The Taiwan authority's move to punish the chief of the biggest semiconductor company in the Chinese mainland will not pose a material impact on Taiwanese investors on the mainland's semiconductor industry, analysts said on Friday.

Richard Chang, president and chief executive officer of Semiconductor Manufacturing International Corp (SMIC) based in Shanghai, released a statement, saying he was puzzled and regretted punitive action against him by the Taiwan "Ministry of Economic Affairs" (MOEA).

In a statement on Thursday the "MOEA" said Chang held a Taiwan ID from 2000 to 2002, but founded and illegally invested in SMIC in 2000, a move forbidden by the Taiwan authority.

Chang was fined NT$5 million (US$150,000) and was required to withdraw his investment in SMIC.

The "MOEA" said that if Chang does not withdraw and end his investment, it will continue to punish him until he does so.

"The ministry" also warned that it would act over other unapproved investments in the future.

Chang explained on Friday that he is a US citizen and has lived on the Chinese mainland since 2000. He said he also believed that science and technology should be used for universal purposes.

He has entrusted lawyers to handle the affair and will continue to work for investors, clients and employees of SMIC.

In March, the Taiwan authority also punished some employees with another semiconductor giant, United Microelectronics Corp, for transferring capital and technologies to Hejian Technology in Suzhou of East China's Jiangsu Province.

A spokeswoman with SMIC said the so-called punishment of the company's chief will not have any impact on the operations of the Shanghai-based firm.

Donald Lu, an analyst with Goldman Sachs, believed the impact on SMIC is minimal, as the fine is very small and the Taiwan authority has no direct control on Chang, since he seldom visits the island.

Wu Xianfeng, a semiconductor analyst with Guotai Jun'an Securities, believed the moves by the Taiwan authority reflected their anxiety over the flow of investment away from the island towards China's mainland.

"Even if investors come across some obstacles or restrictions, it is an inevitable trend," said Wu.

Nancy Dang, a senior analyst with US-based market research house iSuppli, believed the restrictions will cause the postponement of some investment projects among smaller semiconductor companies looking at opening operations on the Chinese mainland.

"Technologies from Taiwan are important to the semiconductor industry on the Chinese mainland, but the huge market potential on the Chinese mainland will bring more benefits to the investors," said an analyst with another professional US research house In-Stat, who declined to be named.

Goldman Sachs' Lu also said the regulations of the Taiwan authority are out of date with the development of the industry and will incur resistance from industrial players.

Dang with iSuppli pointed out that future investors will have more considerations on the combination of capital, such as how much capital will come from Taiwan and how much from their operations in other parts of the world, as well as technologies.

She pointed out that government departments on the Chinese mainland should give more support to semiconductor companies, as they are high capita- and technology-intensive and government support is a global practice.

She suggested that under the current situation, financial support from local banks or financial consortium are especially important to help overseas investors ease their financial burdens as well as pressures from respective authorities.

(China Daily April 2, 2005)