A major Epistar shareholder has demanded for Chinese LED chip manufacturer San’an Opto to withdraw investments in the company, due to the Chinese company’s headhunting activities, according to a recent Economic Daily News report.

The investor sent a complaint to Taiwan’s Ministry of Economic Affairs (MOEA) that San’an Opto headhunt of Epistar’s high ranking officials, and patented technology violated conditions outlined by the ministry’s Investment Commission. The leading Chinese LED chip maker’s investment in Epistar was approved by the commission under the conditions of “four no policies”, which banss the company from requesting the transfer of intellectual property rights, headhunting, interfering with company management, or transferring LED technology.

Epistar spokesperson Rider Chang confirmed that a certain shareholder had made the request during a board meeting, and pointed out San’an Opto violated the agreed conditions. The Chinese LED manufacturer continued to headhunt talent from Epistar’s newly acquired subsidiary FOREPI, which clearly violates investment terms. It remains unclear, whether the shareholder has filed a former complaint to Taiwan’s MOEA.

San’an Opto became FOREPI’s largest shareholder after acquiring a 19.9% stake in the company for NT $2.35 billion (US $80 million) in 2013. Epistar acquired FOREPI in late June 2014. At the time San’an Opto had the option of retaining its 120 million shares in FOREPI, or converting them into Epistar shares and acquiring a 3.1% stake in its rival.

MOEA approved San’an Opto’s investment in Epistar in Oct. 27, 2010, but requested the company to follow the “four no policy”.

San’an Opto’s has a long record of picking up staff from rival Epistar. The company has headhunted more than hundreds of Epistar engineers, and recently even a 10-member team to run operations at its arm in Xiamen, China. However, it has been difficult for Epistar to win these cases in court, since the Chinese manufacturer tends to assign Epistar staff in companies that appear unrelated to San’an Opto, explained Chang. It has been difficult for Epistar to prove in court that former employees in these companies are working directly for San’an Opto.

In response to the above accusations, San’an Opto said it had not received any official notice to withdraw investment in Epistar, according to a NBD report. Employee turnover is very normal in the industry, and it is difficult to stop people from finding more suitable work environments, where they can meet their full potential, said a San’an Opto source. “There are Chinese manufacturers headhunting Taiwan engineers, but not all of them have left for San’an Opto,” he added.

Even if San’an Opto pulls out investments in Epistar, it will have almost no impact on the company, commented a senior industry analyst. Moreover, withdrawing investments in Epistar will actually boost its cash flow. “The company’s strategic investment in FOREPI was to integrate Cross-Strait resources, but the investment has become insignificant with the emergence of the ‘four no policy’, which has turned San’an Opto into a mere financial investor,” he added.