Taipei - A Taiwan government committee has given the green light to the island's top two memory chip makers, Powerchip and ProMOS, to set up plants in China, local media reported.

The inter-department committee, organised by Taiwan's Ministry of Economic Affairs, also gave permission to Advanced Semiconductor Engineering, the world's leading chip testing and packaging company, to set up in China, the Central News Agency reported.

Following the go-ahead from the committee, the three Taiwan companies need only obtain final approval from the economics ministry, which is widely expected before the end of the year.

A green light would mark the biggest opening into China to date for Taiwan's microchip industry, whose sole representative now operating legally there is Taiwan Semiconductor Manufacturing, the world's largest contract chip maker.

The industry has complained for years that its inability to invest in China - to take advantage of cheaper labor and to be closer to customers - has put it at a disadvantage to rivals like Samsung Electronics and Hynix Semiconductor

But the Taiwan government has been reluctant to let what it considers strategic industries, including semiconductors, to become economically dependent on a political opponent.

The economics ministry is widely expected to permit Powerchip Semiconductor and ProMOS Technologies to move older 8-inch silicon wafer technology to China. The two companies, which specialise in dynamic random access memory (DRAM) chips, would still make their most cutting-edge, 12-inch wafers in Taiwan.

ProMOS has said it plans to invest $360-million (about R2,5-billion) to open its first China factory after it gets permission. The company declined on Monday to comment on the media reports.

The economics ministry, Powerchip and Advanced Semiconductor Engineering (ASE) could not immediately be reached for comment.

ASE said earlier this month it would invest an additional T$100-billion (about R21-billion) in Taiwan after a bid by private equity firm Carlyle for the company raised fears of an exodus of manufacturing to China.

Some industry watchers had interpreted Carlyle's move as a way for ASE to get around the tough Taiwan restrictions on investment in China.

China has been one of the world's fastest-growing semiconductor markets, making it a major consumer of chips used in everything from cell phones to home appliances.

With about 15 percent global market share for DRAM, Taiwan has to look for new opportunities to survive in the highly competitive market dominated by Samsung and Hynix.

The interdepartmental Taiwan committee includes the Financial Supervisory Commission, the Mainland Affairs Council and the Central Bank, according to Taiwan media reports. - Reuters