Apple’s major supplier, Foxconn, and its subsidiaries have come under scrutiny in China as they face a tax investigation for potential violations, according to sources close to the company. This development could have significant implications for investors and traders interested in the financial markets.
In addition to the tax investigation, China’s natural resources agency has also conducted on-site investigations into the land use of Foxconn firms in the provinces of Henan and Hubei, among others.
It is worth noting that these audits are taking place just a few months before Taiwan’s presidential election, as well as during Foxconn’s efforts to diversify its manufacturing away from China. This raises questions about the timing and potential political motivations behind these investigations.
The investigations may serve as a warning to Foxconn, formally known as Hon Hai Precision Industry, as the company has been relocating its production lines from China to India. The source suggests that this could be seen as a deliberate push from China to either keep Foxconn on its side or force it to leave.
Furthermore, considering China’s struggling economy, the investigations could also be perceived as a response to major companies like Foxconn choosing to invest in India instead. This highlights the significance of China’s economic challenges and their impact on global business decisions.
In response to the investigations, Foxconn has stated that it will actively cooperate as legal compliance is a fundamental principle of its operations. However, the ongoing investigation is likely to have a significant impact on the company’s future.
Unsurprisingly, news of the tax investigation has already affected Foxconn’s stock performance. On Monday, the company’s Taiwan-listed stock experienced a decline of 2.2%, while the overall Taiwan market was down approximately 1%. These market movements suggest that investors are reacting to the uncertainty surrounding Foxconn’s future.
It’s important to note that Foxconn’s founder, Terry Gou, announced in August his intention to run for Taiwan’s 2024 presidential elections. This adds another layer of complexity and political significance to the current situation.