China's Tsinghua Unigroup is apprehensive that its $2.6 billion offer for stakes in three Taiwanese chip firms will face unprecedented scrutiny by the new government and complicate the chance of success, Reuters reported.
As a step toward building China's own semiconductor industry, the state-backed conglomerate intends to buy into the island's technology sector. However, its offers have become a target of political attack as cross-straits economic ties were a much-debated issue during the Taiwan election.
According to the report, Taiwan's fears that China may influence its foremost industries have prompted the government to review Tsinghua's offers. Taiwanese regulators and executives at the targeted firms said that China's offer will be subject for review by the newly elected parliament, national security advisors and financial regulators, and requested its management team make its case personally to a government panel.
"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.
Tsinghua, however, is aware that all three deals may not receive approval due to the change in government, and said that it will continue with overseas acquisitions on Taiwan and the United States, a source familiar with Tsinghua told Reuters.
The report said that Tsinghua is yet to submit investment plans to Taiwan regulators and declined to comment.
Last year, Tsinghua made offers for a quarter each of chip testing and packaging companies Powertech Technology Inc., ChipMOS Technologies Inc. and Siliconware Precision Industries Co. Ltd.
According to the report, Tsinghua will inject a total of $2.6 billion into the three in exchange for stakes and one board seat with no management control. The offers came after Tsinghua's informal $23 billion takeover bid on Micron Technology Inc. was rejected by the U.S. over 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."
Rupert noted that Taiwan's new government will need policies to keep businesses free of Chinese control and ensure Taiwan's role as a major player in the global technology supply chain.
During his campaign, President-elect Tsai Ing-wen of the Democratic Progressive Party (DPP) said that the offers were tricky and could lead to Taiwan surrendering 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.
Meanwhile, in January, shareholders of Powertech and ChipMOS have approved the plans as they seek capital to expand and survive in a global chip sector undergoing record merger-and-acquisition activities.
Siliconware, which scheduled a shareholder vote for Jan. 28, postponed the voting due to the political timing, spokesman Byron Chiang said.
Powertech Chairman D.K. Tsai said that the other deals were unexpected as 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," Tsai told reporters after shareholders accepted the offer.