Taiwan Semiconductor Manufacturing Corp filed suit with the California Superior Court of Alameda County on August 25 claiming SMIC was still violating its trade secrets in breach of an agreement the two companies reached in January over alleged copyright violations.

Shanghai-based SMIC has filed a counter suit with the same court saying Taiwan Semiconductor breached that contract and failed to deal in good faith.

The cross-complaint alleges, among other things, that Taiwan Semiconductor has undertaken a concerted effort since the previous lawsuits to discredit SMIC by making unfair and misleading accusations.

SMIC agreed to pay the Taiwan-based chipmaker US$175 million over six years to settle the original dispute.

"It is unfair and TSMC is using the lawsuit to disrupt SMIC's business and valued relationships with its customers," SMIC said in a statement yesterday.

"Taiwan Semiconductor's suit shows it is worried about SMIC's growth and potential threat and the Taiwan-based company aims to put pressure on SMIC and its clients," said Li Ke, an analyst at Beijing-based CCID Consulting.

Taiwan Semiconductor controls 50 percent of the world's market for customized chips, while Semiconductor Manufacturing, the industry's fourth-biggest manufacturer, holds 7 percent, according to researcher IC Insights Inc.

Global sales of customized chips are poised to rise 22 percent to US$20.2 billion this year, according to estimates by IC Insights.

SMIC operates two 12-inch wafer plants in Beijing and Shanghai, which represent the world's most advanced chip-making technology.

China will surpass the United States to become the world's largest chip market this year, according to CCID.

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