TAIPEI, Taiwan Robert Tsao, the chairman of foundry giant United Microelectronics Corp. resigned on Monday (Jan. 9) just hours before being indicted in Taiwan for allegedly making illegal investments in a Chinese foundry. UMC vice chairman John Hsuan was also indicted and has resigned his post.
Tsao’s resignation comes three months earlier than expected. Tsao had tipped plans to resign in March in a letter to shareholders issued on Dec. 29, 2005.
Instead, Tsao was replaced as chairman by chief executive Jackson Hu during a special board meeting held before the indictments were issued by the Hsinchu District Prosecutor's Office. Both Tsao and Hsuan were immediately hired as advisors to UMC and will continue to attend board meetings, with the titles of Chairman Emeritus and Vice Chairman Emeritus, according to a statement from UMC.
The prosecutor also indicted Tzeng Tun-chian, president of a UMC venture capital firm, but did not go after Hsu Chien-hwa, the chairman of HeJian.
The executives’ departures come as the prosecutor’s office steps up its pressure to prove the illegality of investments by UMC in Chinese foundry He Jian Technology Corp., which runs 8-inch wafer fabs in Suzhou, China, a city west of Shanghai.
The investigation has dragged on since early last year, when more than 120 investigators raided UMC offices, looking for evidence of investment activity in He Jian. Taiwanese laws designed to prevent a flight of technology to mainland China, insist that semiconductor manufacturers may only open or invest in 200-mm wafer fabs in China with government approval. The process is intended to serve as a check on the flow of advanced technology to China, which Taiwan views as a potential military enemy.
UMC did not seek government approval for arrangements it put in place with He Jian. In contrast, Taiwan Semiconductor Manufacturing Co. Ltd., a rival foundry, has secured permission and currently runs a facility in Shanghai.
Since the raid, Tsao has been increasingly combative in his relations with the Taiwan government. Tsao originally said he would resign in 2007. Then, last month, after what seemed like a minor run-in with regulators of the local stock exchange that resulted in a roughly $1500 fine, Tsao announced he would resign in March of this year.
On Monday, UMC criticized the indictments as of a “purely political nature” brought about by the poor relations between Taiwan and China, which has viewed the island as a “renegade province” ever since the end of a civil war in 1949.
If convicted, the executives may face jail time of between six months and five years.