Taiwan fines Foxconn for unauthorized investment in China

TAIPEI, Dec 17 (Reuters) – Taiwan’s government said Saturday it would fine Foxconn (2317.TW), the world’s largest contract electronics maker, for an unauthorized investment in a Chinese chipmaker, even after the Taiwanese firm announced to sell them use.

Wary of China’s ambitions to boost its semiconductor industry, Taiwan is tightening legislation to prevent China from allegedly stealing its chip technology.

Foxconn, a major supplier to Apple Inc. (AAPL.O) and iPhone maker, announced in July that it is a shareholder in embattled Chinese chip conglomerate Tsinghua Unigroup.

Foxconn said in a filing with the Taipei Stock Exchange late Friday that its China subsidiary has agreed to sell its entire stake in Tsinghua Unigroup.

Taiwan’s economy ministry responded that its investment commission, which must approve all foreign investments, will ask Foxconn for a “full explanation” about the investment on Monday.

“As for the fact that the investment was not previously declared, the amount will still be calculated according to the formula and the penalty will be imposed according to the law,” it said, without giving details.

Foxconn did not immediately respond to a request for comment.

People familiar with the matter have previously told Reuters that Foxconn failed to obtain Taiwanese government approval before the investment and authorities believe it has broken a law governing self-governing Taiwan’s relations with China, which owns the island claimed.

In a statement Saturday before the Commerce Department, Foxconn said as year-end neared the original investment remained “uncompleted.”

Foxconn said Xingwei, which is 99% controlled by its China-listed entity Foxconn Industrial Internet Co Ltd (FII) (601138.SS), agreed to sell its holdings for at least 5.38 billion yuan ($772 million ) to a Chinese company called Yantai Haixiu.

Xingwei controls a 48.9% stake in another company, which holds a 20% stake in the vehicle that owns all of Unigroup.

“In order to avoid uncertainty caused by further delays or impact on investment planning and flexible use of capital, the Xingwei Fund will transfer its entire stake in Shengyue Guangzhou to Yantai Haixiu,” it said.

“Following the completion of the transfer, FII will no longer indirectly hold any capital in Tsinghua Unigroup.”

Tsinghua Unigroup did not respond to a request for comment.

Taiwan law states that the government can ban investments in China “on the basis of consideration for national security and industrial development.” Violations of the law could be subject to repeated fines until corrections are made.

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

The company has sought to acquire chip factories worldwide as a global chip shortage is rocking makers of everything from cars to electronics.

Taipei bans companies from setting up their most advanced foundries in China to ensure they don’t take their best technology overseas.

($1 = 6.9708 yuan)

Reporting by Meg Shen and Ben Blanchard; Edited by Louise Heavens, Tom Hogue and Nick Macfie

Our standards: The Thomson Reuters Trust Principles.

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