LDN - Business

Foxconn picks chip-unit head for chairman, as Gou seeks Taiwan presidency

[June 21, 2019] By Yimou Lee

TAIPEI (Reuters) - Apple Inc supplier Foxconn chose chip-unit boss Liu Young-way as chairman on Friday to succeed Terry Gou, who is preparing to contest Taiwan's presidential elections next year.

Liu was tipped to take over from Gou, who told Reuters in April that he planned to step down to pave the way for younger talent to move up the ranks of the world's biggest electronics contract manufacturer.

Earlier on Friday, Gou told the company's annual general meeting (AGM) in Taipei he will hand over the running of the company to a newly formed nine-member operations committee. Gou retained a seat on the board of the company, formally known as Hon Hai Precision Industry Co Ltd.

The change of guard comes as Foxconn - with its big factories in China and large roster of U.S. clients - navigates a trade war between Washington and Beijing.

But Liu's appointment does not portend big changes in strategy and Gou is likely to keep control of the company he founded 45 years ago, analysts have said.

The handover to Liu is only a formality, said a Taipei-based analyst, who declined to be identified due to Taiwan's trading regulations.

"Gou is still a director ... he can still control much of Hon Hai. He can still give advice or reject proposals," the analyst said.

Foxconn said nearly 3,000 shareholders, employees and supporters attended the AGM. Thousands braved the heat to watch a live broadcast of the meeting on big screens outside Foxconn's headquarters, while scores of employees lined up to welcome Gou and Liu inside.

"In the next four years I want to contribute what I gathered in the past 40 years to (Taiwan)," said Gou, who was wearing an orchid garland and a dark suit.

"Give me four years, and give Taiwan a chance of survival."

Taiwan's election is set to take place amid a period of increasing tensions between Beijing and Taipei, with Gou seeking to represent the China-friendly opposition Kuomintang (KMT) party.

His election bid might be weighed down by his ties to a Chinese leadership that refuses to renounce the use of force to unify with self-ruled Taiwan it considers a wayward province, analysts have said.

Gou, 68, is Taiwan's richest person with a net worth of $7.6 billion, according to Forbes.

Foxconn shares closed down 1.2% on Friday, compared with the flat broader market.

"GET ELECTED!"

"Terry Gou get elected!" employees chanted and threw flowers as he ended his speech and walked out of the company's offices.

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Terry Gou, founder and chairman of Foxconn reacts during an interview with Reuters in New Taipei City, Taiwan June 12, 2017. REUTERS/Eason Lam/File Picture

Scores of police were on standby outside the headquarters, where supporters stood next to dozens of protesters who questioned Gou's policy over labor rights and wages.

Placards saying "young people are poor - can't afford to buy house, to get married and to have kids" intermingled with signs calling Gou "the hope for the youth".

In his speech, Gou criticized the state of Taiwan's economy, saying growth had hit a bottleneck.

Taiwan's economic growth has slowed, hurt by shrinking global tech demand and the tariff war between its two largest trading partners, China and the United States.

The island's central bank again cut its 2019 economic growth forecast on Thursday after export orders fell for a seventh straight month.

TRADE ANGLE

Liu, 63, has led Foxconn's nascent semiconductor business, dubbed the S sub-group, since 2017. He gained great trust since joining as a special assistant to Gou in 2007, a source told Reuters in May.

After the AGM, he told Reuters that the company had no plan to increase production capacity outside China at the moment and that he was not aware of client requests for Foxconn to shift part of its production outside China.

Investors are keen to know whether Foxconn will adjust its production line for Apple and others. The Nikkei Asian Review reported that Apple has asked its main suppliers to assess the cost implications of moving part of their production capacity from China to Southeast Asia.

Foxconn said last week it had enough capacity outside China to meet Apple's demand in the American market if the need should arise for the iPhone maker to adjust its production lines due to the U.S.-China trade war.

U.S. President Donald Trump has threatened to slap further tariffs on $300 billion worth of goods from China, where the bulk of Apple's devices are assembled. The country is also a key market for the firm.

Gou met with Trump in May and sought U.S. support to boost Taiwan's tech industry. He vowed to be a "peacemaker" for China, the United States and Taiwan, if he wins.

(Reporting By Yimou Lee; Writing by Sayantani Ghosh; Editing by Anne Marie Roantree, Stephen Coates and Muralikumar Anantharaman)

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