Original URL: http://www.theregister.co.uk/2005/02/18/umc_hejian_plot_thickens/

UMC chief admits desire to acquire Hejian

Confesses to advising the Chinese foundry's founders

By Tony Smith

Posted in Financial News, 18th February 2005 11:37 GMT

UMC chairman Robert Tsao has admitted helping the founders of China-based foundry Hejian Technology devise a business plan for their company.

But while he re-iterated UMC's previous position that neither it nor its executives have a stake - financial or technological - in Hejian, Tsao came clean on UMC's interest in acquiring the Chinese foundry should the Taiwanese government relax its rules governing the ownership of technology businesses on the mainland.

Tsao's comments, made in a statement written in Chinese and issued to Taiwanese reporters today, came after Taiwan's Ministry of Justice (MoJ) launched an investigation into allegations the UMC staff had indeed invested in Hejian and that they had done so without the government's blessing.

Taiwanese law requires any local chip company investing in a venture on the mainland to declare the fact. If they wish to set up over there, they must first seek the government's permission. Tsao maintains that his role as an advisor to Hejian management is not covered by the law. He said that his input was limited to ways Hejian could compete with Chinese foundry SMIC rather than with UMC or other Taiwan-based chip producers. SMIC, he said, was a far greater threat to Taiwan's chip industry than Hejian is.

Indeed, he said that UMC may in the future seek to buy Hejian. The MoJ claims that UMC tacitly licensed almost 200 patents to Hejian. Tsao did not admit such an agreement, but he did say that UMC has held back from pursuing possible patent infringement claims through the courts the better to strengthen its hand in any future bid to take over the Chinese company. Presumably that hands-off approach also applies to any efforts UMC might have made to pursue allegations that Hejian staff downloaded its technology by hacking into its intranet.

The MoJ probe saw not only UMC's HQ but also the homes of senior executives raided this week in a bid to expose evidence to back up the allegation.

Yesterday, it emerged that Hejian chairman J H Hsu had been detained by the MoJ before being released on a TWD10m ($316,910) bail pending the outcome of the investigation. ®

Related stories

Taiwanese agents detain Chinese foundry chief
UMC HQ raided in China investment probe
UMC Q4 income plummets on inventory adjustments
SMIC coughs $175m to settle espionage allegations
Chips are down for Taiwan foundry giants