Sat, Feb 19, 2005 - Page 1 News List

Prosecutors step up probe into UMC's investments

DENIALS Prosecutors and police insisted that their investigation was not driven by politics, while UMC said that it had no illegal investments in China

By Rich Chang and Lisa Wang  /  STAFF REPORTERS

Prosecutors and the Criminal Investigation Bureau yesterday said there were no political motives behind a probe into alleged illegal investments in China by United Microelectronics Crop (UMC, 聯電), and they pledged to step up their investigation.

UMC yesterday denied allegations of illegal investment in China's He Jian Technology (Suzhou) Co (和艦), saying that it only assisted in the establishment of the chipmaker but did not violate law.

Fending against a loss in competitiveness to rising Chinese firms, the government restricts local semiconductor companies from setting up production lines in China.

A defiant UMC chairman Robert Tsao (曹興誠) yesterday issued a statement to authorities asking them to stop the investigation and called it "white terror."

Tsao also said that the investigation began from a what he called a "forged accusation letter," which was written by a former He Jian employee by the name of Chen Cheng-yu (陳澄佑), who was thought to be an undercover agent who secretly gathered He Jian information for its rival, Semiconductor Manufacturing International Corp (SMIC, 中芯國際集成電路).

UMC said it hoped to acquire He Jian if and when the government relaxes or scraps altogether restrictions on China-bound investment. Financial authorities in the past signaled they are willing to do so.

"UMC will be able to tap into the Chinese market by merging with He Jian soon after the Chinese market is ripe, or after the cross-strait relations improve," Tsao said in a statement published in local newspapers yesterday.

Tsao's comments came after He Jian president Shyu Jann-hwa (徐建華), himself a UMC executive, was released on NT$10 million bail Thursday after he was held for questioning.

"It's no secret that UMC is keeping friendly relations with He Jian and giving aide to the company," Tsao said.

UMC has helped the Suzhou-based foundry company supply chip orders from UMC customers in the fast-growing Chinese market, including Xilinx Inc and Infineon Technologies AG, Tsao added.

Speculation that high-ranking UMC executives had bankrolled, or subcontracted orders to He Jian were simply untrue, Tsao said.

Tsao also rejected "hollowing out" allegations which would jeopardize UMC's competitiveness, as prosecutors suspected the Hsinchu-based chipmaker illegally transferred technology, capital and personnel to He Jian.

He Jian said in a statement that it is an independent enterprise with foreign investment dedicated to semiconductor wafer foundry business and says no direct relationship with UMC exists.

In response to Tsao's accusations, Tsai Ten-yuan (蔡添源), spokesman for the Hsinchu District Prosecutors' Office said "prosecutors will never stop the probe into the UMC case, and the investigation won't be affected by anyone's words."

Tsai also said prosecutors found evidence of illegal conduct in documents seized from UMC, and would summon Tsao and UMC vice chairman John Hsuan (宣明智) for questioning at a later date. In addition, over 50 former UMC employees now working for He Jian would be summoned for questioning.

Tsai also said prosecutors welcomed Tsao voluntarily showing up for questioning in order to speed up the investigation.

Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) is the only local chipmaker allowed to produce chips at its Shanghai factory at the less-advanced 0.25-micron processing technology, which began late last year.

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