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By Ucilia Wang

Taiwan Semiconductor Manufacturing Co. (NYSE:TSM) has dominated the contract chipmaker business for years. Now it's eyeing the solar market and wants to buy its way in.

TSMC's CEO Morris Chang, who founded the company in 1987, retook the helm this past June as the company saw its quarterly profits drop for the third quarter in a row. TMSC makes chips to order for companies such as Intel and Texas Instruments, as well as a slew of startups that can't afford to build their own factories.

Chang told Bloomberg on Monday reiterated that the company is in discussions to invest in solar and LED companies. These two industries share some similarities with the chip business in how they manufacture products. TSMC discussed this strategy of getting into these markets in June, but is now talking about acquisitions.

In fact, the solar industry has attracted a stream of chip industry veterans, be they executives or companies that want to expand into an emerging market.

National Semiconductor is now peddling chips for improving the output of solar panels while Applied Materials is making factory equipment for producing thin-film solar panels. The large trade show, Intersolar North America, drew crowds in San Francisco last month while its sister semiconductor show nearby looked like a ghost town.

Chang apparently didn't name potential targets or discuss what types of solar technologies would be worthy. But the company has some good choices just within Taiwan.

The country is cultivating a solar beltway from Taipei in the north to Tainan in the south, where the government has created science parks to house solar companies.

The government recently passed legislation to create a solar incentive program (see Feed-In Tariff Comes to Taiwan). The government-run Taiwan National Development Fund recently spent NT$500 million ($15.3 million) to take a 28.6 percent stake in PVNext, which makes copper-indium-gallium-selenide solar cells, reported DigiTimes.

Taiwan is home to Motech Industries, one of the 10 largest solar cell makers in the world. It also has many startups that popped up in recent years, and they span the spectrum, from silicon producers to solar panel makers and system integrators.

There are roughly 30 solar cell makers and 18 companies making solar panels, according to the government funded Industrial Technology Research Institute, which, incidentally, was headed by Chang and where TSMC was born.

If TSMC fancies solar cell makers, it can shop around for both crystalline silicon and thin-film companies. Then there's crystalline silicon cell maker Neo Solar Power whose CEO, Quincy Lin, was a senior vice president of TMSC and headed the chip company's operations in Europe and Japan.

Neo Solar, founded in 2005, saw its sales rise to $11.7 million from a few years ago to $318 million in 2008. It has a 90-megawatt factory and another 120-megawatt factory that could be expanded to 600 megawatts, said Andy Shen, Neo Solar's senior vice president of worldwide sales, during a meeting in June.

There are a number of thin-film makers that could use an infusion of cash to help them expand.

Auria Solar, which boasts a gleaming factory for making amorphous silicon solar panels, is looking to raise around $130 million to $150 million to expand its manufacturing capacity from 60 megawatts to 200 megawatts, said Chien-Sheng Yang, president of Auria, during a interview a few months ago.

The two-year-old company, which began mass production earlier this year, is producing solar panels with a 9 percent stabilized efficiency, which takes into account the degradation that typically happens to amorphous silicon solar panels during their initial operation.

Auria has figured out a way to squeeze more performance out of the equipment it has bought from Oerlikon Solar, and it expects to boost the panel efficiency to 11 percent next year, said Auria CEO Chi-Yao Tsai.

TSMC could even take a gamble by investing in a concentrating photovoltaic startup.

Everphoton, founded in 2007, is developing high-concentrating PV systems using the highly efficient but expensive solar cells from the III-V family of semiconductors.

The systems use tiny slivers of the cells in order to manage the materials costs, and the built-in lenses concentrate the sun to boost the cells' energy production.

Concentrating solar companies are largely in pre-commercialization stages because many of them bounded into the market a few years ago when silicon prices were high. These companies promise to deliver cheaper solar power by using non-silicon cells.

Everphoton is designing lenses that could concentrate the sun 500 times, said Eric Lai, the company's CEO, in a recent interview. The company's investors include an LED lighting company Everlight Electronics and Yee Fong Chemical.

Source: Taiwan Semi Goes Shopping for Solar