China's largest chip foundry, SMIC, accused of patent infringement by Taiwanese rival TSMC, stepped up a war of words between the two companies Thursday, warning against any efforts to restrict competition.

While declining to comment directly on the merits of a lawsuit filed in the United States by Taiwan Semiconductor Manufacturing Co., the normally tight-lipped Semiconductor Manufacturing International Co. insisted on its right to compete fairly.

"SMIC believes in fair competition and firmly supports the belief that the worldwide markets as well as China market should be accessible by all companies," SMIC said in a statement it said was in direct response to the lawsuit.

"Any form of artificial or unfair restrictions should not be imposed on such fair competition," it added without elaborating.

TSMC accused Shanghai-based foundry SMIC on Monday of stealing trade secrets, a bombshell for its ambitions to float shares overseas next year.

Analysts say TSMC's surprise accusation might be aimed at keeping North American customers--TSMC's major clients--from being lured by SMIC's low-price strategy.

And it could disrupt the smaller 2-year-old rival's IPO plans--key to fresh funding after securing capital earlier from such firms as Goldman Sachs and Shanghai Industrial Holdings, they said.

The Taiwan company's suit, filed in the U.S. District Court of Northern California on Friday, follows a hail of complaints this year from Western tech, auto and media companies against Chinese firms, alleging copyright piracy and patent infringement.

U.S. semiconductor designers Broadcom and Marvel, two of TSMC's major clients, had placed orders with SMIC recently after the mainland-based foundry lowered prices on advanced technology, TSMC said earlier this week.

SMIC has been acquiring technical expertise through partnerships with companies such as German chipmaker Infineon in which the Chinese company adapts advanced technology. TSMC's statement is the first accusation that SMIC acquired technology illegally.

Executives of SMIC, which obtained a five-year contract on Thursday to supply advanced memory chips to Japan's Elpida Memory, declined comment. Elpida is a joint venture between Hitachi and NEC.

TSMC is seeking monetary damages and a permanent injunction preventing SMIC from selling the products in question.

SMIC's chief executive, Taiwan-born chip industry veteran Richard Chang, is the former head of Worldwide Semiconductor Manufacturing, which was absorbed by TSMC in 2000.


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