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Apple’s primary contract manufacturing supplier, Hon Hai Precision Industry Co, commonly known as Foxconn, has stressed that its production is not affected by China’s tax probes. Apple and Foxconn investors were dealt a shock earlier this year when China’s state run Global Times revealed that Foxconn was being investigated for alleged tax and land improprieties, with the report failing to mention any specific violations that the firm might have committed. Foxconn, like TSMC, is at the center of geopolitical frictions in the South China Sea as not only are the two among the most important technology companies in the world, but their criticality in the electronics supply chain often raises concerns about potential disruption in the global technology industry.
Foxconn Stresses That Operations Remain Normal & Shares That It Will Cooperate With Chinese Authorities
The report by China’s Global Times created quite a bit of a stir, particularly on the political front. This is because Foxconn’s founder and former chief Terry Gou – known as ‘Uncle Terry’ in the U.S. – is also running for election as Taiwan’s president. Taiwan’s political status is one of the most highly fraught topics in international politics as China lays claim to the island as its own territory. The political status has also cast Western doubt on TSMC’s viability as a stable investment since all of the chip maker’s latest chip manufacturing plants are located on the island.
The Global Times report was careful to mention Mr. Gou’s decision to run as an independent candidate since it believed that Gou would split the opposition vote and enable Taiwan’s current Vice President to ascend to the highest political office on the island. Beijing is worried that the Taiwanese vice president would rush towards independence, while he asserts that the decision lies solely in the hands of the Taiwanese people.
In its response, Foxconn states that it is continuing to work with external stakeholders as part of discussion surrounding its operations and legal position. It also stressed that production is continuing as normal despite the investigation, asking those addressed to refrain from spreading rumors.
Anonymous sources speaking to Reuters believe that while other companies in China are also being investigated for alleged tax and land improprieties, only Foxconn’s investigation has been made public. This opens up speculation that perhaps the move is political in nature and designed to serve as a pressure tactic against Mr. Gou. The Foxconn founder has retired from overseeing the firm’s daily operations, leaving the responsibility to a successor some years back.
A self made individual, his firm’s partnership with Apple catapulted him to become one of the richest people in the world. However, Mr.Gou is facing troubles in his electoral campaign, with opinion polls consistently showing that he lags behind candidates of Taiwan’s opposition and ruling parties.
Foxconn’s crucial relationship with China, where it operates some of the biggest factories in the world, has also come under spotlight for these ties. Opponents and critics have questioned whether he will be malleable to Chinese influence if elected, worrying that Beijing could simply threaten Foxconn’s business interests to influence Gou’s decision making. He has remained adamant that this is not the case, stressing that he remains independent and unable to take dictation from anyone.