel Corp. and Qualcomm Inc. have announced investments in the mainland.
As a result, Taiwan Semiconductor Manufacturing Co. (TSMC) and its smaller domestic rivals have petitioned the island nation's government to ease the restrictions.
TSMC, the world's largest contract chip manufacturer, has said that its Chinese clients prefer to work with the company in China and that it could see itself expanding production in China.
A TSMC representative told Reuters on Tuesday that the company is still evaluating the potential of building a new 12-inch wafer plant in China.
The new investments come at a time when Beijing is keen to bring in additional foreign capital and chip technologies into the country, as well as highlighting how international tech firms are still eager to invest in China despite risks from its slowing economy and a weakening yuan.
In 2014, Taiwanese authorities gave approval to United Microelectronics Corp. (UMC), the island's second-biggest contract chipmaker, to invest $710.64 million in a 12-inch wafer plant in Xiamen under a joint venture with Chinese partners.
UMC said that the Xiamen investment could reach $1.35 billion within five years and that it would ultimately seek full ownership of the plant.