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Foxconn’s unauthorized chip investment faces backlash; fine in tow

On Friday, it was unveiled that tech beast Foxconn had invested in a Chinese chip conglomerate out of their own accord and without regulatory approval from the authorities. Taiwanese government might set similar powerhouses as an example by fining them up to T$25 million ($835,600).

Being the world’s most in-demand electronic product manufacturer, Foxconn being held accountable for this “reckless” move is a must.

It had issued an official statement claiming that it had stakes in the Chinese chip multi-corporation Tsinghua Unigroup through a large subsidiary investment of 5.38 billion yuan ($797 million at current prices).

This move commenced just as the Taiwanese government chose to overlook China’s goal to have its semiconductor industry on a burgeoning path and has rationalized new restraints to ensure that China won’t be bagging its chip mechanics.

The island’s government had not given Foxconn a nod of approval before the investment was finalized, and this was because Foxconn had chosen not to consult with the authorities before making its decision—an insider shed light that this move might have contravened a law that was stable between Taiwan and China.

The lawmakers tut at this situation and are now trying to determine how massive of a sum the fine ought to be since the impactful size of the Chinese investment warranted an equally enormous fine. Thus far, they’re seeing the largest number at $T25 million.

On the matter of stock exchange, Foxconn had promised to send the documents and claims to the Investment Commission of the Economy Ministry in the following period.

Regulators tend to go layer through layer of the investment in a hawk-eyed vision before settling on fixed fine money. They would finalize after they have the corporation’s application in hand. It can be in the range of anywhere from T$50,000 and T$20 million, according to another source aware of this matter.

This source also added that there is the possibility of an approval post the fine, and if the island’s government remained stone-faced, Hon Hai might have to cancel engagements and call off the investment deal. Hon Hai Precision Industry Co Ltd is Foxconn’s former identity.

This might be a likely outcome if the guidelines after the fine aren’t met, since once a company violated the law, it may be fined time frequently until it mended its wrongdoings. This can be seen emphasized in some of the laws set by the Taiwanese government which spoke about any hypothetical investments being banned in China based on how detrimental it was to industry development and the country’s security.

Foxconn has a track record of aiming to spread its wings over various markets; after working with Apple Inc (AAPL.O) it had a motive to touch the ground of the electric vehicle industry with auto chips.

The corporate giant is set on gaining chip plants across the globe since the blatant restraint on supplies has landed a strike on productions in the area of materials from automobiles to devices.

For this reason and to focus their influence in one area globally, Taipei has a ban that warned companies against producing their most demanding and technologically promising foundries in China to protect their legacy and make sure it does not fall into the gutters.

The Tsinghua Unigroup had built its resources strongly in the past 10 years, making it a formidable contestant in China’s competitive chip market.

In the beginning, the Unigroup was formulated as a part of China’s renowned Tsinghua University and paved its way to be where it is right now.

However, while still in the jurisdiction of Zhao Weiguo, the former chairman, the corporate giant was crippled with debt—forcing it into default based on a series of bond payments in the latter months of 2020, pushing it into a state of bankruptcy. Despite promising performance since then, the company still has not flourished to the point of praise in the semiconductor industry.

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