SMIC accuses TSMC of breach of contract in cross-complaint

Semiconductor Manufacturing International Corp (SMIC), China's biggest microchip maker, has filed a cross-complaint in the United States against larger rival Taiwan Semiconductor Manufacturing Co (TSMC), seeking damages for alleged breach of contract.

The Shanghai-based company's cross-complaint alleges, among other things, that TSMC has undertaken a concerted effort since previous lawsuits to discredit SMIC by making unfair and misleading accusations.

TSMC was using a lawsuit filed last month 'to disrupt SMIC's business and valued relationships with its customers', SMIC said in an announcement yesterday. 'We will vigorously pursue a cross-complaint and defence.'

TSMC, the world's biggest made-to-order chipmaker, filed a lawsuit against SMIC last month claiming a breach of intellectual property rights in violation of an agreement reached in January last year.

Under that agreement, SMIC agreed to pay TSMC US$175 million over six years as part of a settlement of a 2003 lawsuit and cross-license certain patents with the Taiwanese company until December 2010.

'TSMC did not voice any complaint for a period of more than 17 months, until July 2006, after SMIC succeeded in meeting a number of major business and technical milestones during the second quarter of 2006,' said SMIC, which filed a response strongly denying TSMC's allegations.