China is investigating iPhone maker
Foxconn,
according to local media reports. It’s a reminder of the delicate situation Taiwanese companies face amid growing U.S.-China tensions and how risks could mount heading into Taiwan’s presidential elections.
Foxconn—also known as
Hon Hai Precision Industry
(2317.Taiwan)—was subjected recently to searches by Chinese authorities, according to China’s state-run Global Times newspaper, which cited unidentified sources.
Chinese tax authorities conducted inspections of Foxconn businesses in Guangdong and Jiangsu provinces, while the natural-resources department conducted on-site investigations into Foxconn’s land use in Henan and Hubei provinces, the Global Times reported. Foxconn has sites manufacturing
Apple
products in three of the provinces cited.
“We will actively cooperate with the relevant units on the related work and operation,” Foxconn said in a Chinese-language statement seen by Barron’s and translated using online tools.
Foxconn shares fell 2.2% in Taiwan on Monday.
Apple
(ticker: AAPL) stock was down 0.9% in U.S. premarket trading.
Foxconn is a huge employer in China but faces a tricky balancing act to satisfy demands from its American customers and Chinese authorities, while also taking into account domestic politics in Taiwan. The investigation suggests China is ramping up the pressure on the company just as Foxconn considers major investment in India and its founder stirs up Taiwan’s presidential elections.
Foxconn founder Terry Gou said in August that he intends to stand for the Taiwanese presidency. He has resigned from the company’s board but continues to hold a 12.5% stake. Gou is fourth in the polls for the election, which will be held in January.
Reuters reported that sources close to Foxconn believed the probe into the company was made public for reasons tied to the elections and as a warning around Foxconn’s plans to diversify its production outside China.
Write to Adam Clark at [email protected]
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