We may know soon whether Taiwanese-owned fabs can finally begin operating more freely in China. The buzz is that Taiwan's government might let Taiwan Semiconductor Manufacturing Co. run wafers on 180-nanometer processes at TSMC's Shanghai facility and that it may grant Powerchip Semiconductor and ProMOS permission to build. That is, if they still want to do so. Glaciers have melted faster than it has taken Taiwanese officials to consider some companies' applications.

"We submitted maybe two or three years ago--it's been so long that I've forgotten," said Eric Tang, a vice president at Powerchip. Today, that company is so busy building 300-mm wafers that it couldn't redirect resources to a Chinese fab even if it got the go-ahead.

Further delays in technology transfers to China won't wreck these companies' fortunes. Indeed, Powerchip and ProMOS wouldn't even use the Chinese fab lines to serve their main businesses, since making commodity memory at the 180-nm node isn't close to competitive. All would do some foundry work or specialty memory, though, and would benefit marginally.

Trailing-edge foundry moves in China would not hollow out Taiwan's industry, which continues to build 300-mm fabs and pursue advanced manufacturing--and yet Taiwan holds back. That's disappointing but not surprising: The administration of President Chen Shui-bian hasn't been all that business-friendly, though its keen enthusiasm for favor-selling has embroiled Chen's own family in controversy.

The Chen government's initial condition for opening a 200-mm fab in China (300 mm isn't an option) was that the applicant have a fully ramped 300-mm fab in Taiwan. TSMC, ProMOS and Powerchip each have two. All three are building, planning to build or ramping up at least several more, handling 130-nm, 90-nm, 65-nm or more-advanced manufacturing technology. More than 10,000 jobs will be created.

So why wait on 180 nm in China? Your guess is as good as mine. Chen's government isn't saying much, other than that it would like to see the creation of "complementary conditions"--whatever that means.

The Chen government's impact on industrial growth is minimal. Unlike the old days, when government spent heavily to create the likes of TSMC, United Microelectronics Corp. and Winbond, today even the tax breaks are shrinking--as rival China expands its perks. But Taiwan can clamp down on technology transfers to the mainland--and at that it is proving adept.

Few Taiwanese believe the island will be holding its own a decade from now. The best they can hope for is that China stumbles, as it has in the past, or that a new administration, in 2008, will put away the blunt tools of protectionism.

Or perhaps, before then, the current administration will change course, abandoning its "active management" policy for China and returning to the "active opening" policy of a few years ago. A step in the right direction would be to reward the companies that have followed the rules, outdated as they are.

TSMC believes it will get permission reasonably soon for the 180-nm mode. If that happens, it should immediately apply to use 130-nm processes in China. Who knows? By the time permission's granted, 130 may not yet be obsolete.