By Michael Gold
TAIPEI (Reuters) - Taiwan government rules regarding its domestic semiconductor companies investing and merging overseas, particularly in mainland China, are too strict and should be reconsidered, a leading Taiwan chip company said Friday.
Taiwan risks falling behind in the global race to develop the best chips if it does not invest more overseas to recruit talent and access large markets like China's, MediaTek Inc chief executive M.K. Tsai told reporters after the company's annual investor conference.
Citing the examples of competitors Qualcomm Inc and Intel Corp, both of which have ploughed billions into China, Tsai said that Taiwan's rules prohibiting the export of advanced chip technology to the mainland risked its business prospects there.
"China is such a huge market ... if everyone else is going and you have to stay on the sidelines, you're in a weaker position," Tsai said.
Taiwanese regulations prohibit chip design firms like MediaTek from investing any funds in China for research and development purposes, let alone for mergers and acquisitions, according to the company.
Tsai lamented Taiwan's "passive" stance amid a recent wave of mergers in the chip world, including the $37 billion purchase of Broadcom Corp by Avago Technologies Ltd and the $16.7 billion acquisition of Altera Corp by Intel Corp.
"You have to keep up with the technological advancements or you'll become irrelevant," he said.
Taiwan's chip industry is one of the world's largest and is a mainstay of its economy. China trails Taiwan in semiconductor technology though it is catching up quickly.
MediaTek-designed chips are particularly popular among Chinese phone vendors like Xiaomi, who are nipping at the heels of rivals Apple Inc and Samsung Electronics Co Ltd.
Unlike chip design, investment in chip manufacturing in China is allowed, though heavily regulated. Last year United Microelectronics Corp, the world's second-largest contract chip maker, received approval from Taiwan's government for its $1.35 billion investment into a China factory.
(Editing by Stephen Coates)