Foxconn faces hefty fines from Taiwanese government for unauthorised investment in Chinese chip makers

In a bid to dissuade other semiconductor manufacturers from getting involved with China, Taiwanese officials have decided to fine Foxconn a hefty amount for their unauthorised investments in a number of Chinese chip-making companies.

Taiwan, along with the US has been keeping an eye on China’s plan to dominate the global semiconductor industry by unfair means and is tightening legislation to prevent what it says is China stealing its chip technology.

Foxconn who are a major supplier for Apple and manufactures various models of the iPhone for the Cupertino-based tech giant, disclosed in July that they were a shareholder of a Chinese chip conglomerate called Tsinghua Unigroup. The Tsinghua Unigroup is facing a number of sanctions from many countries across the world. 

Foxconn, upon learning of the development, informed the Taipei stock exchange its subsidiary in China had agreed to sell its entire equity stake in Tsinghua Unigroup and will be exiting the Chinese chip manufacturing industry soon. Taiwan’s Economy Ministry said in response that its investment committee, which has to approve all foreign investments, will ask Foxconn on Monday for a “complete explanation” about the investment.

Foxconn has been seeking to acquire chip plants globally as a worldwide chip shortage rattles producers of goods from cars to electronics. It is keen to make auto chips in particular as it expands into the electric vehicle market.

Taiwanese companies need to seek approval from the Taiwanese government before making an investment, something that Foxconn failed to do. Taiwanese law states the government can prohibit investment in China “based on the consideration of national security and industry development”. Violators of the law can be fined repeatedly until corrections are made.

Taipei also prohibits companies from building their most advanced chip foundries in China to ensure they do not site their best technology offshore.

Authorities believe it violated a law governing self-ruled Taiwan’s relations with China. This is to hinder China’s claim that Taiwan is a part of sovereign Chinese territory.