Former top UMC executives found not guilty

The founder and former chairman of UMC was found not guilty of investing in Chinese chip maker, He Jian.

The founder and former chairman of the world's second largest contract chip maker was found not guilty of investing in and transferring technology to a Chinese chip maker, a Taiwanese court said.

Taiwan's Hsinchu District Court said there wasn't enough evidence to prove wrongdoing in the government's case against Robert Tsao. A former vice-chairman of United Microelectronics Corp. (UMC), John Hsuan, and the head of a venture capital firm, Cheng Tun-chien, were also found not guilty in the case, the court said in a statement.

The trio were indicted last year for allegedly investing in and transferring chip technology to Chinese chip maker He Jian Technology (Suzhou) The executives and UMC repeatedly denied wrongdoing in the case. They have admitted to advising He Jian during its start-up phase, but maintain that all help was within legal bounds. Prosecutors plan to appeal the verdict.

Taiwan carefully controls chip investments to China, fearing it could lead to job losses on the island or that its technology could be used to bolster Chinese military might. The two separated in 1949 amid civil war, and Beijing has long threatened the use of force to take the island if it moves towards formal independence. Due to their strained relationship, Taiwan chip makers are required to receive government approval before investing in or transferring chip-related technology to China.

The verdict is the second setback for the Taiwan government so far this year in its efforts to enforce regulations governing Taiwanese chip investments to China. In July, a Taipei court overturned an NT$5 million (US$154,000) fine against UMC, also citing a lack of evidence that it invested in He Jian.

The court actions underline a rift among Taiwanese in their dealings with China. Some people on the island, which share linguistic and cultural ties to China, are working towards independence as a way to safeguard democratic reforms that have taken hold in Taiwan over the past two decades. Others view China as their homeland, and are working to ensure Taiwan unites with the mainland and takes part in its economic boom.

Last year, UMC said a 15 percent stake in He Jian that the Chinese chip maker offered as payment for help establishing the company was put into a trust. The payment was part of UMC's efforts to make sure its shareholders benefitted from the growth of He Jian.

UMC Chairman Jackson Hu has repeatedly referred to He Jian as UMC's partner in China, and said UMC will refer its customers to He Jian when they're looking for some chip work to be done in China.

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Dan Nystedt

IDG News Service
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