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By Ucilia Wang

The world's largest contract chip manufacturer has made it known that it very much wants to be a major player in the emerging solar industry.

The Taiwan Semiconductor Manufacturing Co. (TSM) has made its move. The company said Wednesday it plans to buy a 20 percent stake in Motech Industries for about NT$6.2 billion ($193 million).

Motech, also based in Taiwan, was one of the world's' top 10 solar cell producers in 2008 and makes its own crystalline silicon ingots and wafers. The company, whose shares are traded over the counter in Taiwan, also makes inverters and sells solar energy systems.

The purchase, which will still require the approval from Motech shareholders, gives TSMC a faster entry into the solar market than if it were to invest in a startup company developing newer technologies. Most of the solar panels sold today use crystalline silicon solar cells.

TSMC produces chips for companies that can't afford to have their own factories (or need extra production capacity in the near term). Founded in 1987, it rose to be the biggest player as chip factories became more and more expensive to own and operate. Most of the chip startup companies today rely on TSMC and other contract manufacturers to turn their new technologies into commercial products.

The same model could one day dominate the solar industry. Already, major companies and startups have turn to contract manufacturers, or scrapped factory plans to focus on licensing their know-how.

BP Solar (BP) and Evergreen Solar (ESLR) are hiring manufacturers to produce some of their products.

SunPower (SPWRA) also hired Jabil Circuit (JBL) to assemble SunPower's cells into panels.

Innovalight, based in Sunnyvale, Calif., changed its business plan from making solar cells and assembling them into panels to selling its silicon ink and licensing its technology. Another startup, 1366 Technologies in Lexington, Mass., is pursuing a similar strategy.

TSMC discussed its desire to get into the solar market earlier this year, and has been hunting for investment opportunities in Asia and the United States. In my August story about likely acquisition targets, TSMC Goes Shopping for Solar, I mentioned Motech and several startup companies within Taiwan.

TSMC has been recruiting for talents with experiences in thin-film solar technology that uses copper, indium, gallium and selenium for converting sunlight into electricity. The company also is interested in managers with a know how in integrating various components into a solar energy system.

Source: Taiwan Semi Wants a Piece of Motech