September 13, 2006 – SMIC has filed a counter-complaint against TSMC, after the rival Taiwan foundry filed a new lawsuit citing breach of a settlement between the two firms signed a year ago.

The two firms, which had fought via lawsuits concerning patents and trade secrets, signed a deal in January 2005 by which SMIC would pay $175 million over six years, plus a cross-licensing deal through 2010, and dismissal of all legal actions. In the original suit filed in late 2003, TSMC alleged that SMIC hired dozens of former TSMC employees, some of whom took secret company information with them, including coded references to TSMC best practices.

In its counterclaim, SMIC claims TSMC aims to “discredit” the Chinese rival “by making unfair and misleading accusations,” and has “failed to negotiate and act in good faith.” TSMC’s claim, filed 17 months after the settlement, is due to SMIC achieving various business and technical milestones in 2Q06, the foundry claims. “TSMC [has] used the lawsuit and subsequent campaign to repeat its previous campaign to disrupt SMIC’s business and valued relationships with its customers,” stated SMIC, adding that it “welcomes fair competition and participation by other companies in the development of Mainland China semiconductor industry, and urges TSMC to act fairly and reasonably.”