Taiwan Warns Chip Maker UMC on Compliance

United Microelectronics needs to show it is complying with a Taiwan government fine and with requests to remedy its relationship with a Chinese chip maker, a high-ranking official said Monday.

Although the government is “in no hurry” to levy another fine on the world’s second-largest contract chip maker, UMC needs to show some improvement, said Tsai Ing-wen, the vice premier of Taiwan, during a meeting with journalists in Taipei.

The Taiwan government fined UMC NT$5 million (US$153,000) in February for allegedly aiding in the establishment of Chinese chip maker He Jian Technology (Suzhou) without first gaining approval from Taipei, as required by regulations.

In February, UMC said it would appeal the fine, which was lighter than the NT$25 million maximum penalty it faced.

UMC ran afoul of the Taiwan authorities a year earlier, in February 2005, when prosecutors raided its offices in Taipei and Hsinchu and detained nearly two dozen Taiwanese employees of He Jian. The government had been gathering evidence that UMC 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 China’s military might. 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.

UMC has repeatedly denied wrongdoing in the He Jian case. Although UMC executives have admitted to offering extensive aid to the development of He Jian, they have maintained that they did so within legal bounds. Robert Tsao, the company’s former chairman, resigned along with another key executive early this year after Taiwanese prosecutors indicted them over the issue, and Taipei has leveled fines on UMC and He Jian executives.

He Jian has also offered UMC a 15 percent stake valued at US$110 million in return for its help in establishing the Chinese chip maker, an offer aimed at allaying one of Taipei’s criticisms: that UMC built a competitor, threatening its shareholders by hurting its own competitive position.

-Dan Nystedt, IDG News Service

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