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 The Chinese state-backed conglomerate aims to buy into the island's
technology sector as a step toward building China's own
semiconductor industry. But the timing of its offers, during a
Taiwan election in which deepening cross-straits economic ties was a
hot topic, left the firm a target of political attack.
Following civil war in China, Nationalist forces fled in 1949 to
Taiwan which has been self-ruled ever since. But China regards it as
a wayward province to be taken back by force if necessary, fuelling
fears among Taiwanese of Chinese influence in the island's foremost
industries.
Such fears prompted the government to subject Tsinghua's offers to
review by the newly elected parliament, national security advisors
and financial regulators, and to request its management team make
its case personally to a government panel, Taiwanese regulators and
executives at the targeted firms said.
"We said from the start that it will not entirely be approved," said
Emile Chang, executive secretary of Taiwan's Investment Commission,
the agency under the Ministry of Economic Affairs in charge of
reviewing inbound and outbound investment.
"Whether one or two of the cases can pass, we need to see the review
process," Chang told Reuters at a recent briefing.
Tsinghua is aware it may not receive approval for all three deals
due to the change in government, but overseas acquisitions will
continue to focus on Taiwan and the United States, a person familiar
with Tsinghua's thinking told Reuters, declining to be identified
due to the sensitivity of the matter.
Tsinghua, which is yet to submit investment plans to Taiwan
regulators, declined to comment when contacted by Reuters.
NATIONAL SECURITY
Tsinghua made offers in quick succession late last year for a
quarter each of chip testing and packaging companies Powertech
Technology Inc, ChipMOS Technologies Inc and Siliconware Precision
Industries Co Ltd (SPIL).
The company plans to inject a total of $2.6 billion into the three
in exchange for stakes plus one board seat at each with no
management control. The offers came after Micron Technology Inc
rejected Tsinghua's informal $23 billion takeover bid on the
presumption of U.S. national security concerns.
"Security and business concerns over relying on Chinese suppliers
include intellectual property and trade secrets protection,
competitiveness, and innovation," said Rupert Hammond-Chambers,
president of the U.S.-Taiwan Business Council, in a commentary
labeling Tsinghua's moves "hostile".
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Taiwan's new government will therefore need policies that keep
businesses free of Chinese control to ensure Taiwan remains a major
player in the global technology supply chain, he said.
CEDING CONTROL
President-elect Tsai Ing-wen of the independence-leaning Democratic
Progressive Party (DPP) - which was elected by a landslide - said
when campaigning the offers were problematic and could lead to
Taiwan ceding control of its tech industry.
"From the country's point of view, this is not just a business
deal," said Wu Tsong-tseng, a DPP adviser on technology issues
during the election.
Shareholders of Powertech and ChipMOS approved the plans in January
as they seek capital to expand and survive in a global chip sector
experiencing record merger and acquisition activity.
SPIL scheduled a shareholder vote for Jan. 28 but postponed due to
the political timing, spokesman Byron Chiang said.
Powertech Chairman D.K. Tsai said the other deals, announced six
weeks after its own, were unexpected. He said he was committed to
seeing through Powertech's application and that he would "respect
any (government) decision."
"I am regretful that this matter became emotional for society and a
political factor," Powertech's Tsai told reporters after
shareholders accepted the offer.
(Reporting by J.R. Wu; Additional reporting by Yimou Lee in HONG
KONG; Editing by Christopher Cushing)
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