Taiwanese iPhone Maker Arm Backs Top China Chipmaker After $9 Billion Rescue

A Shanghai-listed arm of Foxconn Technology Group acquired a stake in China’s top chipmaker during its $9 billion bailout, people familiar with the matter said, the latest in a series of investments the Taiwanese-run firm has made in the mainland’s semiconductor industry.

Foxconn Industrial Internet Co. invested in state-backed Tsinghua Unigroup through a fund it set up with investment house Wise Road Capital, according to people familiar with the deal. The fund paid about 5.3 billion yuan ($788 million) for a minority stake in Unigroup, one of the people said, asking not to be identified discussing a private deal.

The investment by the unit of Apple Inc.’s main iPhone assembler, known also as Hon Hai Precision Industry Co., could raise eyebrows as tensions rise between Beijing and Taipei over issues including technology and supply chain security. The deal requires a green light from Taiwan’s investment commission, which oversees sensitive deals, but Foxconn hasn’t submitted an application for approval, an official with Taiwan’s Ministry of Economic Affairs told Bloomberg News by phone.

“FII has invested in private equity funds in China to look for investment targets that can help FII’s future development,” the company said in a statement.

Unigroup, owned by a consortium led by state-backed JAC Capital following the bailout, is considered one of a handful of chipmakers crucial to realizing Beijing’s ambition of self-reliance in semiconductors. Foxconn has been expanding its chip investments in recent months partly to satisfy its own growing demand as it pushes into the electric vehicle sector. The Taiwanese company began assembling chips at a plant in eastern China in 2021 and acquired a modest chip plant in Taiwan the same year.

A JAC representative declined to comment on the investment, which was first reported by the Securities Times. The newspaper later removed the article.

Taiwan’s Economic Daily cited officials from the island’s investment commission as saying Foxconn will need to apply for approval to close its investment. Calls to a commission spokesman went unanswered Wednesday.

Apple is considering new sources for the memory chips that go into iPhones, including its first Chinese producer of the critical component, to limit supply disruptions, Bloomberg News has reported. This year, it tested sample NAND flash storage made by Hubei-based Yangtze Memory Technologies Co., which is owned by Unigroup.

Memory is typically a gateway to more complex chipmaking because it requires production capabilities and heavy investment rather than the intricate designs needed for advanced processors and other logic chips. Washington is now considering leveling sanctions on Yangtze Memory, The Information has reported.

On Wednesday, Unigroup’s new chairman, Li Bin, said the company intended to eventually expand beyond chips and into sectors like genetics and artificial intelligence.

“History has proven that all scientific development and national prosperity depends, among other things, on realizing where one is ignorant,” Li wrote in a memo to his staff. “And then it’s the ability to remain curious, endless explore and learn, and seek progress.”