Taiwan fines chip maker UMC over Chinese company

TAIPEI — Taiwanese financial regulators have fined the head of contract chip maker United Microelectronics Corp. (UMC) NT$3 million (US$95,300) amid an ongoing investigation into alleged illegal investments in a Chinese semiconductor company.

The penalty is part of Taiwan’s efforts to control chip sector investment in political rival China, and analysts said it was largely expected.

The chairman of the world’s second largest contract chip maker, Robert Tsao, will have to pay the fine.

“If they do anything beyond giving fines, like putting executives in jail, that would be bad. But I don’t think that’s going to happen,” said Mark Atamer, chip analyst at Primasia Securities in Taipei.

UMC failed to adequately keep its shareholders informed of its assistance in the development of China’s He Jian Technology (Suzhou), Taiwan’s Financial Supervisory Commission said in a statement late Wednesday. UMC also violated disclosure laws by delaying the announcement of a board decision regarding its relationship with He Jian, it said.

“UMC failed to reveal … its promise to aid He Jian in a timely manner, violating shareholder rights,” the FSC said. He Jian was established in 2001 by former employees of UMC before Taiwan relaxed a ban on semiconductor investments in China.

Tsao was not named in the FSC statement. However, Taiwan law makes the chairman responsible for company activity, and the first to face fines or jail time for any violation.

The commission’s fine is the first UMC has faced amid an ongoing investigation into its China-related activities. In February, Taiwanese prosecutors raided UMC’s headquarters to investigate whether the company had illegally provided funds and technology to He Jian. UMC has admitted to a broad relationship with He Jian but denied violating any laws.

UMC declined to comment Thursday on the commission’s decision.

The company could face further penalties related to He Jian if it is found to have illegally transferred technology to the chip maker.

Taiwan carefully controls chip investments to China over fears of job losses and that its technology could be used to bolster Chinese military prowess. Taiwan and China separated in 1949 amid civil war, and China has threatened to take the island by force if it declares independence.

Taiwan Semiconductor Manufacturing Co. (TSMC) last year became the first Taiwanese chip maker to legally begin producing semiconductors in China after a long government approval process.