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Investigations and Uncertainty Surround Foxconn: A Critical Supplier for Apple

Investigations and Uncertainty Surround Foxconn: A Critical Supplier for Apple

Foxconn, one of Apple’s largest suppliers and the manufacturer of iPhones, is facing investigations by Chinese authorities. The probe comes in the wake of company founder Terry Gou’s announcement to run for the presidency of Taiwan, emphasizing that he won’t be influenced by Beijing despite his extensive business operations in China. While the connection between the investigations and Gou’s political aspirations remains uncertain, the news has raised concerns among foreign businesses operating in China.

Investigations and Audits

According to state media reports, tax authorities in China recently audited Foxconn’s key subsidiaries in the provinces of Guangdong and Jiangsu, where the company operates major factories. Additionally, the country’s natural resources ministry investigated Foxconn’s land use in Henan and Hubei provinces. The investigations were reported to be related to compliance with tax and land use regulations. Foxconn, also known as Hon Hai Precision Industry, has assured its commitment to complying with the law and stated that it will cooperate with the relevant authorities.

Impact on Foxconn and Market Response

The news of the investigations has had immediate consequences for Foxconn’s financial standing. Foxconn’s listed unit in Shanghai, Foxconn Industrial Internet, experienced a sharp decline of 10% in its stock value, reaching the daily limit. Parent firm Foxconn Technology, listed in Taipei, also witnessed a decline of over 2%. The market response reflects the concerns and uncertainties surrounding the investigations and their potential implications for Foxconn’s operations and financial performance.

Growing Pressure on Foreign Businesses

The investigations into Foxconn come in the wake of Chinese authorities reportedly raiding the Shanghai office of international advertising agency GroupM, owned by WPP. These incidents highlight a broader trend of increasing pressure on foreign businesses and a crackdown on international consulting firms in China, citing national security grounds. Foreign businesses are becoming increasingly wary of the rising risks, including the possibility of raids and detentions, in the world’s second-largest economy.

Founder’s Political Aspirations

Terry Gou, the founder of Foxconn, announced his intention to run for Taiwan’s presidential election as an independent candidate. Gou, a self-made billionaire, has been vocal about not succumbing to pressure from Beijing. Despite his long history of doing business in China, he has asserted that he won’t comply with any orders from the Chinese Communist regime. Gou’s candidacy has raised questions about the potential impact on Foxconn and its relationship with China, given the company’s significant presence and investments in the country.

Implications for Investors and Global Businesses

The investigations into Foxconn and the broader crackdown on foreign businesses in China have created uncertainty among investors and global companies. The investment community, already discomfited by China’s ongoing actions, expresses doubts over the country’s investability. Foxconn’s global shareholder base, including major investment firms and pension funds, adds to the potential ramifications of any adverse actions taken against the company. The interconnectedness of Foxconn’s operations and its role as a supplier to important Western firms further underscores the potential global implications of any disruptions to its business.

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