A decision by Foxconn Industrial Internet Co. (FII) to dispose of its indirect stake in Chinese semiconductor developer Tsinghua Unigroup is unlikely to affect its day-to-day operations, the Shanghai-listed communication network equipment subsidiary of Taiwan-based manufacturing giant Hon Hai Precision Industry Co. said on Tuesday.
The comments came after Hon Hai, also known as Foxconn globally, said late last week that Xinwei Fund, which is 99.99 percent owned by (FII), had reached an agreement to sell its indirect stake in Tsinghua Unigroup to Yantai Haixiu IC Investment Center for no less than 5.38 billion Chinese yuan (US$771 million).
In a statement, FII said fund transfers for the purchase and disposal of the Tsinghua Unigroup stake would not have an adverse impact on its operations though it warned that Xinwei Fund might face a delay in receiving the money from the sale.
FII said the stake disposal would be completed and the funds would be transferred to Xinwei Fund no later than March 15 after Yantai Haixiu comes up with a report assessing the Chinese chip firm’s value.
In July, Hon Hai had disclosed in a statement that FII’s Xinwei Fund had invested 5.38 billion yuan indirectly in Tsinghua Unigroup.
However, the investment raised concerns that it would help strengthen China’s chipmaking capability and boost its competitive edge internationally, a move some argued would compromise Taiwan’s national security, at a time when Taipei is forging closer ties with Washington amid escalating threats from Beijing.
According to Hon Hai, Xinwei Fund controls a 48.91-percent stake in another Chinese firm that holds a 20-percent stake in Beijing Zhiguangxin Holding, which fully owns debt-ridden Tsinghua Unigroup after a recent business restructuring.
The investment in Tsinghua Unigroup had been made without prior approval from the authorities in Taiwan, and the Ministry of Economic Affairs (MOEA) has said Hon Hai could face a fine of up to NT$25 million (US$811,688).
Hon Hai said the decision to dispose of the Tsinghua Unigroup stake was intended to avoid uncertainty about the company’s investment strategies resulting from a delay of the deal, given that the investment could not be finalized even after several months had passed.
The Investment Commission under the MOEA said on Monday that it had contacted Hon Hai to confirm FII’s decision to dispose of the Tsinghua Unigroup stake.
Although FII has decided to sell its Tsinghua Unigroup stake, the commission said Hon Hai would still be slapped with a fine due to a failure to secure regulatory approval to invest in the Chinese semiconductor firm earlier this year, and the exact fine would be calculated based on the information submitted by the iPhone assembler about the stake transfer.
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 in Tsinghua Unigroup.
Liu said Hon Hai believed the investment in Tsinghua Unigroup adhered to the law, but if the government had concerns about it and would not give retroactive approval, his company had a contingency plan. However, he did not disclose any details about it.
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.
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.
Source: Focus Taiwan News Channel