Taiwan media has reported that Foxconn's China-listed unit Foxconn Industrial Internet Co Ltd plans to spend 9.8 billion yuan ($1.46 billion) for a stake in Unigroup, as part of Foxconn's plans to get more into chip-making.
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The island's government has become increasingly cautious about China's ambition to boost its semiconductor industry and has proposed new laws to prevent what it says is China stealing its chip technology, amid rising concern in Taipei that Beijing is stepping up its economic espionage.
Taipei prohibits companies from building their most advanced foundries in China to ensure they do not offshore their best technology.
Rio Lu, deputy executive secretary of Taiwan's Economy Ministry's Investment Commission, told Reuters that on Wednesday they had been in contact with Foxconn and "reminded them that the case needs to be reviewed before doing anything".
If Foxconn breaks the rules it can be fined T$ 25 million ($837,577), Lu said, adding her department has already reported this plan to Economy Minister Wang Mei-hua.
Foxconn, formally called Hon Hai Precision Industry Co Ltd and a major assembler of iPhones for Apple Inc, said in a brief statement sent to Reuters late on Wednesday that it will handle the case "in accordance with the rules". It did not elaborate.
Foxconn has not formally confirmed any plan to invest in the Chinese group.
Records on Qichacha, a Chinese website that tracks business registration records, show that Foxconn controls 99% of a Chinese entity called Xingwei.
Xingwei controls a 48% stake in a different entity that itself holds a 20% stake in the vehicle that owns all of Tsinghua Unigroup, Qichacha data shows.
Foxconn declined to comment on the data. A spokesperson for Unigroup did not respond to a request for comment.
Originating as a branch of China's prestigious Tsinghua University, Tsinghua Unigroup emerged in the previous decade as a would-be domestic champion for China's laggard chip industry.
But the company fell into debt under former chairman Zhao Weiguo, prompting it to default on a number of bond payments in late 2020 end eventually face bankruptcy.
The conglomerate has yet to produce any global leaders in the semiconductor sector.
Electronics manufacturing giant Foxconn is keen to make auto chips amid its foray into the electric vehicle market. The company has been seeking to acquire chip plants globally as a worldwide chip shortage rattles producers of goods from cars to electronics.