Shares of Semiconductor Manufacturing International Corporation (SMIC), China's largest chipmaker, plunged 5.06% in intraday trading on Friday, following news of a Taiwanese investigation into the company's alleged illegal recruitment practices.

According to a statement from Taiwan's justice ministry investigation bureau, SMIC is suspected of setting up a shell company in Taiwan, posing as a Samoan firm, to illegally lure Taiwanese tech workers. The investigation is part of Taiwan's broader efforts to prevent Chinese companies from stealing know-how and attracting talent from the island's crucial semiconductor industry.

The news has raised concerns among investors about potential legal and operational challenges for SMIC. As the company has been ramping up investments to expand production capacity and strengthen China's domestic semiconductor capabilities in the face of U.S. export controls, any disruption to its talent acquisition strategy could impact its growth plans. The situation also highlights the ongoing tensions between China and Taiwan in the high-stakes semiconductor industry, which Taiwan considers the "lifeblood" of its economy.