Thu, Feb 17, 2005 - Page 1 News List

UMC raided on suspicion of China ties

ILLEGAL INVESTMENTS?Authorities descended on the headquarters of the world's No. 2 custom chipmaker, as officials at the company swore innocence

By Lisa Wang  /  STAFF REPORTER

United Microelectronics Corp (UMC, 聯電), the world's No. 2 contract chipmaker, yesterday said it was under investigation regarding its ties with Chinese semiconductor start-up He Jian Technology (Suzhou) Co (和艦), as it is illegal to make some investment in China.

The Hsinchu-based chipmaker said in a statement that investigators raided its offices Tuesday afternoon, but that no evidence of any wrongdoing had been found.

Authorities have not yet commented on what, if anything, they discovered in the raid.

"UMC has no direct investments in China," said UMC spokesman Liu Chi-tung (劉啟東) in a phone interview with the Taipei Times. The chipmaker said the search did not affect UMC's operations.

Chief executive Jackson Hu (胡國強) told investors earlier this month that his company has no financial ties with He Jian and that it had not subcontracted orders to the Chinese chipmaker.

But, the close ties between the companies have attracted the government's suspicions.

"UMC's relationship with He Jian are at the center of the search," said Tsai Ten-yuan (蔡添源), a prosecutor in charge of the case at the Hsinchu Prosecutor's Office, saying that the action came after recent tip-offs.

Investigators are trying to determine whether UMC illegally invested in, transferred technologies to, or exchanged engineers with the Suzhou-based foundry company, Tsai said.

Investigators brought back a batch of accounting records and other documents after making a search of UMC's offices, and the residences of vice chairman John Hsuan (宣明智) and another UMC employee on Tuesday, Tsai said.

He Jian executive Hsu Chien-hwa (徐建華), a former UMC employee, was also investigated. Investigators began another round of questioning yesterday.

"The investigation will continue," Tsai said. He said they will not rule out the possibility of restricting Hsu from leaving the country.

The probes of UMC's investments in China weighed heavily on UMC's share price yesterday. The company's shares fell nearly 1 percent to NT$20.8 on the Taiwan Stock Exchange.

"I believe the impact will be merely psychological and short-lived. I don't see [the probes] as a big issue. What really matters is the fundamentals," said Rick Hsu (徐稦成), a senior research analyst at Nomura Securities Co Ltd (野村證券) in Taipei.

As the semiconductor sector is bottoming out, Hsu said he will keep intact his "buy" rating for UMC.

Investigators' actions did not scare away overseas fund managers. Foreign investors bought a net of 37.65 million UMC stocks yesterday.

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