Not convinced
Investors apparently did not buy UMC Chairman Tsao's explanation in his public statements about his company's ties with He Jian.
UMC shares plunged to NT$18.60 after hitting an all-time low of NT$18.35 in the middle of the session on March 22, a day after Tsao published a public letter.
"We almost unloaded all of our UMC shares because of the worry of UMC's losing competitiveness to He Jian," Lan said.
UMC has struggled to boost capacity usage to improve its profitability in recent quarters, while He Jian achieved the amazing success of booking profits within the first four years of its establishment, Lan said.
"The transfer of value to He Jian has been one key reason why we have been cautious on UMC," said Bhavin Shah, an analyst with JP Morgan, in his report released in mid-February.
Shah retained his underweight rating on UMC, despite signs pointing to a gradual improvement of the semiconductor industry on falling inventory.
The probe into UMC could be disruptive to the company's operations and is certainly likely to affect its reputation, Shah said.
"This will make it difficult for institutional investors to justify owning the stock," Shah said. "In the past, we have demonstrated why, at least in our view, certain decisions taken by UMC may not be in the best interests of shareholders."
Welcome change
Yeh Yin-hua (
"Shareholders' interests should be highly respected, if UMC's aid to He Jian involves the transfer of intellectual property rights held by UMC," Yeh said.
Yeh added that the 15-percent stake offer by He Jian should be valued by a third party rather than a negotiation between UMC's vice chairman John Hsuan (
But although the offer has come under fire from investors and government officials, most investors -- including Shah and Lan -- saw it in a positive light.
"The government is unlikely to OK [the] proposal in the next several months," Lan said. "But in the long run, UMC is highly likely to gain a strong foothold in China, the world's fastest-growing chip industry."
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