Industry watchers wonder whether the Taiwanese firm's suit over US patents is timed to interfere with SMIC's listing plan Taiwan Semiconductor Manufacturing Co (TSMC) is suing cross-strait rival Semiconductor Manufacturing International Corp (SMIC), alleging patent infringement and misappropriation of trade secrets. Analysts believe the move could be a bid by the Taiwanese firm to derail the mainland firm's upcoming initial public offering. TSMC filed the suit in the United States District Court of Northern California on Friday. The complaint, also made on the behalf of units TSMC North America and WaferTech, seeks injunctive relief along with unspecified monetary damages. SMIC officials declined to comment on the charges yesterday. 'SMIC currently has not received any official notice from any court in any jurisdiction filed by TSMC, so we have no comment on this matter at the present time,' an SMIC spokesman said. 'We want to emphasise that we always respect intellectual property rights of any third party.' TSMC spokesman Tzeng Jin-hao said the Taiwanese company brought the suit after tests on SMIC-made products revealed that the Shanghai firm had violated its US patents. Mr Tzeng would not say when the tests were performed but said the products were SMIC-made chips sold in the US market. The suit also notes that about 100 former TSMC employees worked for SMIC and alleged some were asked to furnish their new employer with TSMC trade secrets. Mr Tzeng said the complaint quoted the case of Katie Liu Yun-chien, a former TSMC worker who later became an SMIC consultant. In 2001, TSMC accused Ms Liu of sending 11 e-mails to SMIC between November 2000 and January 2001 which allegedly contained the company's trade secrets. The case was referred to Taiwanese authorities. The Hsinchu District Court later issued an injunction against SMIC requiring it not to use TSMC trade secrets or poach the Taiwanese firm's employees. SMIC chief executive Richard Chang at the time denied Ms Liu had given SMIC trade secrets. Analysts questioned the motives behind the TSMC suit, in particular because the complaint relied in part on allegations which were almost three years old. 'Why it is taking SMIC to court now is probably because TSMC wants to prevent SMIC from listing,' Gartner analyst Dorothy Lai said. The mainland firm plans to raise about US$750 million in Hong Kong and New York next year. But choking off capital to SMIC would prevent it from gaining much-needed funds to expand chip-making capacity, such as a 12-inch advanced wafer plant in Beijing which would be China's first. In the past, TSMC chairman Morris Chang has lashed out at mainland foundries, saying their aggressive expansion would lead to the next cyclical downturn in the semiconductor industry. But Mr Tzeng denied the suit was timed to scuttle SMIC's listing plan, saying that it only recently had access to SMIC products in the US and it could not previously conduct tests to determine whether the chips violated its patents. 'The suit couldn't be filed any sooner,' he said. He also said TSMC chose to bring action in the US and not the mainland because the SMIC-made products violated the company's US patents. The dispute between the two companies highlights fears in Taiwan that it may be losing its best to its rival across the strait. Mr Chang is the former head of Worldwide Semiconductor Manufacturing, which TSMC bought in 2000. But one SMIC engineer bristled at the notion he or his colleagues would improperly use knowledge obtained in Taiwan. SMIC required all such employees to sign an agreement stipulating they would not use any document or specification obtained from their former employer, he said.
