An employee walks in front of the logo of Taiwan Semiconductor Manufacturing Co Ltd (TSMC) at its headquarters in Hsinchu, northern Taiwan, Nov. 19, 2015. REUTERS/Pichi Chuang

Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC), the world's top contract chip maker, signed an agreement with the Nanjing City Government in China to invest $3 billion for building an advanced silicon wafer manufacturing facility.

The move signaled a shift from Taiwan’s restrictions on manufacturing activities of its prized semiconductor sector in China amid political tension between the neighbors. China currently views Taiwan as a renegade province.

The proposed manufacturing plant would have a capacity to make 20,000 12-inch semiconductors, or wafers, per month and would also include the construction of a design service center, TSMC said. The chip maker asked Chinese municipal authorities to allow the company to wholly own the unit out of concern for intellectual property protection. TSMC already has a wholly-owned 8-inch chip making plant near Shanghai.

Production at the 12-inch wafer facility is expected to begin in the second half of 2018.

TSMC’s production was affected when silicon wafers were damaged at a plant in southern Taiwan due to an earthquake early in February. While the company’s manufacturing facilities were not damaged, TSMC lost some of its first quarter inventory, resulting in delays in delivery.

Following the earthquake, the company increased its forecast for first quarter revenue to between 201 billion Taiwanese dollars ($6.19 billion) and 203 billion Taiwanese dollars ($6.29 billion) but reduced its expected margin range for the quarter by three percentage points.