UMC chairman to resign over spat with government

The founder and chairman of the world’s second largest contract chip maker on Thursday said he plans to resign from his positions as chairman and board member of United Microelectronics Corp. (UMC).

Robert Tsao cited mainly government meddling and scrutiny of his company’s business affairs for his planned departure. Recently, the Taiwan Stock Exchange Corp. fined the company NT$50,000 (US$1,522) for its failure to report accounting errors in a timely manner to shareholders.

Tsao’s resignation is the latest salvo in an ongoing battle between the company and government officials in Taiwan over alleged illegal investments in a Chinese chip maker. UMC ran afoul of Taiwanese regulators in February, when police raided UMC offices in Taipei and Hsinchu, and detained a number of Taiwanese employees of Chinese chip maker He Jian Technology (Suzhou) Co. Ltd. The government has been gathering evidence against UMC that it invested in He Jian without applying for permission to do so, which is illegal in Taiwan.

Taiwan carefully controls chip investments to China, fearing it could lead to job losses on the island or that its technology could be used to bolster Chinese military prowess. The two separated in 1949 amid civil war, and Beijing has long threatened the use of force to take the island if it moves toward independence.

More recently, UMC in mid-December restated past financial statements after the U.S. Securities and Exchange Commission requested that it rework full year earnings for 2002 through 2004 because they didn’t conform to U.S. accounting regulations. But UMC made no changes to financial statements based on Taiwanese accounting standards. The company’s stock is listed in both the U.S. and Taiwan.

UMC released a statement regarding the planned changes to its U.S. financial statements after U.S. stock markets closed, but failed to notify Taiwanese shareholders in the local language until the next morning, over an hour after the Taiwanese exchange had opened. That delay garnered the fine from the Taiwan Stock Exchange.

But UMC disagrees that it has done anything wrong. On Wednesday, the company issued an open letter in major Taiwanese newspapers lambasting government interference into its affairs, insinuating the NT$50,000 fine was politically motivated and lamenting the “unreasonable” attention its financial restatements had garnered for the company.

The chip maker also questioned if politics had made Taiwan too chaotic, and suggested it might de-list its stock from the island’s exchange.

The Taiwan Stock Exchange said it was only doing its job of looking out for shareholders’ rights by levying the fine.

In his Thursday resignation statement, Tsao wrote that, “With regard to the recent financial filing incident, UMC has acted in complete compliance with international standards, and has done nothing illegal or made any oversights. Unfortunately, the filing process, carried out with complete professionalism and fully in accordance with global practices, has been greeted in Taiwan by distortion and political manipulation, with total disregard for right or wrong.”

The executive plans to resign at the company’s board meeting in March of next year, he said. He plans to hand over the chairmanship to Jackson Hu, the chief executive officer of UMC.