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Trade war

Taiwan's UMC to pay $60m fine to settle US trade secrets case

Chipmaker also agrees to cooperate in probe of former Chinese chip partner

UMC will pay a $60 million fine over charges that it stole trade secrets from Micron of the U.S. (Source photos by Reuters)

TAIPEI -- Taiwan's second-largest contract chipmaker United Microelectronics Corp. has agreed to pay a $60 million fine to settle an industrial espionage lawsuit with the U.S. Department of Justice, bringing to an end a two-year legal dispute that also involved American memory chip giant Micron Technology and a Beijing-backed Chinese chip manufacturer.

The Justice Department said UMC, the world's No. 4 largest contract chipmaker, pleaded guilty to criminal trade secrets theft. In addition to the fine, UMC has also agreed to cooperate with the American government "in the investigation and prosecution of its co-defendant, a Chinese state-owned-enterprise," the department said in a statement.

The Chinese company in question is Fujian Jinhua Integrated Circuit Co., a homegrown DRAM chip maker once expected to eventually challenge market leaders such as Samsung, SK Hynix and Micron. Fujian Jinhua is part of Beijing's ambition of achieving self sufficiency in vital semiconductor components and slashing the country's dependence on foreign suppliers.

Back in 2016, UMC said it would develop DRAM chips with Fujian Jinhua but later suspended the partnership after the U.S. indicted both entities on charges of industrial espionage. UMC later significantly scaled down the project, Nikkei earlier reported. Fujian Jinhua was banned from receiving any American tech and support following the U.S. indictment, which came in late 2018.

UMC's $60 million fine is the second-largest ever in a criminal trade secrets case, the DOJ said, adding that the ruling is subject to a "three-year term of probation" during which UMC must fully cooperate with the U.S. government. However, other criminal charges and a parallel civil suit by the U.S. against UMC will be dismissed, according to the department.

"UMC stole the trade secrets of an American leader [Micron Technology] in computer memory to enable China to achieve a strategic priority: self-sufficiency in computer memory production without spending its own time or money to earn it," Deputy Attorney General Jeffrey Rosen said.

UMC, Fujian Jinhua and three of its employees in early November 2018 were charged with economic espionage by the U.S. Justice Department over allegations of stealing Micron's technologies, with each company facing a maximum fine of more than $20 billion -- nearly 60 times the Taiwanese chipmaker's annual net profit of $339 million in 2019.

The Taiwanese company also gave up its plan to list a subsidiary in Shanghai, where it hoped to capitalize on the high price-earnings ratios in Chinese capital markets in mid-2019, due to its souring relations with Chinese authorities and its local tech partner.

"UMC takes full responsibility for the actions of its employees, and we are pleased to have reached an appropriate resolution regarding this matter. We will continue to focus on delivering competitive logic and specialty technologies that meet the highest standards of excellence to companies in every major sector of the electronics industry," the Taiwanese company said on Thursday.

UMC, a supplier to many worldwide chip developers such as Qualcomm, Broadcom, NXP and MediaTek, added that it values the U.S. market which accounted for one-third of its revenue and stressed its longtime American engagement. "UMC has long-standing business relationships, both as a supplier and a customer, with many well established and respected U.S. companies in the semiconductor industry," the chipmaker said.

The indictment in 2018 dropped a bombshell on the tech industry, delivering a blow to China's concerted efforts to increase its technology prowess. It is not the only example of legal trouble involving American authorities and Chinese tech players, however. Huawei Technologies CFO Meng Wanzhou, daughter of company founder Ren Zhengfei, was arrested on the border of Canada one month after Fujian Jinhua was indicted, over allegations of bank fraud.

Dutch chipmaking equipment maker ASML also became caught in between the U.S. and China, with its planned delivery of a cutting-edge advanced chip production tool to Semiconductor Manufacturing International Co., China's top contract chipmaker, suspended since late 2019 due to U.S. pressure, Nikkei Asia reported.

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