HONG KONG, Nov 27 (Reuters Breakingviews) - Terry Gou is not running for Taiwan’s presidency after all. His decision to drop out of the race can shield Foxconn (2317.TW), the electronics maker he founded, from immediate political crossfire arising from polls due to be held on Jan. 13. Nonetheless, the $45 billion Apple (AAPL.O) supplier’s continuing push to move production outside of China leaves it firmly on frontlines of rising cross-strait tensions.
Despite the billionaire's pitch to act as a key intermediary between Washington and Beijing, Gou’s political motives were questioned in mainland China which claims the self-ruling island of Taiwan as its own territory. Critics saw his long-shot candidacy as a ploy to divide opposition votes and give the independence-leaning Democratic Progressive Party (DPP) an easier path to stay in power. Shortly after confirming his intention in October to run, Chinese authorities initiated multiple investigations on Foxconn’s tax and land use in several provinces.
The opposition did not need any help. The two main parties, including the long-established Kuomintang (KMT), argued they could bolster more peaceful ties with the mainland and were edging towards a coalition. Any hopes of an alliance, however, fell apart on Friday following a ugly spat in front of a crowded press conference.
From a business point of view, Gou, who stepped down as chairman in 2019 but still owns 12% of the company formally called Hon Hai Precision Industry, needed not to worry who’s in charge in Taipei beyond a point. Foxconn’s golden era began at the turn of the century when the DPP took power from the KMT for the first time but that was also around the same time China joined the World Trade Organization. Foxconn grew into the biggest employer in China, with more than 1 million workers at its peak and a top contract manufacturer for global brands.
Fast forward and the China-U.S. relationship looks barely stable, and globalisation is no longer in such good health. Foxconn still drives more than 70% of its revenue from China as of March, but it is moving production abroad to serve global clients who want to de-risk from China. The company also has financial motivation to wean itself off China where labour costs are rising and strict procurement rules of its big customer Apple make it hard to cut costs. The Taiwanese company’s gross margins have fallen to roughly 6% from 8% a decade ago.
Foxconn is out of the election spotlight but it still has to grapple with an awkward status quo.
CONTEXT NEWS
Terry Gou, the billionaire founder of electronics maker Foxconn, announced on Nov. 24 that he will be withdrawing from Taiwan’s presidential election next month. The 73-year-old has not given a reason for his dropping out nor disclosed which candidate he will endorse.
Gou’s withdrawal came shortly after a deal between two opposition parties to run a joint ticket in the election broke down on Nov. 24, giving the incumbent Democratic Progressive Party an easier path to victory, Taipei Times reported.
Editing by Una Galani and Thomas Shum
Our Standards: The Thomson Reuters Trust Principles.
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