For decades, Apple Inc. (AAPL) has faced a series of layered challenges in China, from counterfeit Apple retail stores and factory protests to constantly tightening censorship and application rules. Now, this iPhone manufacturer may be embroiled in the sharpest contradiction in US China relations: Taiwan's future.
Foxconn Technology Group, one of Apple's largest suppliers and Taiwan's OEM manufacturer, stated on the past Sunday that it is cooperating with relevant Chinese departments for investigation; Previously, Chinese official media reported that China had launched tax inspections and land use investigations against Foxconn. These investigations come as Foxconn founder and billionaire Terry Gou announces his candidacy for Taiwan's presidential election.
A few days before the announcement of the investigation, Apple CEO Tim Cook had just visited China, and these investigations may expose Apple to a new type of geopolitical risk in China.
Kenneth Jarrett, a senior consultant at corporate consulting firm Albright Stonebridge Group, said, "Foxconn is a key component of Apple's Chinese supply chain." He said, "Anything that endangers Foxconn's foothold and development in China, even if it is not related to Apple, can become a headache for Apple
Cook met with senior leaders of the Central Republic last week, marking his second visit to China this year. He also visited a non Foxconn factory in eastern China that produces AppleWatch and visited Apple stores, emphasizing the importance of China as a market and manufacturing center.
Apple CEO Cook met with Chinese Vice Premier Ding Xuexiang earlier this month.
Chinese Vice Premier Ding Xuexiang expressed during a meeting with Cook that he is willing to provide more opportunities and create a better environment for the development of foreign enterprises, including Apple, in China.
After sending this reassuring signal, China's investigation into Foxconn is an uncoordinated reminder to Apple that in the world's second largest economy, the company must address the risks of expanding scope. These investigations also come at a time when competition between China and the United States is intensifying, and Taiwan's future is a central issue in the tense relationship between the two countries.
The offices of Apple, Foxconn, and Terry Gou have not yet responded to requests for comment. Foxconn stated on Sunday that it is cooperating with the Chinese government's investigation and has made a commitment to comply with the law. Guo Taiming stated in a statement released on Tuesday that he would not comment on the investigation and stated that the outside world could refer to Foxconn's statement on Sunday.
After a decline of about 3% on Monday, Foxconn's Taiwan listed stock further fell by over 2% on Tuesday, hitting an eight month low.
Guo Taiming is one of the wealthiest people in Taiwan, and he is an unpredictable factor for the presidential election to be held in January next year. The Chinese government is closely monitoring this election. The CPC believes that Taiwan is a part of China and has expressed its intention to control the autonomous island.
Why investigate Foxconn now, 'said William Chung Chih tung, a researcher at the Institute for National Defense and Security Research, a think tank with official Taiwanese background? Of course, there are special political considerations involved.
Guo Taiming supports establishing closer relations with Beijing. But in a report on the investigation of Foxconn on Sunday, the first Chinese official media to report on the matter, the Global Times, quoted unnamed analysts as saying that Guo Taiming's candidacy may further divide Taiwan's opposition camp. And this may be beneficial for the ruling Democratic Progressive Party, which has been working to strengthen its relationship with the United States. Some analysts say that Beijing is likely to want Guo Taiming to withdraw from the election.
  On Monday, a Democratic Progressive Party legislator claimed that Guo Taiming was a hostage from Beijing.
Analysts say the same applies to Apple. Zhong Zhidong said when talking about Western companies, including Apple, that the mindset of "politics is politics, economy is economics" is too naive. He said that when dealing with China, it is necessary to be very clear about the risks related to the Chinese market.
Foxconn founder Terry Gou attended an event during his presidential campaign.
Guo Taiming stated in August that if he sacrificed his personal property, he could come in exchange for Beijing not attacking Taiwan, and he was "willing to become a mold worker again".
Guo Taiming stepped down as chairman of Foxconn in 2019 and resigned from his board of directors position in September after announcing his candidacy for president. But as of September, he still holds a 12.6% stake in Foxconn.
Over the past decades, this Taiwanese entrepreneur has successfully crossed the gap between Chinese Mainland and Taiwan by seeking both sides.
Guo Taiming, now 73 years old, founded Foxconn in 1974 and produces black and white television components at a factory near Taipei. Due to rising costs, Guo Taiming opened a factory in southern China in 1988, where there was a large amount of cheap labor. Foxconn's business in China continues to expand, gradually growing into a giant in the electronics manufacturing industry, winning the favor of Apple and becoming the largest iPhone assembly company.
Foxconn Chairman Yang Liu stated in March this year that about 70% of Foxconn's revenue comes from China.
Recently, Foxconn has increased production capacity by investing in India and Vietnam, helping Apple achieve diversified production outside of China.
Gabriel Wildau, an analyst at business consulting firm Teneo, said that through these investigations, the Chinese government may also be trying to indicate that China is concerned about Foxconn's role in helping Apple and other foreign companies achieve diversification.
He said in a report that the leaders of Chinese Mainland would prefer Foxconn to actively resist the anti China decoupling trend.
During Cook's trip to China, he visited an Apple store.
Analysts point out that it is certain that Cook's meeting with Chinese officials proves that Apple, with its strong reputation and consumer influence in China, continues to receive government support. Apple is also seeking to reduce its dependence on Foxconn and delegate the production of its latest products to other suppliers.
Randal Phillips, a strategic consultant who studies China issues, said that from a consumer and manufacturing perspective, Apple's investment in China is very large, so reducing risks in the short term is difficult.
Phillips said, "Apple will have to gamble that they are 'too big to fail' in China." Phillips was once the Asia executive partner of due diligence company Mintz Group, whose Beijing office was raided in March this year and staff members were detained. Phillips also stated that Apple may have to put in more effort to consolidate its relationship with the Chinese government.
China's investigation into Foxconn may also be counterproductive, as Taiwanese companies, including Foxconn, play a crucial role in the Chinese economy. According to Foxconn, in 2022, Foxconn accounted for 3.5% of China's exports. The company is one of the largest employers in the private sector in China, with hundreds of thousands of workers assembling electronic products in factories in Zhengzhou, Shenzhen, and Chengdu.