By Yoko Kubota
HONG KONG -- Foxconn Technology Group said it is ready to shift
production out of China if necessary for Apple Inc., its biggest
customer, as the electronics assembler tries to assuage investors'
concerns over the U.S.-China trade conflict.
In its first-ever investor meeting and conference call since
going public in 1991, senior executives at Taiwan-based Foxconn
sought to address investor uncertainty as it prepares for a
leadership transition.
Tuesday's events were aimed at outlining a succession plan for
when Terry Gou, Foxconn's founder, stands down as chairman to focus
on his campaign for Taiwan's presidency.
Much of the discussion, however, centered on the worsening trade
dispute between China and the U.S. and the impact it might have on
the core of Foxconn's business -- assembling iPhones and iPads for
Apple, mostly in China.
"We are totally capable of dealing with Apple's needs to move
production lines if they have any," said Young-Way Liu, who heads
Foxconn's semiconductor business group, during the meeting at the
company's headquarters outside Taipei.
Mr. Liu said that Foxconn's manufacturing capacity outside of
China is sufficient to meet demand in the U.S. market from Apple
and other customers, and that production could be expanded at
factories globally "according to the needs of our clients."
Foxconn has plants in Brazil, Mexico, Japan, Vietnam, Indonesia,
Czech, U.S. and Australia among other countries, according to the
investor presentation.
Foxconn, formally known as Hon Hai Precision Industry Co., is
the world's biggest contract electronics manufacturer and relies
for a large portion of its business on Apple and China. Around 50%
of Foxconn's revenue is related to Apple, analysts say. Meanwhile,
only about 25% of its manufacturing lies outside China, according
to Mr. Liu.
Foxconn and other manufacturers have been laying plans to shift
some production out of China as the trade tensions continue to
escalate and, according to many analysts, are unlikely to be
resolved quickly.
The company has already seen clients, including Apple and Huawei
Technologies Co., move production to other locations, said Mr. Liu.
Planning for such shift has gathered steam since the U.S. last
month increased tariffs on $200 billion worth of Chinese goods to
25% from 10%, and proposed to slap penalties on more than $300
billion more of products, including smartphones, according to
industry executives.
The new tariffs "killed a lot of people's hope both China and
the U.S. will reach an accord," one of the executives said. "Now
everyone realizes this is a long term change."
As many companies plan production shifts, Chinese officials told
some foreign technology companies last week that there would be
unspecified consequences if they pulled out of China, The Wall
Street Journal has reported.
Foxconn recently said that it set up a response team to deal
with trade row-related issues and that it is monitoring the
situation around the clock.
Aside from trade tensions, Foxconn faces a series of business
challenges, as it seeks to lessen dependence on Apple. Foxconn
acquired Japanese electronics maker Sharp Corp. three years ago to
develop its own consumer brand, while it has also been expanding
into semiconductors. Mr. Liu said the company will focus on
designing semiconductors.
As Mr. Gou plans to step down as chairman, Foxconn must also
transition away from the top-down, detailed and hands-on management
style of Mr. Gou, who built the company over four decades. Mr. Gou,
who turns 69 this year, is one of five candidates seeking the
Nationalist Party, or Kuomintang, nomination for president. The
party will select its candidate next month and the general election
will take place in January.
At Tuesday's meeting, Foxconn executives said it is setting up a
committee of nine executives tasked to decide on major corporate
strategies and take over from Mr. Gou. This operations committee
will meet weekly and report to the board, Mr. Liu said.
Committee members will consist of four board members and five
executives, including Mr. Liu, Fang-Ming Lu, a current board member
and the chairman of Asia Pacific Telecom Co., and Sung-ching Lu,
the chairman of Foxconn Interconnect Technology Ltd.
Mr. Gou will retain a board seat and remain the largest
shareholder, with some 10% of shares. He won't participate in
discussions on corporate strategy since he isn't a member of the
operation committee, Mr. Liu said.
Employees and analysts have said that many Foxconn executives
are well-capable of smoothly running daily operations, though none
has the star power of Mr. Gou. He has developed a personal rapport
with chief executives such as Apple's Tim Cook and has won
accolades from President Trump. The company, after much back and
forth, decided earlier this year to go ahead with the construction
of a liquid-crystal display factory in Wisconsin.
Yang Jie
in Beijing contributed to this article.
Write to Yoko Kubota at yoko.kubota@wsj.com
(END) Dow Jones Newswires
June 11, 2019 10:24 ET (14:24 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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