Taiwan Semiconductor Manufacturing Company has signed a deal to build a $3 billion plant in China, the island's largest outbound investment on the mainland.
The firm, which counts Apple as a client and in revenue terms is the world's top microchip maker providing tailor-made services, will set up the factory in Nanjing, the company said in a statement Monday.
Taiwan previously controlled such hi-tech investment on fears the island could lose its competitive edge to China, which still regards Taiwan as part of its territory awaiting reunification -- by force if necessary.
It started easing the curbs five years ago as overall relations improved.
China, a huge consumer of electronics, is of growing importance to the semiconductor industry and TSMC faces intense competition from regional rivals, such as Samsung, as well as slowing global demand in the technology sector.
"We aim to provide closer support to customers as well as expand our business opportunities in China in step with the rapid growth of the Chinese semiconductor market over the last several years," TSMC chairman Morris Chang said in the statement.
"We look forward to stronger collaboration with our customers to further expand our market share in China," he added.
TSMC has an existing plant near Shanghai, but the new facilities will employ the latest chip-making technology capable of producing 20,000 12-inch wafers a month once the factory is completed in 2018.
Taiwan and China split in 1949 at the end of a civil war, although ties have warmed since Ma Ying-jeou of the Beijing-friendly Kuomintang party came to power in the island in 2008.
But the island’s business community has been jittery since opposition leader Tsai Ing-wen won the presidential election in January as Beijing does not trust her Democratic Progressive Party, which traditionally takes a pro-independence stance.