For the second time in a month, the Ministry of Economic Affairs postponed its decision on easing the restriction, this time without offering any timetable as to when a ruling will be issued. The lack of guidance has some chip industry executives concerned that the government is using stall tactics in an effort to dodge the issue.

"It's understandable why the government delayed its decision again, but Taiwan's advantages will vanish in two to three years if the ban isn't lifted," said Hander Chang, an assistant vice president of Winbond Electronics Corp., Hsinchu, one of Taiwan's largest DRAM manufacturers. "Foundry is one of the few sectors in which Taiwan has dominant power on the worldwide stage."

An easing of the prohibition was promised by Taiwan's Democratic Progressive Party (DPP) during the island's parliamentary election campaign late last year. The centrist proposal, from a party that historically has favored independence for Taiwan and eschewed close ties with the mainland, was seen by many as a measure to help boost the island's battered economy. However, with the reduced incentive for compromise following the DPP's majority victory in the December election, the government may be reluctant to keep its promise, according to some analysts.

"They don't want to remove the ban amid fears that Taiwan's competitiveness will be undercut by the mainland," said Linda Liu, an analyst at Primasia Securities Ltd. in Taipei. "Still, companies will find a way to get around the system, with or without the ban being lifted."

At the top of the ministry's list of reservations is the fear that mas-sive capital spending by Taiwan's foundries on fabs in China would undermine the island's domestic economy, which is already suffering. It takes about $1 billion to build a 200mm-wafer manufacturing facility. Another concern is the possibility that Taiwan could lose its leading-edge tech- nologies to China, a ministry official told reporters.

Even if the government is unwilling to loosen its grip, Taiwan Semiconductor Manufacturing Co. Ltd., United Microelectronics Corp., Winbond, and other Taiwanese chipmakers face growing competitive pressure to invest in China. Multinationals such as Intel Corp. have been expanding their investments on the mainland, seeking to ride the surging demand of the world's largest market for PCs, cellular phones, consumer electronics, and other electronic products.

While the global semiconductor industry is likely to be generally flat this year, China is forecast to post 5% to 6% growth, according to Gartner Dataquest, San Jose. China's consumer electronics IC market reached $7.1 billion in 2001 and relied on imports for more than 90% of that figure, revealing a massive potential for domestic growth.

Unwilling to lose out on that opportunity, UMC is reportedly defying the government edict by planning to set up wafer fabs in Suchow in southeastern China, Taipei's media reported recently. Last week, UMC cut back on the amount of land it agreed to lease for new fabs in Taiwan's Tainan science park, igniting concerns that the company will start shifting its manufacturing facilities to the mainland. Executives at the foundry weren't available for comment.