Foxconn Shares Drop Amid China Tax Audit and Land Use Probe

Taiwan’s Foxconn Faces Challenges Ahead of Election

Taiwan’s Foxconn, a major supplier of Apple’s iPhones, experienced a 3% drop in shares following reports of tax audits and land use probes in China. The investigations come just months before Taiwan’s upcoming presidential election. China’s state-backed Global Times disclosed that some of Foxconn’s key subsidiaries in China were under scrutiny for tax compliance, while China’s natural resources department conducted on-site investigations into the land use of Foxconn enterprises in Henan, Hubei, and other provinces.

Uncertainty Surrounding Foxconn Probes

Although the Global Times did not provide specific details about the tax or land use probes, no official announcements have been made by any Chinese government department. In response, Foxconn released a statement emphasizing its commitment to legal compliance and its willingness to cooperate with relevant entities. However, the company declined to comment further on the matter. Foxconn, also known as Hon Hai Precision Industry Co Ltd, primarily manufactures iPhones at its Zhengzhou plant in Henan, employing approximately 200,000 individuals. The company also has smaller production sites in India and southern China.

Political Implications

The timing of the Chinese state media report is noteworthy, as it occurs less than three months before Taiwan’s presidential and parliamentary elections. Terry Gou, the billionaire founder of Foxconn who is now an independent candidate, has accused Taiwan’s ruling Democratic Progressive Party (DPP) of endangering peace with China through their policies. Gou, with his extensive business and personal contacts in China and the U.S., claims that only he can maintain peace. However, he currently ranks at the bottom of the polls.

Response from Taiwan’s Vice President

Vice President Lai Ching-te, the presidential candidate for the DPP and currently leading in the polls, expressed surprise and regret at the Chinese report. He urged support for Hon Hai and Taiwanese companies, emphasizing the importance of their role in the country’s economy. Despite this, Foxconn shares experienced a 2.4% decline, underperforming the broader Taiwanese market.

In conclusion, Foxconn’s shares faced a decline amidst ongoing tax audits and land use probes in China. The investigations coincide with Taiwan’s upcoming elections, adding a layer of complexity to the situation. While Foxconn remains committed to legal compliance, the outcome of these probes and their potential impact on the company’s operations are yet to be determined.