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TSMC Accuses Chinese Rival of Pirating

Taiwan Semiconductor Manufacturing Company (TSMC) is suing China-based Semiconductor Manufacturing International (SMIC), accusing the company of conducting industrial espionage in order to steal trade secrets and infringe on its patents.

TSMC, which is called the world's largest contract chip maker, said it is seeking both a permanent injunction and unspecified monetary damages from the Shanghai-based SMIC.

The lawsuit, filed Friday in the U.S. District Court of Northern California, alleges SMIC hired more than 100 TSMC employees and asked some of them to provide SMIC with TSMC's trade secrets. The suit also claims a SMIC official asked a then TSMC manager to obtain TSMC process information and forward it to SMIC.

"We feel that we have no other choice than to proceed through the courts in order to protect our technology," Dr. Dick Thurston, vice president and general counsel for TSMC, said in a statement released with the lawsuit announcement.

Thurston claims SMIC has been systematically infringing on TSMC's patents for several years, but the company has only recently been able to obtain SMIC chips on the open market for an analysis.

"It is our obligation to protect our patents and trade secrets to maintain shareholder value," Thurston said.

Richard Chang, SMIC's chief executive, headed Worldwide Semiconductor Manufacturing Corp. until it was acquired by TSMC in 1999. Chang then founded SMIC in 2000.

SMIC has three fabrication plants in Shanghai and is building a fourth one Beijing in its quest to become China's first large volume chip maker. The company counts Toshiba and Infineon among its major clients. The company is also negotiating with Motorola to transfer Motorola's semiconductor plant in Tianjin to SMIC.

In November, SMIC announced it hoped to raise $1 billion in an IPO early next year.

TSMC manufactures semiconductor chips using their own or third parties' proprietary integrated circuit designs. The Hsinchu, Taiwan-based company has the capability to manufacture complementary metal oxide semiconductor (CMOS) logic, mixed-signal, radio frequency (RF) and embedded memory and bipolar CMOS (BiCMOS) mixed-signal and other semiconductors. TSMC also offers design, testing and assembly services.