ProMOS Says It Has No Plans for UMC Tie-Up in China

ProMOS Technologies, one of Taiwan’s largest dynamic RAM (DRAM) makers, said Tuesday it has no plans to work with United Microelectronics (UMC) on a new chip factory in China.

In a statement to the Taiwan Stock Exchange, the company refuted a local newspaper report that said government officials were keeping a careful eye on ProMOS and UMC, the world’s second-largest contract chip maker, after UMC increased its stake in the memory chip maker. The report said UMC might try to work with ProMOS on a factory in China and transfer technology to the mainland through the DRAM maker.

ProMOS said it has no plans to work with UMC in China.

ProMOS is one of three companies competing to build one of the three chip factories Taiwanese authorities will allow to be built in China. The other company with a pending application is Powerchip Semiconductor. In 2004, Taiwan Semiconductor Manufacturing (TSMC) became the first Taiwanese company to build such a plant, in Shanghai.

UMC, however, was fined earlier this year for allegedly aiding in the establishment of a mainland chip company.

Taiwanese companies are required by local law to gain official approval for any chip-related money or technology transfers to China, because the island sees China as its main military threat.

Taiwan and China remain enemies after splitting in 1949 amid civil war. The island fears China could use chip technology to bolster its military capabilities and strike Taiwan.

Despite the strained relationship, China remains by far the favored destination for Taiwanese investment due to their shared language and culture.

UMC executives have admitted to working with Chinese chip maker He Jian Technology (Suzhou), but have denied breaking any rules. The Taiwan government levied a new Taiwan $5 million (US$153,000) fine on UMC in February, and indicted two top executives at the company, the chairman and a vice chairman, both of whom resigned shortly before news of the indictment broke.

UMC has appealed the fine. The court case against the executives started in May.

Last week, UMC said it bought 66.99 million shares of ProMOS stock, raising its stake in the company to 13.9 percent of outstanding shares.

-Dan Nystedt, IDG News Service (Taipei Bureau)

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