Worried about the loss of its core foundry business to political rival China, the Taiwan government restricts investments in certain technologies, including semiconductor plants capable of processing integrated circuits on 200-mm diameter and 300-mm diameter wafers.

Although Hejian started operations just two years ago, and only has capacity for processing about 30,000 wafers a month using 0.15-micron to 0.50-micron manufacturing technology, the company has said it will invest more than $10 billion over the next 10 years to become China's largest foundry.

UMC has a lot in common with Hejian: Many of Hejian's customers have received investment from UMC, some of Hejian's senior management are former UMC employees, their processes are reportedly compatible, and UMC's biggest client, U.S. FPGA company Xilinx Inc., has invested in Hejian.

While similarities between foundries sparked a lawsuit alleging IP theft and corporate espionage between Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC) and Shanghai-based Semiconductor Manufacturing International Corp., UMC instead seems to have cultivated a close co-operative relationship with Hejian, acknowledging that it sometimes refers orders to the Suzhou-based foundry.

It has denied any official relationship, however. "UMC has no direct investment in Hejian," a spokesman said Wednesday (Feb. 16).

A justice ministry spokesman here confirmed the raid had taken place, and said the agency had assigned staff to work with the Hsinchu prosecutor's office on the matter. The UMC spokesman said investigators went through files at UMC's Taipei and Hsinchu offices, but he did not know if any documents were taken.

Few other details were available about the incident, but some observers were already doubtful that much would come of it. Any link to UMC would be hard to trace because Hejian is a Cayman Islands registered company.

Taiwan law allows semiconductor manufacturers to invest in Chinese fabs using 200-mm wafer technology only after a lengthy review process. One of the criteria applicants must meet is having a fully operational 300-mm wafer fab in Taiwan.

TSMC is the only Taiwanese semiconductor manufacturer to have finished the investment review. It is in the process of ramping up a 200-mm fab in Shanghai. DRAM maker Powerchip Semiconductor Corp has also indicated it plans to seek the government's permission to open a China fab.