Taiwan-based manufacturing giant Hon Hai Precision Industry Co. has agreed to sell all of its stake in Chinese semiconductor developer Tsinghua Unigroup to another Chinese entity.
In a statement posted late Friday night on the Taiwan Stock Exchange (TWSE), where Hon Hai shares are traded, the company said Xinwei Fund, which is 99.99 percent owned by its Shanghai-listed communication network equipment subsidiary Foxconn Industrial Internet Co. (FII), has reached an agreement to dispose of its stake in Tsinghua Unigroup to Yantai Haixiu semiconductor development center for no less than 5.38 billion Chinese yuan (US$722 million).
On Saturday, Hon Hai posted another statement on the TWSE saying it decided to give up the investment to avoid uncertainty over the company’s investment strategies resulting from a delay of the deal, given that the procedure to make the investment could still not be finalized after several months passed.
The iPhone assembler, also known as Foxconn on the global market, said the decision to sell the Tsinghua Unigroup’s stake was also aimed at allowing the company to have more flexibility in capital management.
The decision came after consulting with FII and Xinwei Fund, and the transaction will be completed no later than March 15 after coming up with a report assessing the Chinese chip firm’s value, the company said.
According to Hon Hai, Xinwei Fund controls a 48.91 percent stake in another Chinese firm with a 20 percent stake in Beijing Zhiguangxin Holding, which owns a 100 percent stake in debt-ridden Tsinghua Unigroup after a business restructuring.
In July, Hon Hai disclosed in a statement that FII’s Xinwei Fund had invested in Tisnghua Unigroup for 5.38 billion yuan. But the decision on the investment raised concerns that it would help strengthen China’s chipmaking capability and boost its competitive edge internationally, a move some argued will compromise Taiwan’s national security, at a time when Taipei is forging closer ties with Washington amid escalating threats from Beijing.
The investment in Tsinghua Unigroup had been made without prior approval from the authorities in Taiwan, and the Ministry of Economic Affairs had said Hon Hai could face a fine of up to NT$25 million (US$814,332).
In an investor conference held in mid-August, Hon Hai Chairman Liu Young-way (???) said the company had a backup plan if it failed to secure regulatory approval in Taiwan for its investment Tsinghua Unigroup.
Liu said Hon Hai believed the investment in Tsinghua Unigroup adheres to the law, but if the government has concerns about it and does not give retroactive approval, his company has a contingency plan. However, he didn’t disclose any details on Plan B.
According to Liu, Tsinghua Unigroup mainly runs non-chip manufacturing operations, such as IC design and servers, router and exchange board production, which would meet Hon Hai’s needs for future business growth, and the investment aimed to set up business ties with members of the Chinese firm as suppliers or clients for future cooperation.
Hon Hai is already one of the largest foreign investors in China, operating a broad production base and employing more than 1 million workers who roll out tech gadgets for international brands, such as Apple Inc.
In recent years, Hon Hai has intensified its efforts to diversify its product portfolio through the “3 plus 3” initiative, referring to three emerging industries — electric vehicles, robotics, and digital health care — that utilize artificial intelligence, semiconductor, and communication technologies in a bid to transform itself from a pure contract electronics manufacturer to a company which is able to integrate its hardware and software strengths.
Source: Focus Taiwan News Channel