BEIJING, November 9 (TMTPost)— Hon Hai Technology Group (Foxconn), posted a plummet in revenue from a year ago amid tax underpayment rumor following Chinese government’s investigation.

Credit：Visual China

Foxconn said on Sunday it generated TW$741.2billion (US$23 billion) last month with a 7.2% decrease year-over-year (YoY), though it is the second highest revenue for October and rose 12.2% from the previous month. On the YoY basis, components and other products had a robust growth of revenue, while smartphone and other smart consumer electronics products showed almost stagnant, and both computing products and cloud and networking products experienced the decline. Sequentially, sales of smart consumer electronics and computing products were driven by China’s largest annual online shopping festival Singles’ Day and Thanksgiving holiday season in the West, but revenue of components and other products was roughly flat. 

Foxconn’s key customer Apple failed to meet the Wall Street’s expectation for sales during the year-end holiday season. Revenue in the current quarter is expected to be similar to the same period a year ago, Apple chief financial officer (CFO) Luca Maestri told analysts at an earnings call last Thursday. That is a weaker-than expected outlook as the Wall Street projected revenue in the December quarter will climb around 5% YoY to $122.8 billion. However, Foxconn reconfirmed its forecast of a significant growth for the fourth quarter given last month. It said operations will ramp up sequentially, fueled by the peak season for consumer tech products and its increasingly complete product mix.

Foxconn’s sales yearly drop reflected uncertainty in its business as the world’s largest contract electronics manufacturer was under the reported probe last month.

The tax authorities on mainland have conducted tax audits of key subsidiaries of Foxconn Group in Guangdong, Jiangsu, and other provinces, and the natural resources authorities have conducted on-site examinations of the land use of Foxconn's factories in Henan, Hubei, and other provinces, the state-backed newspaper Global Times reported two weeks ago. The audits and examinations were a normal administrative action in accordance with the law, the report quoted Zhang Wensheng, deputy dean of the Taiwan Research Institute of Xiamen University. Foxconn's subsidiaries have an obligation to actively cooperate with inspections and investigations. If there are illegal and irregular activities, they should admit their mistakes, accept punishment and quickly correct them.

Legal compliance is a basic principle of our group for operations across the world, and the group will actively cooperate with the relevant units on the related work and operations, a Foxconn statement in response to the report.

 “While sharing the growth dividends on mainland China and achieving rapid development, Taiwan-based companies should also assume corresponding social responsibilities and play a positive role in promoting the peaceful development of relations across the Taiwan Strait”, Zhu Fenglian, a spokesperson of the Taiwan Affairs Office (TAO) under the State Council, commented on the Democratic Progressive Party-ruled local authorities’ calling China’s reported probe into Foxconn a political practice.

Zhu didn't elaborate the responsibilities or what actions Taiwan companies should take. She said relevant mainland authorities treat all enterprises equally if they launch any law-abiding investigation in accordance with the law and regulations, and such investigation is a normal law enforcement act.The spokesperson said.

Foxconn denied last week recent news circulated online that it was required to pay RMB180 billion in back taxes during a thorough investigation and Chinese government will take control of the land with a size of about 20,000 soccer fields it owns. All of the aforementioned news are rumors that fabricated groundless by a few we-media at multi-platform social media channels, which seriously undermined the company’s reputation, Foxconn said in a statement released at Chinese social media Weibo. The Taiwan-based company said it always abides by laws and regulations related to operation and the production and operation is running normally.

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