Taiwan considers fining Foxconn over China investment

The government of Taiwan is thinking of fining semiconductor giant Foxconn up to NT$25 million (approximately £706,000) over its investment in a Chinese chip company without first receiving regulatory approval.

Earlier this week, Foxconn became a shareholder in Tsinghua Unigroup, a Chinese chip conglomerate, after spending ¥5.38 billion yuan via a subsidiary, according to Reuters.

Foxconn reportedly didn’t seek approval from the government before investing in the Chinese company, and could have violated a law governing the nation’s relationship with China. Taiwan has been increasingly worried about its neighbour’s ambition to grow its semiconductor industry and has tabled new laws to prevent what it claims to be is China stealing its chip technology.

Regulators are now considering whether to punish Foxconn with the maximum fine possible, which is NT$25 million, because of the big size of the investment into the Chinese company.

IT Pro has contacted Foxconn for comment. The company referred Reuters to an earlier filing on the stock exchange, claiming it will deliver the necessary documents to Taiwan’s Economy Ministry's Investment Commission in the near future.

The company could be given a fine between NT$50,000 and NT$20 million for investing without the government’s approval, with regulators set to scrutinise the decision and make a decision once Foxconn has submitted an investment application, another source told Reuters.

"There's a chance that an approval will be given. If not, Hon Hai will have to withdraw the investment," the source said, using Foxconn's formal name, Hon Hai Precision Industry Co Ltd.

Laws in Taiwan state that the government is able to prohibit investment in China, based on considerations of national security and industry development. Those who break this law could be fined repeatedly until a change is made. The government stops companies from building advanced chip fabs in China to make sure their best technology remains in the country.

Foxconn has been attempting to acquire semiconductor plants around the world as the global chip shortage continues.

However, Taiwan may also be wary of US bans on China-made technology. Earlier in July, the US also contemplated placing new restrictions on shipments of chipmaking tools to China. The move is targeting SMIC, the country’s largest chipmaker and supplier of Huawei devices. The US Commerce Department is leaning towards a potential ban on export of tools to Chinese semiconductor fabs producing advanced chips with 14nm nodes or similar.