Foxconn Wisconsin deal is now under scrutiny.
Image: YouTube | CNBC Television

It looks like Foxconn Chairman Terry Gou will not have the opportunity to make Taiwan great again. In April, the executive announced plans to leave the company he founded to seek the Taiwanese presidency. However, on July 14, Han Kuo-yu defeated the billionaire to become the candidate of the Kuomintang Party (KMT) in Taiwan’s forthcoming national election.

On Monday, Gou congratulated Han on his victory and told the Strait Times he wouldn’t seek the presidency as an independent.

Why Gou Lost Presidential Bid

Ostensibly, Gou seemed like a shoo-in to become KMT’s presidential candidate. In addition to his wealth and high-level connections, the businessman has a compelling personal narrative. Gou’s family immigrated to Taiwan in the ‘40s to escape the Chinese Civil War, and the self-made businessman gradually turned his humble startup into one of the world’s largest electronics manufacturers.

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But his seemingly inevitable rise to power ran into a major speed bump in the form of a popular populist politician. Last November, Han Kuo-yu rose from relative obscurity to become the mayor of Taiwanese port city Kaohsiung. Han won over voters by promising to improve the area’s economic conditions. He subsequently became a notable figure in the nation’s political scene by inking agricultural trade deals with Hong Kong, Macau, and Shenzhen.

Subsequently, Han captured the imagination of Taiwan’s lower and middle classes by vowing to revive the nation’s economic vitality. In the KMT primacy, Han won 44.8 percent of the vote to Gou’s 27.7 percent. He’ll now face incumbent President Tsai Ing-wen in the country’s January presidential election.

Industry Implications

The most immediate consequence of Gou’s loss in the Taiwanese presidential primary is that it benefited his company’s stock price. Foxconn’s shares increased in value by 2.8 percent following the primary. Industry analysts attribute the company’s growth to investors’ belief that Gou will return his focus to Foxconn.

Foxconn’s market position may suffer, however, if Gou decides to fund an independent run. It’s worth noting that the executive chose to pursue the Taiwanese presidency after the sea goddess Mazu told him to in a dream. The billionaire may decide that one decisive electoral loss isn’t enough to thwart his celestial destiny.

Another significant implication of the outcome of the KMT primary is its potential effect on U.S.-Taiwan relations. Han Kuo-yu is a China supporter as well as a populist. He promised to strengthen ties between his country and the mainland if elected. Defense analyst Derek Grossman told Bloomberg his election wouldn’t be an issue for Washington unless the government comes to believe Beijing helped Han win the presidency.

If the Trump administration views President Han as a puppet of the Chinese Communist Party, the global semiconductors industry might suffer.

Specifically, if Washington chooses to add new tariffs on Taiwanese imports, it could disrupt the worldwide component supply chain. Since the Sino-American trade war began, several Taiwanese companies have moved their manufacturing facilities back to their homeland. Those strategic relocations will be rendered meaningless if Republic of China electronics and components are saddled with heavy import levies.

On the other hand, Han’s populism may not be enough to overcome the Taiwanese people’s desire to remain independent. President Tsai saw her poll numbers rise recently after criticizing Beijing’s desire to erode the republic’s autonomy.

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