On Friday, Foxconn Founder and CEO Terry Gou said he hopes Apple relocates its manufacturing out of the Chinese mainland. “Speaking from the perspective of the Republic of China, I will plead to Apple to come to Taiwan,” he said. Presently, the Cupertino, California-based electronics manufacturer sources 90 percent of its production in China.
Last week, The Burn-In reported Apple asked Foxconn and its Chinese component suppliers to investigate the cost of relocating 15 to 30 percent of their manufacturing facilities out of the country. However, the corporation reportedly wants its suppliers to consider relocating to India, Indonesia, Mexico, or Vietnam.
In May, the Trump administration announced plans to levy a 25 percent import tax on Chinese electronics beginning July 1. That same month, Apple asked that its products be exempted from the tariff, but the federal government hasn’t announced making such an exception. If the firm is unable to avoid the tax hike, a supply chain relocation might be its best option to keep costs down.
Market analysts estimate Apple’s U.S. sales could take a 10 to 40 percent hit if the tech giant passes along the cost of the tariffs to consumers.
A Mutually Beneficial Relationship
A few factors likely motivate Gou’s request that Apple sources its manufacturing to his home country.
Most prominently, the CEO wants to ensure Apple’s sales are high. Indeed, Foxconn reportedly derives 50 percent of its revenue from the manufacturing of the firm’s products. Last month, the U.S.-China trade war hurt Huawei’s order numbers so badly that Foxconn temporarily stopped manufacturing its devices. If a similar sales slowdown hits Apple, the Taiwanese fabricator would be economically devastated.
Furthermore, Gou isn’t the only Foxconn executive to highlight the importance of its deal with Apple. In early June, Young Liu, head of the firm’s semiconductor division, said the company could produce all of Apple’s iPhones outside of China.
Another big motivator behind Gou’s announcement is that the entrepreneur is seeking the Taiwanese presidency. In April, the tech executive announced that a prophetic dream inspired him to run for president. Moreover, Gou said he’d be stepping down as Foxconn CEO to focus on his political ambitions.
In the 2020 election, the billionaire will face off with current Taiwanese president Tsai Ing-wen. One of the critical issues in the 2020 contest will be the nation’s relationship with China. Tsai’s Democratic Progressive Party staunchly supports the country’s autonomy. Conversely, Gou is part of Kuomintang, a party that advocates for closer relations with the mainland.
Following the massive Hong Kong protests against a bill allowing citizens to be extradited to China, President Tsai has become more critical of Beijing’s “one country, two systems” policy. As a result, she has enjoyed a sharp uptick in popular support. If Gou can bring Apple’s iPhone production to Taiwan and thousands of manufacturing jobs along with it, he might be able to counter his rival’s momentum.
Taiwan’s presidential election will take place on January 11, 2020.