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UMC investors endorse share purchase

UMC chairman Robert Tsao answers questions during a shareholders meeting yesterday. PHOTO: HONG YOU-FANG, TAIPEI TIMES

United Microelectronics Corp (UMC, 聯電), the world's second-largest contract chipmaker, yesterday received shareholders' approval to obtain a 15 percent stake of the Chinese chipmaker He Jian Technology (Suzhou) Co (和艦).

Shareholders yesterday passed a proposal in the annual meeting to take a 15 percent stake in He Jian for "past assistance" despite legal repercussions, and to back UMC Chairman Robert Tsao's (曹興誠) plan to expand into China, the company said in a statement.

"The assistance given in the past by the chairman and UMC's management team was in the company's long-term interests, and in no way violated the obligations of their offices," the Hsinchu-based chipmaker said.

Shareholder support could help Tsao escape breach of trust allegations against him, which sparked a series of investigations by authorities over the past six months into possible illegal investment in He Jian.

"UMC has never invested in or transferred any technology to He Jian. We only have a strategic tie with the company, as this should be a good way for UMC to ward off investment risk in China," Tsao said yesterday.

It would be a formidable task for UMC to acquire the US$110 million worth of He Jian shares legally, as the government bars local chipmakers from producing chips made with advanced technology -- such as 0.18-micron process technology -- in China.

The Suzhou-based He Jian, however, already possesses such technology.

In response to the news, Minister of Economic Affairs Ho Mei-yue (何美玥) said yesterday that any plans to buy a stake in He Jian would first need to be approved by financial authorities.

Ho added that the government has not yet received an application from UMC to acquire a stake in He Jian, but it could still reject the investment proposal.

Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) is currently the only local chipmaker to have received approval to produce chips in China, and is setting up a plant in Shanghai, to manoeuvre for a share of the fast-growing semiconductor market there.

In a closed-door shareholder's meeting yesterday Tsao also revealed that the company had planned to merge He Jian with its Japanese unit, UMC Japan, to circumvent the government's ban on making chips in China, according to Chinese-language media reports.

Tsao told shareholders that he had already got the go-ahead from President Chen Shui-bian (陳水扁) to undertake the consolidation during a meeting with the president on Jan. 25, but a police raid on UMC's headquarters in mid-February had upset the arrangement.

Shareholders yesterday also approved a stock dividend payment of NT$1 and cash dividend payment of NT$0.10 per common share for the fiscal year 2004, according to the statement.

UMC shares climbed 0.43 percent to NT$23.4 yesterday on the Taiwan Stock Exchange.
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