Taiwan presidential run by Terry Gou creates ‘uncertain’ future for Foxconn, analysts say

Foxconn chairman Terry Gou’s decision to make a run for Taiwan’s presidency creates “uncertainty” for the world’s largest iPhone assembler, and could threaten Apple’s long term relationship with the company, analysts have said.

The 68-year-old Gou, Taiwan’s richest man with a net worth of US$7.6 billion, said on Wednesday that he would take part in the opposition Kuomintang’s (KMT) primaries for the 2020 race to challenge current president Tsai Ing-wen.

In a statement, Foxconn said that Gou wished to “withdraw from daily operation” but will “continue to provide strategic direction and guidance”.

The price of shares in Foxconn Industrial Internet, Foxconn’s smart factory and cloud computing division, which was listed on the Shanghai Stock Exchange in 2018, soared for two consecutive days after Gou’s announcement. FIH Mobile Limited, a Hong Kong listed subsidiary of Foxconn, also soared for over 50 per cent on Thursday morning.

Mei Xinyu, a researcher of a think tank affiliated to China’s Ministry of Commerce, said Gou’s political bid has cast a “deep shadow of uncertainty” on Foxconn and the global electronic industry.

“Both camps in Taiwan have been trying to win support from Gou given his business power. But Gou is now a political game player, which will bring him and Foxconn much trouble. His political opponents will magnify all the flaws of Foxconn, which they probably used to cover for Gou,” Mei said.

Founded in 1974 in Taiwan, Foxconn began to invest in mainland China in 1988 and now has 45 factories scattered throughout mainland China. To date, it has over 200 representative offices and subsidiaries across Asia, Americas and Europe. In 2018, Foxconn achieved NT$5.2 trillion (US$168 billion) in revenue.

“It is unpredictable whether Apple will change its relationship with Foxconn in the future. The tie between Apple and Foxconn has already been weakened [due to disappointing iPhone sales], now it seems that Gou is more inclined to Beijing rather than the US amid the ongoing US-China trade war,” said Lin Thung-hong, an associate research fellow at the Institute of Sociology of Academia Sinica in Taiwan.

“If Gou wins the election, his properties in China might be under threat [as his identity will change]. Taiwanese voters will probably have concerns over it.”

In 2017, Foxconn announced a US$10 billion investment in the US state of Wisconsin to build liquid crystal display panels and promised to employ up to 13,000 workers, which would earn US$4 billion in state and local tax credits for Foxconn, according to report.

However, hours after news of Gou’s announcement broke, Wisconsin governor Tony Evers said that he wanted to renegotiate the contract as it is “unrealistic” to think the company will employ 13,000 people as originally promised.

“It's our goal to make sure that the taxpayers are protected and environmental standards are protected and we believe that we need to take a look at that contract and see if it needs to be downsized as a result,” Evers said.

Jenny Chan, an assistant professor at Hong Kong Polytechnic University, believes there will be “far closer business ties and sociopolitical integration” between Taiwan and mainland China if Gou is elected as his electronics empire is rapidly expanding and strongly rooted in the comprehensive production networks in mainland China, along with its headquarters of Hon Hai Precision Industry in Taipei.

“The far-reaching international relations between Taiwan and the United States will also transform, for better or worse. Research and development in cutting edge technologies, robotics, and consumer electronics will advance further when more transnational investment projects are set up,” Chan said.

In 2012, Gou said at Taipei Zoo that Hon Hai had a workforce of over one million worldwide and “as human beings are also animals, to manage one million animals gives me a headache”.

The comment sparked wide criticism as Gou was seen to be referring to his employees in mainland China. Foxconn later apologised by saying that “Mr Gou’s comments were directed at all humans and not at any specific group”.

Chan expressed concerns about Gou’s potential style of governance if he was elected.

“How respectful is Gou to his own staff and workers? His sensitivity to employees’ well-being is cast in serious doubt, in light of successive waves of suicides, riots, strikes and protests at Foxconn factories,” she said.

Researcher Mei added: “China has a strong desire of unification of mainland and Taiwan. In China’s pursue of that desire, Gou, as an entrepreneur, has been well treated by China, but things will turn different once Gou is elected.”

In a statement sent to the South China Morning Post on Friday morning, Foxconn Technology Group said: “Over the past days, there have been numerous instances of media jumping to conclusions regarding the remarks of Foxconn founder and chairman Mr Terry Gou.

“These reports misinterpreted Mr Gou’s actual remarks.

“Mr Gou stated he will run for the KMT’s nomination for president if the primary process – which is still being determined by party leadership – is open, transparent, and grounded.

“When and if this determination is made, Mr Gou will run in the KMT’s primary to seek for the party nomination for president.”

The statement also clarified that Apple CEO Tim Cook did not call Gou after the announcement, despite reports by media outlets in Taiwan and mainland China.

 Apple did not respond to request for comment.