The Taiwan government said on Monday it had approved a request by TSMC to build a new 450 millimeter wafer factory in the central part of the country.

Manufacturing bigger silicon wafers could significantly lower the cost of chip production. Currently, companies are using 300mm diameter (18-inch) wafers to produce chips

TSMC is expected to invest $8-10 billion in new 450mm factories, although tech challenges remain unsolved and will be possibly saty that way for the years to come. Moving on 18-inch fabs requires significant investments on new tools and equipment for the factories, meaning that equipment and material suppliers should help the foundry solve the current technical barriers.

"18-inch is something we have to do, but the technology is not ready yet ... if we can overcome it, it'll be a big breakthrough," said TSMC Chairman Morris Chang after the company's annual general meeting.

Samsung and Intel are also working on developing a 450mm wafer. Intel has said it plans to invest up to $8 billion to expand high-tech manufacturing facilities in Arizona and build a new site in Oregon, which would be able to produce 450mm wafers.

Seperately, TSMC expects to see gains over the next years from Renesas Electronics' decision to make chips on a contract manufacturing basis.