Taiwan Semiconductor Manufacturing's (TSMC) founder and chief executive Morris Chang told specatators at a ceremony in Hsinchu City that he disagreed with the idea that the LED industry was a low return sector for electronics companies.
TSMC is the largest contract chip maker to build a technology research and development centre and a new lighting manufacturing plant.
It will invest NT5.5 billion (£116 million) in the first-phase laying infrastructure.
Mr Chang sent out a warning to competitors of the company's intentions in the coming years, Focus Taiwan reported.
"TSMC is not interested in competing for petty profits with other rivals. TSMC will be winning the race with advanced technologies and high production capacity," he said.
Taiwan is currently the largest producer of LED technology and it is increasingly being used in more everyday electronics worldwide, such as streetlights, mobile phones and computers.
