China's plan to dominate chip manufacturing may be overly ambitious, but the awakening Asian giant has defied the odds before in its drive to become a hardware superpower.

Industry analysts are puzzled about why China would want to attempt such a monumental engineering task. But at least one chip manufacturer isn't just perplexed - its top executive is nearly apoplectic about the move.

China's attempt to build 10 chip fabrication plants in each of its major cities would disrupt the industry, Robert Tsao, chairman of Taiwan-based United Microelectronics Corp., said at the Forbes Global CEO Conference in September. "If they achieve their goals, there would be complete chaos," he said.

The worldwide semiconductor industry is in such a slump that 60 of the 100 semiconductor plants are idle, Tsao said. "If China starts to build a huge number of new fabs [fabrication facilities], we would have an industry where a majority of players would lose a lot of money."

Allan Armstrong, telecommunications research firm RHK's semiconductor analyst, said he was surprised Tsao would say something so controversial in response to China's aggressive plans. "It would seem to impact people's confidence in his business," Armstrong said.

Currently, chip manufacturing - an industry segment separate from chip design - is dominated by three companies: Singapore-based Chartered Semiconductor Manufacturing, Taiwan Semiconductor Manufacturing Co. and UMC. Some of the most modern and efficient chip making plants, though, are operated by IBM in the U.S.

China, which is eager to be accepted as a full partner in the World Trade Organization, has forged alliances with North American and European equipment vendors and is emerging as a hardware powerhouse. This summer, Intel CEO Craig Barrett predicted that within a couple of years, China will be the hardware superstar of Asia, while India will be the continent's software giant.

Jay Patel, The Yankee Group's semiconductor analyst, said it's not surprising that China wants to grab a share of the chip manufacturing market dominated by Taiwan. "Ten factories [per major city] may be too optimistic," Patel said. "But in five or 10 years, it could make sense."