Taiwan Semiconductor Manufacturing Co. (TSMC), the world's largest contract chip maker, is planning to open a factory producing a technically-demanding component of integrated circuits in Nanjing, capital of east China's Jiangsu province.

The company has filed an application with the island's outbound investment authority for the plan, it announced on Monday.

According to a statement on its website, the factory should open in 2018 and will be able to produce 20,000 12-inch wafers per month.

A wafer, normally made of crystalline silicon, is used as the substrate for integrated circuits of electronics. A 12-inch wafer, the largest TSMC produces, can accommodate more integrated circuits but requires finer manufacturing technology.

TSMC's three current 12-inch wafer factories are all located in Taiwan, while its mainland factory produces eight-inch wafers.

TSMC will also set up a design service center of semiconductors in Nanjing.

The new factory will cater to the rapid growth of the semiconductor market in the mainland, said TSMC Chairman Morris Chang.

The company reported an annual revenue of 23.25 billion US dollars in 2014, ranking it third in semiconductor firms worldwide, following Intel and Samsung.