UMC fined NT$5 million over illegal China investment

United Microelectronics Corp (UMC), the world's No. 2 supplier of made-to-order chips, was handed a NT$5 million (US$154,550) fine yesterday for helping a Chinese chipmaker set up a plant, according to a Ministry of Economic Affairs statement.

As former chairman Robert Tsao (曹興誠), former vice chairman John Hsuan (宣明智) and other staff provided help in establishing He Jian Technology (Suzhou) Co in 2002 -- including capital, technology and personnel transfer -- UMC violated the Statute Governing the Relations Between the People of the Taiwan Area and the Mainland Area.

The statute stipulates that Taiwanese nationals, corporations or groups are not allowed to invest in, engage in technological cooperation with or do any business with Chinese counterparts without prior government approval, the ministry's Investment Commission said in the statement.

Tsao and Hsuan were indicted for breach of trust and violating the Business Accounting Law (商業會計法) last month, which means that the pair could receive sentences of between six months and five years in prison.

The statement also said that the behavior of the former chairman and fellow employees also constituted a violation of the Regulations Governing the Approval of Investment or Technical Cooperation in China, especially since He Jian agreed to offer a 15-percent stake valued at US$110 million in the company to UMC in exchange for their assistance in setting up the plant.

"The share offer worth US$110 million was quite lavish, so we decided to impose the severest punishment possible on UMC, based on the unrevised regulations," chief commissioner Huang Chin-tan (黃慶堂), said in a phone interview with the Taipei Times.

The Taiwanese chipmaker could face another penalty, if it were to accept He Jian's offer, Huang said.

Huang said that it was extremely fortunate that UMC assisted He Jian before the revisions to the Regulations Governing the Approval of Investment or Technical Cooperation in Mainland China took place, or it could have been fined as much as NT$25 million.

An official at UMC's public relations department, who refused to be named, said yesterday that the company will decide upon which course of action to take after it receives the regulator's formal notification of the penalty.