Taiwan’s authorities reported on Saturday it would great Foxconn, the world’s most significant contract electronics maker, for an unauthorised financial investment in a Chinese chip maker even soon after the Taiwanese business claimed it would be offering the stake.

Taiwan has turned a cautious eye on China’s ambition to raise its semiconductor market and is tightening legislation to protect against what it states is China thieving its chip engineering.

Foxconn, a key Apple Inc supplier and Apple iphone maker, disclosed in July it was a shareholder of embattled Chinese chip conglomerate Tsinghua Unigroup.

Late Friday, Foxconn claimed in a filing to the Taipei stock trade its subsidiary in China had agreed to market its complete equity stake in Tsinghua Unigroup.

Taiwan’s Economic climate Ministry stated in reaction that its investment commission, which has to approve all foreign investments, will ask Foxconn on Monday for a “total explanation” about the expenditure.

“As for the simple fact that the financial commitment was not declared beforehand, the sum will even now be calculated in accordance with the formula and the penalty will be imposed in accordance with the legislation,” it stated, with out offering information.

Foxconn did not promptly answer to a request for comment.

Folks acquainted with the subject have formerly informed Reuters that Foxconn did not seek acceptance from the Taiwan governing administration right before the financial commitment was created and authorities feel it violated a regulation governing self-ruled Taiwan’s relations with China, which statements the island as its own.

In a statement on Saturday just before the overall economy ministry’s, Foxconn stated as the calendar year-finish approached the primary financial commitment had “remained unfinalised”.

Foxconn explained that Xingwei, 99% controlled by its China-mentioned device Foxconn Industrial Online Co Ltd (FII), experienced agreed to offer its holdings for at least 5.38 billion yuan ($772 million) to a Chinese firm termed Yantai Haixiu.

Xingwei controls a 48.9% stake in a unique entity that retains a 20% stake in the car possessing all of Unigroup.

“In buy to prevent uncertainties from further delays or impression to investment decision organizing and the adaptable deployment of capital, the Xingwei Fund will transfer its full keeping in Shengyue Guangzhou to Yantai Haixiu,” it reported.

“Just after the transfer is accomplished, FII will no more time indirectly hold any equity in Tsinghua Unigroup.”

Tsinghua Unigroup did not react to a request for comment.

Taiwanese law states the government can prohibit investment in China “primarily based on the thought of national security and business advancement”. Violators of the regulation could be fined continuously till corrections are built.

Foxconn, formally termed Hon Hai Precision Sector Co Ltd, is eager to make automobile chips in distinct as it expands into the electric vehicle market place.

The organization has been trying to get to get chip crops globally as a worldwide chip shortage rattles producers of products from vehicles to electronics.

Taipei prohibits providers from creating their most sophisticated foundries in China to make certain they do not web site their best technologies offshore.

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