The embattled chairman of United Microelectronics, Robert Tsao, said Thursday he will resign from the world’s No. 2 contract chip maker amid an ongoing conflict between he and Taiwanese regulators over the company’s financial reporting practices and its executives’ stock sales.

In a letter to shareholders filed with the U.S. Securities Exchange Commission (SEC), Mr. Tsao said he plans to resign at the UMC’s board meeting in March. UMC CEO Jackson Hu would become the chairman.

Mr. Tsao’s decision came as Taiwan’s Financial Supervisory Commission (FSC) announced it had begun looking into sales of UMC shares by company executives shortly after the SEC told the company to restate its earnings between 2002 and 2004.

“After I have resigned from my position as chairman, I hope that all external criticism or pressure being exerted by certain authorities can be focused on me as an individual, and not on the company, shareholders, or innocent employees within the company,” Mr. Tsao said.

UMC is listed on the Taiwan Stock Exchange as well as the New York Stock Exchange. Its shares on the New York Stock Exchange declined $0.04 to $3.19 in recent trading.

The FSC probe and Mr. Tsao’s offer to resign came just a day after he threatened to de-list the company from the Taiwan Stock Exchange in a full-page ad that appeared in major daily newspapers in the island country.

The ad challenged the exchange’s decision to fine the chip maker about $1,500 for not disclosing its restated earnings in Taiwan sooner. It also questioned whether Taiwan had become a “country of chaos.”

UMC filed new figures with the SEC on December 13 but didn’t do the same with the Taiwan exchange until December 14, after local trading had begun.

On Thursday, the FSC said it’s investigating whether UMC executives violated rules when they sold company shares soon after the SEC told the chip maker to restate its earnings.

Loss Posted

UMC told the SEC that it miscalculated non-cash charges, goodwill write-offs, employee stock bonuses, among others, when it filed the original earnings reports. After correcting the mistakes, the company posted a loss of NT$222 million (USD$6.7 million) instead of a net income of NT$294 million (USD$8.9 million) for 2002; a net income of NT$12.33 billion instead of NT$10.48 billion for 2003; and a loss of NT$14.24 billion instead of a loss of NT$4.75 billion for 2004.

In his letter, Mr. Tsao denied any wrong-doing by UMC and chided Taiwanese regulators for using “distortion and political manipulation” in response to the earnings filing issue.

“In its most recent statements, the Financial Supervisory Commission has resorted to accusing UMC employees of insider trading, and I hope that this reckless behavior will end with my resignation before it causes excessive damage to the credibility of the government,” Mr. Tsao said.

Taiwanese regulators also have been investigating whether Mr. Tsao broke rules on investing in China when he bought a 15 percent stake in Chinese contract chip maker He Jian Technology. The regulators already had fined him about $91,000 for not disclosing promptly his interest in He Jian earlier this year.

UMC was founded in 1980 and became the first chip company to list on the Taiwan Stock Exchange. Mr. Tsao became the company’s president in 1981.