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Trade war

Taiwan chipmaker UMC halts R&D with Chinese partner after US ban

Fujian Jinhua cut off from buying equipment from American suppliers

UMC signed a technology cooperation agreement with Fujian Jinhua in 2016 to develop memory-related technologies for the Chinese company.   © Reuters

TAIPEI (Reuters) -- Taiwan chipmaker United Microelectronics Corp said it will temporarily halt research and development activities with its Chinese partner Fujian Jinhua, days after the United States cut off the state-backed firm from U.S. suppliers.

U.S. President Donald Trump's administration took action on Monday to cut off Fujian Jinhua from U.S. suppliers amid allegations the firm stole intellectual property from U.S. semiconductor company Micron Technology Inc.

The action against Fujian Jinhua could ignite new tensions between Beijing and Washington since the company is part of the "Made in China 2025" programme to develop new high-technology industries.

The U.S. Commerce Department said it had put Fujian Jinhua Integrated Circuit Co Ltd on a list of entities that cannot buy components, software and technology goods from U.S. firms.

"UMC will follow all government regulations and temporarily hold the R&D activities we are performing for Fujian Jinhua until we are cleared to resume by the appropriate authorities," the Taiwanese company said in a statement late on Wednesday.

"The U.S. ordered sanctions, (so) we will follow U.S. government regulations as well," Richard Yu, head of UMC's corporate communications, told Reuters.

He said UMC was not considered a "supplier" as the Taiwan company does not export any products to Fujian Jinhua.

Attracting semiconductor expertise and talent from Taiwan has become a key part of an effort by China to put the chip industry into overdrive and reduce Beijing's dependence on overseas firms for the prized chips that power everything from smartphones to military satellites.

UMC and Fujian Jinhua signed a technology cooperation agreement in 2016 for UMC to develop memory-related technologies for the Chinese firm, stock exchange filings show.

"Jinhua will provide UMC with DRAM related equipment, as well as service fees to cover R&D expenses according to the progress of the technology development. The developed technologies will be jointly owned by both parties," a statement said.

The world's top two economies are already waging a tariff war over their trade disputes, with U.S. duties in place on $250 billion worth of Chinese goods and Chinese duties on $110 billion of U.S. goods.

The U.S. action is similar to a Commerce Department move that nearly put Chinese telecommunications equipment company ZTE Corp out of business earlier this year by cutting it off from U.S. suppliers.

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