Taiwan’s Foxconn To Sell Its Stake In China’s Chip Giant Tsinghua Unigroup

A subsidiary of Taiwan’s Hon Hai Precision Industry will dispose of its indirect minority stake in China’s semiconductor giant Tsinghua Unigroup, the latest sign that Beijing’s chip industry is becoming increasingly isolated from the rest of the world.

Hon Hai’s China-listed Foxconn Industrial Internet (FII) will sell the shares to Yantai Haixiu IC Investment Centre for not less than USD 772 million, according to an exchange filing.

Hon Hai said in a separate statement that it decided to sell the stake to avoid uncertainty because the investment still needs to be finalised. The Taiwan government is concerned about the company’s interest in the Chinese chipmaker because the state-backed Tsinghua Unigroup is one of China’s most prominent semiconductor companies.

The self-governing island, Taiwan is considered a part of the mainland by China’s ruling Communist Party. Nancy Pelosi’s visit to Taiwan in August heightened tensions between the two countries, with Beijing staging military exercises in the waters surrounding the island. China has maintained provocative flight paths for its warplanes in the Taiwan Strait.

According to Taiwan’s Ministry of Economic Affairs, Foxconn will be fined for investing in Unigroup without informing the government.

According to the Financial Times, Taiwan opposed the investment and wanted Hon Hai to pull out.

FII holds a stake in Unigroup indirectly through Xingwei (Guangzhou) Industrial Investment Partnership. According to a previous filing, Xingwei invested through an affiliate in Beijing Zhiguangxin Holdings, the parent company of Tsinghua Unigroup.

Hon Hai, better known as Foxconn, is the biggest contract maker of Apple’s iPhones and operates several assembly plants on the Chinese mainland.

Beijing’s efforts to develop a self-sufficient chip supply chain are being hampered, with the United States and its allies threatening to restrict Chinese firms’ access to advanced semiconductor technologies.

The US government placed dozens of Chinese technology companies on its Entity List earlier this week, making it nearly impossible for them to obtain critical foreign components and escalating a trade conflict.

Bloomberg News reported that the United States’ allies, including the Netherlands and Japan, intend to adopt at least some of the new US rules.