A subsidiary of Hon Hai Precision Industry Co (鴻海精密) is planning to dispose of its indirect minority stake in China’s Tsinghua Unigroup Co (清華紫光), 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 Co (FII, 富士康工業互聯網) is planning to sell the shares to Yantai Haixiu IC Investment Center (煙臺海秀積體電路產業投資中心) for no less than 5.38 billion yuan (US$771.5 million), a Taiwan Stock Exchange filing showed on Friday.
Hon Hai said in a separate statement on Saturday that it decided to sell the stake to avoid uncertainty because the investment still cannot be finalized.
Photo: Reuters
The iPhone assembler said the decision to sell the Tsinghua Unigroup stake was also aimed at allowing the company to have more flexibility in capital management.
The New Taipei City-headquartered company’s interest in the Chinese chipmaker, despite being relatively small, triggered concerns from the government because state-backed Tsinghua Unigroup is one of the most prominent semiconductor companies in China.
The Ministry of Economic Affairs would still fine Hon Hai for investing in Unigroup without informing the government, the ministry said in a statement on Saturday.
The ministry earlier said that Hon Hai could face a fine of up to NT$25 million (US$814,067).
FII holds the Unigroup stake indirectly through Xingwei (Guangzhou) Industrial Investment Partnership Ltd (興微廣州產業投資).
Xingwei invested in Beijing Zhiguangxin Holding Co (北京智廣芯控股), the parent company of Tsinghua Unigroup, via an affiliate, a previous filing showed.
The share sale would be completed no later than March 15 after drafting a report assessing the Chinese chip firm’s value, Hon Hai said.
Beijing’s efforts to develop a self-sufficient chip supply chain at home are facing mounting challenges, with the US and its allies poised to jointly restrict Chinese firms’ access to advanced semiconductor technologies.
The US government last week included dozens of Chinese technology companies on its so-called Entity List, making it almost impossible for them to procure critical foreign components, and ratcheting up a trade conflict between the world’s two largest economies.
Washington’s action followed the administration of US President Joe Biden’s implementation of tough export controls two months ago to prevent China from buying or making cutting-edge semiconductors — crucial for the Asian nation to leapfrog the US in areas such as artificial intelligence and supercomputing.
Key US allies, including the Netherlands and Japan, are planning to adopt at least some of the new US rules.
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