Report of merger filed with the Fair Trade Commission as Taiwan Semiconductor Manufacturing Company Limited acquired 52% of shares of Global Unichip Corporation

Chinese Taipei

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Summary:

1. Taiwan Semiconductor Manufacturing Company Limited (TSMC) and its wholly-owned and newly incorporated subsidiary Ya Hsin Technology Co. Ltd. (Ya Hsin) merged with Global Unichip Corporation (Global). Following the merger, Global was the surviving company and Ya Hsin was dissolved. TSMC, being Ya Hsin's sole shareholder, thus acquired 52% of Global shares after the merger. As the merger between Global and Ya Hsin did not reach the threshold for reporting under Article 11(1) of the Fair Trade Law, it was not required to report to the Fair Trade Commission (FTC). However, as TSMC was Ya Hsin's sole shareholder, and subsequent to the merger would acquire 52% of Global shares, the merger qualified under Article 6(1)(ii) of the Fair Trade Law as a type of merger in which an enterprise "holds or acquires shares or capital contributions of another enterprise, reaching one-third or more of the voting rights or total capital of such other enterprise." Furthermore, in 2001, TSMC's market share for foundry production in Chinese Taipei reached 61.5%, while its market share for semiconductor (IC) production was 41.6%, and as such, it met the conditions under Article 11(1)(ii), "where one of the enterprises participating in the merger has one-fourth of the market share," requiring combining enterprises to file a report with the Central Competent Authority. Hence, TSMC filed a report regarding the merger with the FTC.

2. TSMC's attorney submitted the report documents on 3 December 2002. However, as no legal Power of Attorney was attached, the report and attachments for this merger did not conform to Article 8 of the Enforcement Rules to the Fair Trade Law and were not accepted. The FTC issued a letter informing TSMC that if they still intended to file a report, they could do so at any time with a complete set of required documents. TSMC's attorney then resubmitted their report on 13 December 2003; the report and attachments were deemed to conform to the relevant regulations and were accepted.

3. Chinese Taipei's IC industry has a vertical division of labor that can be broken down, in descending order, into IC designers, IC manufacturers (including those using photomask processes), IC assembly, and IC testing. Under this structure TSMC's foundry production fell into the category of IC manufacture, while Global, which performs overall IC design for customers and provides post-design to foundry service, fell under IC design. As such, this case constituted a vertical merger between upstream and downstream enterprises. Furthermore, according to the "2002 Semiconductor Industry Yearbook" published by the Ministry of Economic Affairs' Department of Industrial Technology, there were 150 IC design companies and 15 wafer manufacturers in Chinese Taipei in 2001. The merger, therefore, would not restrict competition. In addition, related laws and regulations of Chinese Taipei contain no special restrictions regarding the merger of IC enterprises, nor are the entry barriers for the market high. The merger, therefore, would not result in a restriction of competition in national markets for IC manufacture and design, nor would it have a negative impact on market competitiveness. Furthermore, the integration of Global's system-on-a-chip design services would provide TSMC with a more complete and varied product line and would help raise the standard of research and development technology for IC products in Taiwan. It would aid the integration of the upstream-downstream flow of industry resources and provide improved technology and resource integration, thus producing economic benefits throughout the industry. In summary, it was found that the merger would not have any obvious adverse effect on the market's competitive framework and that the overall economic benefits would outweigh any harm from any restriction on competition that may result. The merger was therefore permitted under Article 12(1) of the Fair Trade Law, and the waiting period was shortened pursuant to the proviso of Article 11(3) of the same law.

Appendix:

Taiwan Semiconductor Manufacturing Company Limited's Uniform Invoice Number: 22099131

Global Unichip Corp.'s Uniform Invoice Number: 16299879

Summarized by Jan, Lih-Ling; Supervised by Shih, Chin-Tsun