TSMC, SMIC Reach Out-of-Court Settlement

TSMC, SMIC Reach Out-of-Court Settlement

Sources: All Taipei Newspapers

November 11, 2009

Taiwan Semiconductor Manufacturing Company (TSMC) and Semiconductor Manufacturing International Corporation (SMIC) have reached an out-of-court settlement in California to a lawsuit which involved improper use of trade secrets and violation of settlement.

According to the settlement, SMIC will pay TSMC US$ 200 million in four tranches over a period of four years, issue TSMC 10% of SMIC equity in two tranches, and terminate the mutual authorization of patent contract signed in 2005.  TSMC and SMIC further agreed that TSMC officers would not serve on SMIC’s board of directors, TSMC’s equity share in SMIC being final compensation.

TSMC Chairman Dr. Morris Chang and SMIC CEO Richard Chang had both previously worked for Texas Instruments before returning to Taiwan to found their own companies.  Richard Chang founded Taiwan Worldwide Semiconductor Corporation (TWSC) and served as general manager.  Morris Chang founded TSMC and served as chairman.

In 1999, TSMC merged with TWSC, and Richard Chang left the newly merged company harboring a grudge.  He left for Mainland China the next year and established SMIC.  While expanding SMIC, Richard Chang headhunted many employees from TSMC, eventually leading TSMC to file lawsuits against SMIC.

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