Taiwan’s UMC Halts R&D Activities With China’s Fujian Jinhua After US Ban

October 31, 2018 Updated: October 31, 2018

TAIPEI—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 Oct. 29 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” program 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.

Fujian Jinhua, which is starting up a new $5.7 billion chip factory in Fujian Province, is linked to the Trump administration’s accusations that China has systematically stolen and forced the transfer of American technology.

U.S. Commerce Secretary Wilbur Ross said in a statement that the Chinese firm’s new plant likely was the beneficiary of “U.S.-origin technology” and its additional production would threaten the long-term viability of U.S. chip-makers.

In recent years, the Chinese regime has mainly tried to realize its economic ambitions through stealing intellectual property, forcing technology transfers in exchange for market access, subsidizing Chinese companies, and buying foreign companies to attain sensitive technologies.

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.

ZTE, the world’s fourth-largest telecommunications equipment maker by market share, posted its worst half-year loss of 7.8 billion yuan in August due to U.S. sanctions over violations of export restrictions.

Many members of Congress view ZTE as a national security threat, worrying that the use of its technology in the United States could make it easier for China to steal secrets.

By Jess Macy Yu & Yimou Lee. The Epoch Times contributed to this report.

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