China vs Taiwan in U.S. Court

Posted by: Bruce Einhorn on September 11, 2009

There’s no shortage of lawsuits in the chip industry, where it’s pretty common for semiconductor manufacturers or designers to accuse rivals of intellectual-property theft. Most of the time these cases get settled before going to trial, which is one reason the court battle now underway between Taiwan Semiconductor Manufacturing Co. (TSMC) and its Shanghai-based rival, Semiconductor Manufacturing International Corp. (SMIC), is so interesting. The two companies reached a $175 million deal in 2005 to settle a claim by TSMC, the world’s biggest foundry, that its smaller Chinese rival had stolen some of its secrets. But the Taiwanese company now alleges SMIC reneged on the deal, and oral arguments began yesterday in Oakland.

As reported by Semiconductor International, TSMC’s lawyer argued that “SMIC allegedly changed the name of computer files that included TSMC property, engaged in document destruction, and thereby violated the 2005 settlement.” Contending that TSMC had not behaved in good faith, SMIC’s attorney “argued that TSMC launched the current lawsuit as a means of damaging SMIC’s ability to compete with TSMC, which allegedly feared SMIC’s fast rise into the top tier of foundries.”

The timing of the trail couldn’t be better, coming the same week Abu Dhabi’s sovereign wealth fund announced its bid to buy Chartered Semiconductor, the Singapore foundry that is a distant No. 3 behind TSMC and Taiwanese rival United Microelectronics Corp. Abu Dhabi’s plan is to combine Chartered with GlobalFoundries, the joint venture it formed earlier this year with AMD. Taking control of Chartered would give GlobalFoundries, which already has a fab in Europe and another in upstate New York, with the Asian presence it needs. One piece of the pie still missing, though, is China. Chartered doesn’t have any fab there, but TSMC does and UMC is planning on buying one.

Might GlobalFoundries now be eyeing SMIC as a way of filling that hole? Ed Sperling, blogging at Chipdesignmag.com, says we should expect more such deals, although he doesn’t mention SMIC or any other potential targets. “You have to wonder just how many facets and how deep the plan by the Abu Dhabi government actually runs. Our guess is this is just phase one.” An SMIC deal might make sense: Like Chartered, the company struggles to stay out of the red now but it does have some impressive fabs in China and, as part of a larger company with the scale to compete against TSMC and UMC, it might be a good business.

Presumably any deal for SMIC wouldn’t come till after the TSMC trial is over, though. If so, then we shouldn’t expect any developments for a while: David Lammers, reporting on the trial at Semiconductor International, says it could last 50 to 60 days.

Reader Comments

Stevie Wu

September 11, 2009 4:42 PM

Taiwan is the heart of China.

Jennie PC Chiang

September 11, 2009 5:58 PM

It is interest why the lawsuit was bought up in Oakland of USA. SMIC is based in Shanghai and TSMC must be located or based in Taiwan.

Question is (assuming in a US Federal District Court):

1) if it is a proper forum for litigating a given matter ( as it did not indicate where the subject matter Occurred to give rising a disbute?

2) if a Oakland court has a matter jurisdiction over the controversy?

3) I just wonder if it is the appropriate venue within a specific court system in which to try the case? However, a defendant is responsible to raise a venue of the courts in his/her initial motion.

Mohan Nair

September 13, 2009 8:24 PM

Chinese and stealing thats nothing new.

downhill

September 14, 2009 1:00 AM

In 2007, the district court of northern California ordered TSMC to pay $30.5M damage to UniRAM for misappropriating UniRAM's trade secrets relating to the design of embedded DRAM. TSMC counter-sued later. In 2008, the same judge dismissed TSMC's counter-suit, and said such of TSMC: "wanted to intimidate UniRAM" and "is highly questionable" and cited "substantial evidence that suffered from a general breakdown in confidentiality protocol." (http://www.bloomberg.com/apps/news?pid=conewsstory&refer=conews&tkr=2330:TT&sid=aKvfCweuii7Y)

Mr. Obvious

September 15, 2009 1:38 AM

Advice: Never trust the Chinese. Lying, cheating and stealing is ok even if you get caught. How much can you get away with is the business motto. Look at tainted milk, lead based paint for children, etc etc etc, that's just what they got caught for. Still, the revenue from all that still stays in their pockets while they are smiling. In chinese the commies are paid off by the hei sho (corrupt businesses).

vdattu

September 18, 2009 10:28 PM

This sums up the chinese style of doing biz. Achtung!!!!!!!

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