Taiwan weighs fining Foxconn over China chip investment – source

A poster with a logo of Foxconn is seen at the IEEE Global Communications Conference in Taipei. Taiwan, December 9, 2020. REUTERS/Ann Wang

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TAIPEI, July 15 (Reuters) – Taiwan’s government is considering fining tech giant Foxconn up to T$25 million ($835,600) over its investment in a Chinese chip conglomerate without first getting regulatory approval, a source briefed on the matter told Reuters on Friday.

Foxconn, the world’s largest contract electronics maker, said this week it has become a shareholder in embattled Chinese chip conglomerate Tsinghua Unigroup via a 5.38 billion yuan ($796.97 million) investment by a subsidiary. read more

The investment comes as Taiwan turns a wary eye on China’s ambition to boost its semiconductor industry and has proposed new laws to prevent what it says is China stealing its chip technology.

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Foxconn did not seek prior approval from the Taiwan government before the investment was made and authorities believe that has violated a law governing the island’s relations with China, a person familiar with the matter told Reuters.

Regulators are weighing whether to hand Foxconn the “maximum” fine possible due to the large size of the Chinese investment, the person added.

Foxconn referred Reuters to an earlier filing on the stock exchange, saying it will deliver the documents to the Economy Ministry’s Investment Commission in the near future.

Taiwanese law states that the government can prohibit investment in China “based on the consideration of national security and industry development.” Those violating the law could be fined repeatedly until corrections are made.

Foxconn, best known for assembling Apple Inc’s (AAPL.O) iPhone, is keen to make auto chips in particular as it expands into the electric vehicle market. The company has been seeking to acquire chip plants globally as a worldwide chip shortage rattles producers of goods from cars to electronics.

Taipei prohibits companies from building their most advanced foundries in China to ensure they do not offshore their best technology.

Originating as a branch of China’s prestigious Tsinghua University, Tsinghua Unigroup emerged in the previous decade as a would-be domestic champion for China’s laggard chip industry.

But the company fell into debt under former chairman Zhao Weiguo, prompting it to default on a number of bond payments in late 2020 end eventually face bankruptcy. read more

The conglomerate has yet to produce any global leaders in the semiconductor sector.

($1 = 29.9180 Taiwan dollars)

($1 = 6.7506 Chinese yuan renminbi)

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Reporting By Jeanny Kao and Yimou Lee; Editing by Michael Perry

Our Standards: The Thomson Reuters Trust Principles.

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