A woman drives past the Foxconn logo in front of the company’s building in Taipei, Taiwan, November 9, 2022. Portal/Ann Wang/File Photo Acquire License Rights
TAIPEI, Oct 23 (Portal) – Foxconn (2317.TW), a key supplier of Apple’s (AAPL.O) iPhones, is facing a tax investigation in China, two sources close to Foxconn confirmed on Monday, saying They assumed that this had been disclosed by a state-sponsored paper for political reasons related to the upcoming elections in Taiwan.
On Sunday, China’s state-backed tabloid Global Times reported that some of Foxconn’s key subsidiaries in China were under tax audits and that China’s Ministry of Natural Resources had conducted on-site investigations into land use by Foxconn companies in Henan and Hubei provinces and elsewhere.
The two sources, who did not want to be named because of the sensitivity of the matter, said several companies, which they did not name, had been audited by Chinese authorities in recent months, but they believed that for political reasons only the Foxconn investigation was published.
They stressed that the review comes less than three months before Taiwan’s presidential election and amid Foxconn’s diversification efforts to move some production out of China.
Chinese authorities in Henan, Hubei, Guangdong and Jiangsu did not immediately respond to faxed queries from Portal seeking comment on Foxconn’s audits.
Foxconn, officially called Hon Hai Precision Industry Co Ltd, employs hundreds of thousands of people in China and is a major investor there, regularly touted by Beijing as an example of the success of Taiwanese investors in the country.
The first source told Portal they viewed the audit as a “warning” to Foxconn, which has moved some of its production lines, including those for iPhones, from China to India.
“Their economy is not doing well. It is a warning when you see big companies like us moving to India,” the source said
“They want you to take sides. Either you stay with us or you leave,” the first source said.
It could be no coincidence that the audit was published by a state-backed news agency just as Foxconn founder Terry Gou is running to become Taiwan’s next president in January elections, the source said.
The second source said the audit was “unexpected” and relatively “unusual.”
The Global Times, known for its nationalistic tone, did not comment on the tax or land use investigations, which have not been officially announced by any Chinese government agency.
Foxconn said in a statement on Sunday that regulatory compliance is a “fundamental principle” of its operations everywhere and that it will “actively cooperate with relevant entities in related work and operations.”
On Monday, Foxconn said it had no further comment.
China’s Taiwan Affairs Office did not immediately respond to a request for comment.
Foxconn’s billionaire founder Gou, who no longer plays a role in the company’s day-to-day operations and stepped down as CEO in 2019, is running as an independent presidential candidate despite being at the bottom of the polls.
He has accused Taiwan’s ruling Democratic Progressive Party (DPP) of pushing the island to the brink of war with China through its hostile policies and that only he, with his extensive business and personal contacts in China and the United States, can maintain peace.
Gou’s campaign spokesman Huang Shih-hsiu referred questions about the Foxconn investigation to the company, saying Gou relinquished leadership of the company four years ago, is no longer on the board and is only a shareholder.
Taiwan Premier Chen Chien-jen offered Foxconn the government’s help, while Economy Minister Wang Mei-hua said her ministry had already contacted the company.
At a campaign rally on Sunday, Taiwan’s Vice President Lai Ching-te, the DPP’s presidential candidate and a leading pollster, said the Chinese report on the investigation was “unexpected” and “regrettable.”
“So I hope all our people can support Hon Hai and Taiwanese companies,” he said in comments to Taiwanese television channels.
Shares of Foxconn fell as much as 3% on Monday. The broader market (.TWII) fell about 1%.
Reporting by Yimou Lee and Ben Blanchard; Additional reporting by Shanghai Newsroom; Editing by Jacqueline Wong, Edwina Gibbs and Sonali Paul
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