China group's semiconductor deals 'a threat to Taiwan'

Move will let it have control of industry, says presidential candidate

TAIPEI • Plans by Chinese state-backed giant Tsinghua Unigroup to invest US$2.6 billion (S$3.7 billion) in Taiwan pose a "huge threat" to the island's semiconductor industry, the front runner in next month's presidential polls has said, flagging possible hurdles for the deals.

Longstanding political tension between the two sides has seen Taiwan put restrictions on Chinese investments in its prized semiconductor sector, with an eye to protecting intellectual property and trade secrets.

Yesterday's comments by Dr Tsai Ing-wen, leader of the independence-leaning Democratic Progressive Party (DDP), which is detested by China, signal regulatory obstacles ahead for Unigroup's ambition to take control of three Taiwan chip firms.

"Unigroup has government capital and influence backing it," Dr Tsai, who retains a double-digit lead in opinion polls against her rivals going into the election, told reporters.

"Its entry into Taiwan is an issue not only of control in individual companies, but also the power in gaining key control of the upstream and downstream industry. So the threat to Taiwan's industry is very large."

A LARGE THREAT

Its entry into Taiwan is an issue not only of control in individual companies, but also the power in gaining key control of the upstream and downstream industry. So the threat to Taiwan's industry is very large.

DR TSAI ING-WEN, leader of the independence-leaning Democratic Progressive Party

Unigroup plans to take a stake of about 25 per cent in each of three chip test and packaging firms based in Taiwan: ChipMOS Technologies, Siliconware Precision Industries Co (SPIL) and Powertech Technology.

The deals have yet to secure shareholder and regulatory approvals in Taiwan, however.

Unigroup's plans are "full of serious problems", Dr Tsai added, and warned against rushing the deals through regulatory review. Until doubts over the investments are resolved, there will be little room for their clearance, she said.

Unigroup was not immediately available for comment. Last month, Tsinghua Unigroup chairman Zhao Weiguo said he would focus on investing in the United States, instead of Taiwan, citing the island's regulatory hurdles.

Taiwan's Advanced Semiconductor Engineering (ASE) has also offered to buy out SPIL for US$3.9 billion on condition the smaller rival cancels its tie-up with Unigroup.

China views self-ruled Taiwan as a renegade province and has not ruled out the use of force on it.

Ties have improved since President Ma Ying-jeou of the China-friendly ruling Kuomintang (KMT) took power in 2008, but he steps down next year.

KMT chairman Eric Chu, who was picked to contest the coming presidential election, also said last Friday that he opposed Chinese investment in the firms.

REUTERS, BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on December 16, 2015, with the headline 'China group's semiconductor deals 'a threat to Taiwan''. Print Edition | Subscribe