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Foxconn faces successor challenge as Gou enters Taiwan politics

A look at the key lieutenants in the running to take reins at key Apple supplier

TAIPEI -- Foxconn chairman Terry Gou’s decision to run for the Taiwanese presidency has raised questions about the future of his $41 billion tech empire, not least who will be chosen to run the business at a time when its largest client Apple is suffering an unprecedented decline in sales of its iconic iPhones.

The 69-year-old Gou, who is a follower of Taoism, consulted the sea goddess, Mazu, about his decision at her temple in New Taipei City on the morning of April 17. Hundreds journalists and the faithful jostled for position in the temple waiting for Gou’s arrival. Many of those present called out to Gou to run for the presidency. 

"Mazu appeared in my dreams and talked to me a few days ago," Gou told media after visiting the Mazu Temple. "She said I must come forward [to run for presidency]. I will definitely follow her instruction." The business tycoon sealed his ambition on a visit in the afternoon to the Beijing-friendly Kuomintang’s headquarters, where he announced that he would seek the party's nomination for the presidential race.

Gou’s planned departure from Foxconn may have delighted the faithful but it will pose a challenge for the company he founded as an electrical components manufacturer under the name Hon Hai Precision Industry in 1974. Apple's biggest supplier, Foxconn has suffered two straight years of net profit decline as a result of the global slump in smartphone sales and the iPhone's own loss of momentum. 

Gou's name is synonymous with the company. The Taiwan-born executive is known for his rigorous control of the company’s strategic planning and he has worked tirelessly to cultivate the political relationships that have helped to ensure its success in both the U.S. and China despite the sometimes frosty relationship between the two countries. 

Should he gain the KMT nomination to run for the presidency, the question is who will take the reins? And should he win the presidential race, then who will he trust to take Foxconn through its next phase as it seeks to reduce its reliance on smartphone assembly and become a broadly based, cutting edge tech company? 

Gou on April 17 declined to address questions about succession. In fact, few expect the still fit executive to retire completely, even if he wins the presidency. He may just take a leave of absence. But he does appear to have been doing some planning nonetheless. 

Foxconn has been spinning off key businesses over the past few years, allowing professional executives to run them. While Gou remains the final decision maker for all major strategies, according to people close to the company, some of these executives may be worth watching for those attempting to discern potential successors. 

They include Asia Pacific Telecom Chairman Lu Fang-Ming, who doubles as head of the group’s telecom equipment segment in 5G wireless technology; and Tai Jeng-Wu, chairman and CEO of display and TV maker Sharp, whose businesses are crucial to Foxconn, as display is one of the highest margin components used in iPhones, MacBooks and iPads. Tai has more than once praised by Gou as "Mr. Cost," referring to his success in slashing costs and squeezing out greater profitability. 

Then there is Brand Cheng, incumbent CEO to the Shanghai-listed Foxconn Industrial Internet. He was key to strategy at Foxconn’s telecom equipment business under Lu, before he was dispatched to serve at FII in 2018. The low-profile Cheng is one of the executives Gou relies on for strategy advice, sources familiar with Cheng said. 

Terry Gou speaks to media at a temple, in New Taipei City, Taiwan on April 17. (Photo by Kensaku Ihara)

Young Liu, chairman to Foxsemicon Integrated Technology and Big Innovation Holding, oversees Foxconn’s semiconductor business. Gou views this as one of the most important technologies for Foxconn to develop going forward. Liu, who rarely speaks to media or appears in public, has been seen recently accompanying Gou to his official events.

The elusive de facto CFO, Huang Chiu-lien, is aunt to Gou’s first wife and has been in charge of approving the group’s major investments for decades. Finally, the tech tycoon’s eldest son Jeff Gou is chairman to electronics channel Syntrend Creative Park, which counts Foxconn as an investor. However, he has shown little interest in being involved in Foxconn’s operation. 

With all these candidates, Gou may seem spoiled for choice. But Chung HSI-Mei, a business administration professor at I-Shou University, warned that Foxconn could now enter an unsettled period, as executives compete with each other for a CEO position. Yet there will be continuity, she suggested. Gou is unlikely to give up complete control, and could be expected to operate behind the scenes, making the final decisions. 

Professor Joseph P.H. Fan, of the Chinese University of Hong Kong, is an expert in corporate succession. He warns that even if Gou believed he could drive business friendly policies as a politician, there was still a risk for Foxconn.

"Gou is a strongman. The biggest concern would be whether his gigantic tech empire could be set on driverless mode and still run smoothly during his absence," said Fan. "It remains a big question whether these senior Foxconn executives can cooperate with each other without a big boss, and there is no system to audit the decision making processes."

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