Taiwan-based Foxconn Technology Group, one of the key suppliers of Apple’s (NASDAQ:AAPL) iPhones, is facing investigations by the Chinese authorities into its taxes and land use. Foxconn, also known as Hon Hai Precision Industry, assembles millions of iPhones at its plant in Zhengzhou, also known as iPhone City.
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The probe comes at a time when Apple has been shifting its supply chain to countries like India and Vietnam to reduce its exposure to China amid the escalating U.S.-China tensions.
iPhone Supplier Foxconn Under Investigation
Tax authorities are conducting audits at Foxconn’s subsidiaries in China’s Guangdong and Jiangsu provinces. Additionally, natural resources authorities have commenced on-site investigations into the company’s land use in the Henan and Hubei provinces. Citing Apple’s latest supplier list, the Wall Street Journal noted that Foxconn manufactures devices for the tech giant in three of these provinces.
The state-run media tabloid The Global Times, which first revealed the ongoing probes, did not provide any additional details on the scope of the investigations. Interestingly, Foxconn founder Terry Gou resigned from the company’s board last month, as he ramped up his campaign to become Taiwan’s president. “I will not bow to China’s threats,” said Gou at a briefing in August announcing his presidential bid.
Last year, Apple’s iPhone supplies were significantly impacted by the COVID-19 resurgence in China and the worker unrest at a Foxconn factory. Given the growing U.S.-China problems, it makes sense for Apple to diversify its supply chain to countries like India. The company reportedly plans to invest $40 billion in India over the next four to five years.
Is AAPL Stock a Good Buy?
Analysts are cautiously optimistic on AAPL stock due to the impact of macro pressures on consumers’ discretionary spending, which could impact sales of iPhone and other Apple products. With 20 Buys and nine Holds, Apple scores a Moderate Buy consensus rating.
The average price target of $207.51 implies 20% upside potential. Apple shares have risen 33% year-to-date.
