Taiwan fines Foxconn for unauthorized investment in China

TAIPEI, Dec 17 (Reuters) – The Taiwanese government said on Saturday it would fine Foxconn (2317.TW), the world’s biggest contract electronics maker, for an unauthorized investment in a Chinese chipmaker , even after the Taiwanese company announced that it would sell the stake.

Taiwan has been wary of China’s ambition to boost its semiconductor industry and is tightening legislation to stop what it says is China stealing its chip technology.

Foxconn, a major Apple Inc (AAPL.O) supplier and iPhone maker, disclosed in July that it was a shareholder in struggling Chinese chip conglomerate Tsinghua Unigroup.

On Friday night, Foxconn said in a Taipei stock exchange filing that its China subsidiary had agreed to sell its entire stake in Tsinghua Unigroup.

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

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

Foxconn did not immediately respond to a request for comment.

People familiar with the matter previously told Reuters that Foxconn did not seek Taiwanese government approval before the investment was made and authorities believe it violated a law governing the self-governing Taiwan’s relationship with the China, which claims the island as its own.

In a statement released to the Economy Ministry on Saturday, Foxconn said that as the end of the year approached, the initial investment had “remained unfinished”.

Foxconn said Xingwei, 99% controlled by its China-listed unit Foxconn Industrial Internet Co Ltd (FII) (601138.SS), had 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 a different entity that owns a 20% stake in the vehicle holding 100% of Unigroup.

“In order to avoid uncertainties related to further delays or the impact on investment planning and flexible capital deployment, Xingwei Fund will transfer its entire stake in Shengyue Guangzhou to Yantai Haixiu,” it said. -he declares.

“After the transfer is completed, FII will no longer indirectly hold any stake in Tsinghua Unigroup.”

Tsinghua Unigroup did not respond to a request for comment.

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

Foxconn, officially called Hon Hai Precision Industry Co Ltd, wants to manufacture automotive chips in particular as it expands into the electric vehicle market.

The company has sought to acquire chip factories around the world as a global chip shortage rattles producers of goods ranging from cars to electronics.

Taipei prohibits companies from building their most advanced foundries in China to ensure they don’t locate their best technology overseas.

($1 = 6.9708 yuan)

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

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