Chinese state media reported on Sunday that an investigation has been launched into Apple iPhone manufacturer, Foxconn, concerning issues related to tax and land use. Citing anonymous sources, The Global Times revealed that tax authorities had conducted inspections at Foxconn’s facilities in the provinces of Guangdong and Jiangsu, while natural resources officials inspected sites in Henan and Hubei.
Foxconn has publicly pledged its full cooperation with the investigation, stating, “Complying with laws and regulations is a basic principle for the group worldwide. We will actively cooperate with the relevant authorities’ operations.”
The Global Times article quoted an expert as saying, “Taiwan-funded enterprises, including Foxconn… should also assume corresponding social responsibilities and play a positive role in promoting the peaceful development of cross-strait relations.”
Notably, Foxconn founder Terry Gou is running as an independent candidate in Taiwan’s presidential elections scheduled for January. This election holds significant influence over Taiwan’s relationship with China and the tensions in the Taiwan Strait. Gou, who handed over Foxconn’s management to a successor CEO four years ago, resigned from the board in early September after announcing his presidential run, but still maintains a 12.5% stake in the company.
Historically, Beijing has targeted local subsidiaries of Taiwanese firms with regulatory investigations and political pressure during sensitive or tense periods. Chinese officials consistently call upon Taiwanese companies to help promote “peaceful development” between the two sides.
China claims Taiwan as part of its territory and has expressed the option of using force to unify with the island if Taipei resists. The People’s Liberation Army has been increasing its operations to probe the airspace and waters near Taiwan.
According to a poll conducted by Formosa, one of Taiwan’s leading pollsters, Gou currently trails behind all three other presidential candidates with a support rating of just 7%.
Despite decades of doing business in China, which has made Foxconn the country’s largest private employer and exporter, Gou insists that he is not doing China’s bidding. He boldly stated, “If the Chinese Communist Party regime were to say, ‘If you don’t listen to me, I’ll confiscate your assets from Foxconn,’ I would say, ‘Yes, please, do it!’ I cannot comply with their orders. I won’t be threatened.”
Apple is also facing the challenge of navigating a complex relationship with China, given the ongoing historic tensions between Beijing and Washington. Recently, Apple’s CEO, Tim Cook, traveled to China and engaged with key members of Xi Jinping’s leadership team, including Vice-Premier Ding Xuexiang and China’s commerce and information technology ministers.
Furthermore, Chinese government departments and state-owned enterprises have been discouraging or banning the use of Apple devices among their employees. In September, Beijing issued warnings about iPhone-related “security incidents.”
This investigation into the Apple supplier also underscores the broader uncertainties faced by foreign businesses in China following Beijing’s crackdown on consultancies and due diligence groups. In a recent report, the Financial Times disclosed that Chinese police had conducted a raid on the Shanghai offices of the WPP-owned media agency GroupM.
Information for this briefing was found via Financial Times and the sources mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.