Taiwan Government Fines Foxconn for Investing in Chip Factories From China

JAKARTA - The Taiwan government announced on Saturday 17 December that it would fine Foxconn, the world's largest contract electronics company, for illegally investing in a Chinese chip maker even after the Taiwanese company said it would sell its shares.

Taiwan has been wary of China's ambitions to boost its semiconductor industry and is tightening laws to prevent China from stealing its chip technology.

Foxconn, which is a major supplier to Apple Inc and iPhone maker in Asia, revealed in July that it is a shareholder of Chinese chip conglomerate Tsinghua Unigroup.

Late Friday, December 16 Foxconn said in a filing with the Taipei stock exchange, its Chinese subsidiary had agreed to sell all of its equity stake in Tsinghua Unigroup.

Taiwan's Ministry of Economy said in response that its investment commission, which must approve all foreign investment, would ask Foxconn on Monday for a "full explanation" of the investment.

"For investments that were not previously announced, the amount will still be calculated according to the formula and sanctions will be imposed according to the law," he said, without elaborating.

Foxconn did not immediately respond to a Reuters request for comment on this report.

People familiar with the matter previously told Reuters that Foxconn did not seek approval from Taiwan's government before the investment was made and authorities believed it violated laws governing Taiwan's relations with China, which claims the island as its own.

In a statement last Saturday before the economy ministry, Foxconn said towards the end of the year the initial investment "remains unfinished".

Foxconn said that Xingwei, 99% controlled by its unit of registered China Foxconn Industrial Internet Co Ltd (FII), had agreed to sell its holdings for at least 5.38 billion yuan (Rp 12 trillion) to a Chinese company called Yantai Haixiu.

Xingwei alone controls a 48.9% stake in a different entity which holds a 20% share of the vehicles which own all of Unigroup.

"To avoid uncertainty from delays or further impact on investment planning and flexible capital deployment, Xingwei Fund will transfer its entire holdings in Shengyue Guangzhou to Yantai Haixiu," it said. "Once the transfer is completed, FII will indirectly no longer own equity in Tsinghua Unigroup."

Tsinghua Unigroup also did not respond to requests for comment.

Taiwan law states the government can ban investment in China "based on considerations of national security and industrial development". Lawbreakers can be fined repeatedly until corrections are made.

Foxconn, officially called Hon Hai Precision Industry Co Ltd, is eager to make auto chips especially as it expands into the electric vehicle market.

The company has been seeking to acquire chip factories globally as a worldwide chip shortage rocked manufacturers of goods from cars to electronics.

But Taipei is barring companies from building their most advanced foundries in China to ensure they don't deploy their best technology offshore.