Foxconn to sell stake in chip giant

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 Center for not less than $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 cannot be finalised. The company’s interest in the Chinese chipmaker, has triggered concerns from the Taiwan government because the state-backed Tsinghua Unigroup is one of the most prominent semiconductor companies in China.

China’s ruling Communist Party sees the self-governing island as a part of the mainland. A visit to Taiwan in August by then-Speaker of the House, Nancy Pelosi, raised tension between the two sides, with Beijing staging military exercises in the waters around the island. China has continued to send warplanes on provocative flight paths in the Taiwan Strait.

Opposed investment
Taiwan’s Ministry of Economic Affairs said in a statement that it will still fine Foxconn for investing in Unigroup without informing the government first.

Taiwan opposed the investment and wanted Hon Hai to exit the deal, according to a report by the Financial Times.

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

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 facing challenges, with the US and its allies about to jointly restrict Chinese firms’ access to advanced semiconductor technologies.

The US government earlier this week included dozens of Chinese technology companies on its Entity List, making it almost impossible for them to procure critical foreign components and ratcheting up a trade conflict.

US allies, including the Netherlands and Japan, are planning to adopt at least some of the new US rules as well, Bloomberg News reported. Bloomberg