Top foreign institutional investors in Taiwan voiced optimism yesterday about the future of Taiwan’s semiconductor industry in response to news that China’s top chipmaker had reached a lawsuit settlement with Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) on Tuesday.
TSMC officials said on Tuesday that Shanghai-based Semiconductor Manufacturing International Corp (SMIC, 中芯國際) had agreed to pay TSMC US$200 million in installments and issue 10 percent of its total shares — 01.79 billion new shares and a warrant for another 696 million shares — to settle a three-year-old dispute.
TSMC filed a lawsuit against SMIC in California in 2006, accusing the Chinese company of stealing trade secrets and of breaching a patent agreement inked in 2005. TSMC said SMIC’s actions had cost it more than US$1 billion.
With the settlement, TSMC, the world’s largest contract chipmaker, is expected to become the second-largest shareholder in SMIC, should it exercise the warrant.
“TSMC’s acquisition of SMIC shares will pave the way for a merger of the semiconductor industry, which will be a boon for the long-term development of Taiwan’s contract foundries,” UBS analyst Jonah Cheng (程正樺) said.
TSMC might purchase 10 percent of SMIC shares if a good price is offered, but the issue fully depends on the stance of the government, which is scheduled to review its policy on Taiwanese chipmakers investing in 12-inch wafer fabs in China by the end of the year, Cheng said.
Goldman Sachs analyst Donald Lu (呂東風) was optimistic on possible TSMC-SMIC cooperation, saying TSMC would become profitable in China by the end of the year. JPMorgan also viewed the possible venture as TSMC’s first move to realize mergers in the growing Chinese market.
However, variables remain, as the government does not permit Taiwanese semiconductor firms to acquire stakes in Chinese firms — a policy designed to maintain Taiwan’s competitive edge.
Fielding questions during a meeting of the legislature’s Economics Committee yesterday, Vice Minister of Economic Affairs Lin Sheng-chung (林聖忠) said the ministry needed to review the TSMC case because the company had acquired the SMIC shares as a result of a legal action.
“An adjustment to policy might be needed to deal with similar cases,” he said, adding that the government had no stance or fixed timetable on the issue.
TSMC said it has no plans to participate in SMIC’s operations.
“TSMC is a passive shareholder in SMIC and has no obligation as to how long it will hold the shares,” the company said yesterday in a filing with the Taiwan Stock Exchange.
Shares of TSMC rose 2.8 percent to close at NT$62.20 in Taipei trading, while SMIC shares surged 73.7 percent to close at HK$0.66 (US$0.085) in Hong Kong.
ADDITIONAL REPORTING BY BLOOMBERG
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