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Foxconn, the world’s largest contract electronics maker, will be fined for an unauthorized investment in the Chinese chipmaker, Taiwan’s government said on Saturday, even after the Taiwanese company said it would sell the stake.
Kilai Shen | Corbis Historical | Good pictures
Taiwan’s government said on Saturday that it would be fine FoxconnEven after the world’s largest contract electronics maker said it would sell a stake in the Taiwanese firm for an unauthorized investment in a Chinese chipmaker.
Taiwan is wary of China’s ambitions to boost its semiconductor industry and is tightening legislation to prevent China from claiming it is stealing its chip technology.
Foxconn, a major Apple Inc The supplier and iPhone maker, revealed in July, is a partner in Chinese chip conglomerate Tsinghua Unigroup.
Late on Friday, Foxconn said in a filing to the Taipei Stock Exchange that its subsidiary in China had agreed to sell its entire equity stake in Tsinghua Unigroup.
Taiwan’s economy ministry responded that its investment commission, which must approve all foreign investment, would ask Foxconn on Monday for a “full explanation” of the investment.
“Since the investment is not notified in advance, the amount will still be calculated according to the formula and penalized as per law,” it said without elaborating.
Foxconn did not immediately respond to a request for comment.
People familiar with the matter previously told Reuters that Foxconn did not seek permission from the Taiwanese government before the investment, which officials believe violated laws governing self-ruled Taiwan’s relations with China, which claims the island as its own.
In a statement on Saturday before the economy ministry, Foxconn said the original investment “remains unfinished” as it nears the end of the year.
Xingwei, which is 99% controlled by its China-listed unit Foxconn Industrial Internet Co Ltd (FII), has agreed to sell its stake for at least 5.38 billion yuan ($772 million) to Chinese company Yantai Haixiu, Foxconn said.
Xingwei controls a 48.9% stake in another company that holds a 20% stake in all of Unigroup’s vehicles.
“In order to avoid further delays or uncertainties from impact on investment planning and deployment of flexible capital, Xingwei Fund will transfer its entire stake in Shengyue Guangzhou to Yantai Haixiu,” it said.
“Upon completion of the transaction, FIIs will no longer indirectly hold any shares in Tsinghua Unigroup.”
Tsinghua Unigroup did not respond to a request for comment.
Taiwan law says the government can ban investment in China “on grounds of national security and industrial development.” Violators will be fined repeatedly until corrections are made.
Foxconn, formally known as Hon Hai Precision Industry Co Ltd, is particularly interested in making auto chips as it expands into the electric vehicle market.
The company is looking to buy chip plants globally as a global chip shortage hits makers of everything from cars to electronics.
Taipei prohibits the company from building its most advanced foundries in China to ensure that its best technology is not located offshore.
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