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Foxconn has made contingency plans for any fallout for its China business caused by its founder’s political ambitions, the Apple supplier said on Tuesday.
Terry Gou, who is still one of the company’s largest shareholders with a 12.5 per cent stake, is running for president in his native Taiwan, which China claims as part of its territory and aims to bring under its control. Gou cleared the final hurdle to join the race as the Central Election Commission found on Tuesday that he had collected enough valid signatures to support his bid as an independent.
Asked whether Beijing could pressure Foxconn in order to coerce Gou in case he becomes president, Foxconn chair Young Liu said: “I don’t have any crystal ball,” and added Gou had the right to make his own decisions.
“From the management team’s point of view, we will have to be prepared for all the possible cases,” Liu said. The company had made related preparations as part of business continuity management — a practice with which enterprises simulate sudden shocks and disasters and try to protect their operations from them.
The comments come as Beijing is conducting a sweeping investigation into the tax affairs and land use practices of the world’s largest contract electronics manufacturer’s massive operations in China, a move seen as a warning to Gou to drop a presidential candidacy that is splintering support for the opposition, which Beijing would prefer to see win.
Foxconn, which manufactures Apple’s iPhone as well as other electronics products ranging from servers to electric cars, is increasingly building factories outside China as its customers seek to diversify supply chains. But the company said China would still account for the largest portion of its capital expenditure next year, with India, south-east Asia, Mexico and the US also targeted.
Despite a cautiously optimistic outlook on its business, the company forecast flat revenues next year. “If there are no other changes in the political and economic environment, we expect demand to be slightly up by around 5 per cent,” Liu said. “But that could easily be undone by geopolitics.”
Gou trails the other three Taiwan presidential candidates in opinion polls, but people close to the company said his campaign was likely to remain a risk until the January 13 vote. “I wish him the best,” Liu said.
Hon Hai Precision, the group’s Taiwan-listed flagship, reported an 11 per cent year-on-year increase in net profit for the third quarter to NT$43.1bn (US$1.3bn). It said the strong net income, which analysts had not foreseen, was a result of a favourable product mix and cost-cutting efforts.
Liu is pushing to increase business in new areas with higher margins, including electric vehicles and semiconductors, to make up for the low margins in its traditional smartphone assembly operations.
David Huang, chief financial officer, said Hon Hai’s gross margin, which increased by 0.5 percentage points year on year to 6.66 per cent in the third quarter, could be expected to surpass last year’s 6.04 per cent for the full year as well.
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