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UMC chairman to quit over China investment case

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UMC chairman Robert Tsao is to quit his post, the chip foundry revealed this week in a document filed with the Taiwan Stock Exchange.

Tsao is at the centre of allegations that UMC took a stake in China-based foundry Hejian without notifying the Taiwanese government, as the island's law requires.

UMC's filing presents two exit strategies: if Tsao is found guilty of a breach of trust with the Taiwanese government, he will resign immediately. If his name is clear, he will stay on for a little while before quitting in favour of UMC CEO Jackson Hu. The company expects this transition to take place before 2007.

Hejian was founded by a number of ex-UMC executives in 2001. Tsao says he simply advised the founders on business matters. UMC says it has entered into no deal will Hejian, either to provide it with funding or technology.

However, it has been claimed that Hejian staffers not only had access to UMC's intranet, but the company's fab incorporated UMC-patented technology, seemingly without protest from the Taiwanese company. It is alleged that UMC tacitly licensed its technology to Hejian.

Investigators from Taiwan's Ministry of Justice raided UMC's HQ and the homes of executives in February seeking evidence to support these allegations.

UMC has said it would like to invest in Hejian, and in March put in place a scheme to do so, going through the correct channels. It is seeking permission to invest $110m in Hejian. Tsao had already said that UMC would be keen to acquire Hejian at some future time.

The UMC-Hejian case has yet to come to court, though Tsao and 23 other executives, including UMC vice-chairman John Hsuan and Hejian chairman J H Hsu, have been named as defendants when the case is eventually heard by Taiwan's Hsinchu District Court.

UMC called on the Court to speed the start of the trial. Tsao said he had quit his role as a national policy advisor in order to stand trial as an ordinary citizen. ®

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