Taiwan’s government said on Saturday it would fine Foxconn, the world’s largest electronics contracting company, for an unauthorized investment in a Chinese chip maker even after the Taiwanese company said it would sell a stake.
Taiwan has been eyeing China’s desire to develop its semiconductor industry and is tightening legislation to prevent what it says is Chinese theft of its chip technology.
Foxconn, a major supplier to Apple Inc and the maker of the iPhone, disclosed in July that it owned shares in a Chinese chip conglomerate that is at loggerheads with Tsinghua Unigroup.
Last Friday, Foxconn said in a filing to the Taipei Stock Exchange that its Chinese subsidiary has agreed to sell all of its equity stake in Tsinghua Unigroup.
Taiwan’s Ministry of Economy said in response that its investment commission, which must approve all foreign investment, would ask Foxconn on Monday for a “full explanation” about the investment.
“Regarding the fact that the investment was not announced in advance, the amount will still be calculated in accordance with the formula and the penalty will be issued in accordance with the law,” it said, without giving details.
Foxconn did not immediately respond to a request for comment.
People familiar with the matter have told Reuters that Foxconn did not seek permission from the Taiwanese government before the investment and authorities believe it violated a law governing Taiwan’s sovereign relations with China, which claims the island as its own.
In a statement on Saturday before the ministry of economy, Foxconn said that as the end of the year approaches the initial investment “remains unfinished”.
Foxconn said Xingwei, which is 99% controlled by its Chinese-listed unit Foxconn Industrial Internet Co Ltd (FII), has agreed to sell its assets for at least 5.38 billion yuan ($772 million) to a Chinese company called the Yantai Haixiu.
Xingwei controls 48.9% of the shares in a separate company with a 20% stake in the holding company Unigroup.
“In order to avoid uncertainty from further delay or impact on investment planning and flexible deployment of funds, Xingwei Fund will transfer its entire location from Shengyue Guangzhou to Yantai Haixiu,” he said.
“After the transfer is completed, the FII will no longer be able to indirectly hold equity in Tsinghua Unigroup.”
Tsinghua Unigroup did not respond to a request for comment.
Taiwan law says the government can ban investment in China “based on national security and industrial development considerations”. Violators can be fined repeatedly until corrections are made.
Foxconn, formerly known as Hon Hai Precision Industry Co Ltd, is committed to making auto chips especially as it enters the electric vehicle market.
The company has been looking to acquire chip plants around the world as there is a global shortage of chips trading with manufacturers of goods from cars to electronics.
Taipei is barring companies from building their most advanced bases in China to ensure they don’t take their best technology overseas.